Bill C-208, a private member’s bill spearheaded by western Manitoba Conservative MP Larry Maguire with amendments to the federal Income Tax Act, cleared the House of Commons in mid-May and Senate in late June. On June 29, it got royal assent.

However, the federal finance department on June 30 pointed out that C-208 as passed “does not include an application date.”

The Liberal-led government said June 30 it’s “committed to facilitating genuine intergenerational share transfers, while preventing tax avoidance that undermines the equity of Canada’s tax system.”

Thus, the government said, it proposes to introduce separate legislation to “clarify” that C-208’s amendments apply at the beginning of the next tax year, starting Jan. 1, 2022.

C-208’s tax law amendments are meant to exclude the sales of farms and other small businesses to adult children or grandchildren from current anti-avoidance rules.

Under pre-C-208 tax law, Maguire said in May, “when a person sells their small business or farm to a family member, the difference between the sale price and the original purchase price is considered a dividend.”

But if the business instead goes to a non-family member, the sale is deemed a capital gain, which is taxed at a lower rate and allows sellers to use their lifetime capital gains exemption, he said.

During debate on C-208 last fall, the Liberals cautioned that Maguire’s bill, as Ontario MP Tony Van Bynen put it, “seeks to amend two of the Income Tax Act’s most important and complex anti-avoidance rules.”

Those rules, he said, are meant to apply when an individual sells shares of a corporation to another corporation that is linked to the same individual — for example, through a family member.

When shares of a Canadian corporation are sold to such a “linked” corporation, the pre-C-208 rules deem that in certain circumstances, the seller has received a taxable dividend from the linked corporation, rather than a capital gain.

The rule, he said, is meant to ensure taxpayers “cannot use linked corporations to, in effect, remove earnings from their corporations, using a sale as a basis to do so.”

But the Conservatives at the time noted C-208 requires that a family member buying such shares of a farm or small business must not sell them for at least 60 months for any reason, other than “by reason of death.”

To curb tax evasion, they said, C-208’s provisions would not apply to such a buyer who sells before that five-year period ends.

‘Intentions clear’

The Canadian Federation of Agriculture, in a separate statement Friday, took the finance department’s June 30 announcement to mean the government “will likely be making amendments in order to close potential tax loopholes.”

The CFA said its “primary concern” is that C-208’s changes to the treatment of intergenerational farm transfers “must be made clearly accessible as quickly as possible, as Parliament made its intentions clear through the passage of the bill.”

“In our talks with the accounting community, this delay, and the uncertainty around exactly what the amendments will be, will force many farmers who were looking to transfer their farm to a family member to delay their retirement plans until 2022,” CFA president Mary Robinson said Friday.

“If they transfer to a family member under the current rules, it can potentially cost them hundreds of thousands of dollars more in taxes compared to if this bill was fulfilled.”

C-208, Robinson said, would help “preserve the identity and financial stability of the Canadian family farm.”

The Western Canadian Wheat Growers, meanwhile, said they were “dismayed” to hear of the delay. “Canadians need to understand that this current government is not looking out for the best interest of Canadian family farms,” president Gunter Jochum said Monday in a release.

Federal Conservative leader Erin O’Toole also criticized the Trudeau government in a separate statement Friday for “refusing to implement a tax reduction for small business that was passed in Parliament.” –– Glacier FarmMedia Network

The post New rule on farm transfer tax treatment put off to 2022 appeared first on Alberta Farmer Express.

“I was so excited,” said Farmbucks founder Lynn Dargis, who took home the award for her grain-pricing app from TELUS Pitch in July.

“It just solidifies that we’re onto something really good here. It’s given us the additional push we need to keep going and keep breaking down these barriers for price transparency in the ag industry.”

Dargis and her husband operate a 4,400-acre grain operation and 2,000-head feedlot near St. Paul. The mother of three began working on Farmbucks last winter when she became frustrated while trying to compare prices from local grain buyers. So she hired a team of developers and set out to create a tool that would aggregate pricing offers from multiple buyers and show real-time prices — a sort of “Expedia for grain prices.”

And when she came across TELUS Pitch — a small-business contest where business owners from coast to coast vie for a $100,000 grand prize — she knew she had to throw her hat in the ring.

“I had never even heard of it before,” said Dargis, who learned about the contest one day while she was scrolling through Facebook.

“But once I looked into it, I realized, ‘Hey, I have a new idea, something I think is unique and much needed in the industry.’ So I figured we had a good basis to apply and try to win this thing.”

And while it didn’t take home the $100,000 grand prize, Farmbucks beat out more than 6,500 other applicants to become the judges’ unanimous choice for the Most Promising Startup award.

“There was some stiff competition. These weren’t just some novice-level entries that I was up against — these are established businesses,” she said.

“It’s just proven that there is something very unique and special about what I’m doing.”

As part of the prize package, Dargis won $5,000 in Facebook ad credits, a one-year membership to Workhaus (a co-working office space) and a bootcamp session with a Facebook expert. But for Dargis, the real prize was the chance to meet and talk with Dragon’s Den judge Arlene Dickinson and executives from TELUS, Samsung Canada and Facebook Canada.

