The federal government is offering ranchers in parts of Alberta hit by drought deferrals on their 2016 income tax from breeding livestock sales.
The areas include Clearwater, Lethbridge, Mountain View, Red Deer, Rocky View, Vulcan and Wheatland counties; the municipal districts of Bighorn, Foothills, Pincher Creek, Ranchland and Willow Creek; the Municipality of Crowsnest Pass; and the Banff (No. 9) and Kananaskis improvement districts.
The tax deferral provisions allow livestock producers in those regions to defer portions of their 2016 sale proceeds of breeding livestock until the next tax year. Producers can request the tax deferral when filing their 2016 income tax returns.
The intent is to reduce the tax burden associated with the sale, as the cost of replacing the animals at least partially offsets the deferred income.
To be eligible for the deferral, a producer’s breeding herd must have been reduced by at least 15 per cent. If the breeding herd has been reduced by at least 15 per cent, but less than 30 per cent, 30 per cent of income from net sales may be deferred. And when the herd has been reduced by 30 per cent or more, 90 per cent of income from net sales can be deferred.
Proceeds from deferred sales are then included as income in the next tax year. If an area qualifies for a drought or excess moisture/flood designation in consecutive years, producers may defer sales income to the first year in which the area is no longer designated.
The 2016 designation will be the second in a row for affected areas of Alberta, as all but the province’s far northeast received drought designations for 2015.
Preliminary designations are usually made on the basis of spring moisture and summer rainfall, supplemented with estimates of forage yield, while final decisions and other adjustments are made when all forage yield information is available, usually in December.
The deferrals are requested if impact on a designated area is deemed “significant,” defined as forage yields of less than 50 per cent of the area’s long-term average.
Several areas in southern and eastern Ontario and southwestern Quebec also qualified for the program this year.