Incorporated farms included in new small business carbon tax rebate


Incorporated farms in provinces where the federal carbon tax is collected should receive a little more back on their tax return under the “Canada Carbon Rebate for Small Businesses” proposed in the federal budget last week.

The federal government said it would “urgently” return more than $2.5 billion in accrued carbon tax revenue going back to 2019 to an estimated 600 thousand incorporated businesses with fewer than 500 employees in Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.

The refundable tax credit rates or amounts have not yet been announced, but will be based on the number of employees in an organization each tax year.

Finance Canada has confirmed with RealAgriculture that farming businesses that meet the eligibility criteria will be treated the same as other Canadian-controlled private corporations, and automatically receive the new small business carbon rebate on their tax return.

While initially unclear, the department says eligible farms will receive the new small business rebate in addition to the existing fuel charge tax credit for farmers that was implemented following the 2021 federal budget.

Described by then-ag minister Marie-Claude Bibeau as a carbon tax refund for grain drying and other on-farm fuel use, the on-farm fuel charge tax credit is based on a farm’s expenses, and applied at the rate of $1.86 per thousand dollars in eligible expenses in Alberta, Saskatchewan, Manitoba, and Ontario in 2023-24. (For example, a farm with a million dollars in eligible expenses receives a $1,860 tax credit.) While the new small business carbon rebate is only available to corporations, the on-farm fuel charge credit is also available to individuals and partnerships.

Both the Canadian Federation of Agriculture and Canadian Federation of Independent Business (CFIB) welcomed the small business rebate in their post-budget comments last week.

“Carbon tax rebates owed to small businesses have been a long time coming, but we’re glad to see the government making progress on it. Most importantly, it is good to see government broaden its eligibility rules to include most small and medium-sized firms,” noted CFIB president Dan Kelly.

The payment rates for the 2019 through 2023 tax years for the new small business carbon rebate are to be announced by Finance Minister Chrystia Freeland “once sufficient information is available from the 2023 taxation year,” according to Finance Canada.

The government says it intends to apply the small business rebate on an annual basis going forward.

Bill C-234 — the private member’s bill that would have removed the federal carbon tax from propane and natural gas used on farms for eight years — was approved by the House of Commons nearly a year ago, but was heavily amended by the Senate to only apply to grain drying, with a three year timeline. The amended version of the bill is now stranded in the House of Commons, without unanimous support for a vote.

Related: Federal budget features expanded capital gains tax, funding for biofuels, and another promise to look at farm equipment interoperability

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