“We had a chance to network with all these executives, so it was a pretty awesome learning opportunity,” said Dargis, who went to Toronto for the event.

“Meeting face-to-face with these executives was so motivational and inspiring. It’s kind of validation from them — ‘We see you. We notice you. You’re doing things we think are needed as well.’

“It’s inspired me to keep doing what I’m doing.”

But Dargis won’t be resting on her laurels any time soon. She plans to reinvest her winnings and her learnings in her enterprise, which launched earlier this year as a smartphone app and web-based service.

“We’re changing all the time,” she said. “We’ve launched a newer, better version — Farmbucks 2.0 — and we’re making continuous updates to the app, adding new features and functions like pricing alerts, price history and a message board.”

And she’s already planning for big things from Farmbucks, including new strategic partnerships and an expansion into other countries.

“Winning the award has attracted some pretty major companies’ interest,” she said, though she wasn’t able to speak about those just yet.

“We have new people and buyers signing up every day, and I think it’s only going to continue to grow.

“There are some exciting things coming up.”

The post National small business contest gives boost to enterprising Alberta producer appeared first on Alberta Farmer Express.

Mary Ng, who vaulted to cabinet-level last week to take on an existing small business portfolio as well as a new one on export promotion, said she wants to help companies take advantage of new trade deals with the European Union and Pacific nations that have specific provisions to welcome small business trade.

Prime Minister Justin Trudeau’s cabinet shuffle put trade diversification front and center amid rising tensions with the U.S., Canada’s largest trading partner, with Ng and new Trade Minister Jim Carr tasked with finding new markets for Canadian goods.

Threats by the Trump administration to end the North American Free Trade Agreement (NAFTA) have shaken Canadian exporters. Canada sends 75 per cent of its goods exports to the U.S., which imposed tariffs on Canadian steel and aluminum at the end of May and is now mulling punitive measures against autos.

Ng, the MP for the Toronto-area riding of Markham-Thornhill, says Canada has other options.

“Right now Canada has preferential market access to 14 trade agreements and 51 countries. This is a real opportunity for us. The U.S. continues to be an important export market to us, but I also think there is a great opportunity to enable our small business to access these other markets as well,” Ng said in an interview with Reuters.

Ng said both the new 11-nation Trans-Pacific trade deal and the EU-Canada Comprehensive Economic and Trade Agreement have chapters devoted to increasing access for small business.

She said the new cabinet ministry can “provide them with resources” to access the new markets beyond the U.S., but gave no specifics on funding or programs that will drive the export diversification.

Carr said last week that “an awful lot of affection for Canada” will help the government’s push to diversify exports away from the U.S.

Still, Sean Speer, a senior fellow for fiscal policy at the Macdonald-Laurier Institute, a non-partisan think tank, said the integration of U.S-Canadian supply chains as well as the shared language and culture between the two countries make it hard to change the reliance on the American market.

“It’s not that I’m opposed to trade diversification or the idea we should engage new markets… I’m just skeptical of the idea it’s going to lead to a fundamental re-organization of trade patterns,” Speer said.

— Andrea Hopkins is Reuters’ Ottawa bureau chief.

The post Canada’s new export minister to push beyond U.S. market appeared first on Alberta Farmer Express.

“I was very, very offended by all of this,” said Kurt Oelschlagel, of BDO Canada, who was part of a panel on the government changes at the CAFA event, held Thursday in Guelph and online.

Many of the slides in his presentation were made redundant, as Finance Minister Bill Morneau backtracked Thursday on yet another part of the changes.

The Liberal government’s proposed changes to small business corporations were initially aimed at high-income earners who have created personal corporations to manage their incomes to pay taxes at the lower corporate tax rate.

However, when accountants started examining the potential changes, they were much further reaching and complex than expected. They included changes to capital gains tax, tests that determine whether dividends distributed are to people who have contributed to the business and punitive tax rates on savings made within a corporation.

This week, Morneau has backtracked on two of those proposals, including capital gains. The government will now allow up to $50,000 per year to be saved in passive investments in corporations. He says that means that only five per cent of small business corporations will be affected by the higher passive investment return taxation levels.

At the Thursday event, the organizers played Morneau’s latest backtrack on the policy live, as he stood at an Erinsville, Ont. farm and talked about delaying the implementation of the capital gains changes.

That means most of the day’s presenters had to change their presentations after that announcement and the announcement on passive investment earlier in the week.

Justin To, director of policy and budget director for the minister of finance, was slated to speak to the meeting, but he backed out, citing the announcements by the government of changes to the tax proposals and especially the fact Morneau was making an announcement the same day.

“We live in a representative democracy and it looks like politics is coming into play,” said Stephen Sweeney, a Waterloo, Ont.-based partner at Miller Thomson LLP, a law firm that works with agriculture clients.

Sweeney said it will take 10 years to sort out all the implications of such significant tax changes and instead he suggested that time be taken to do thorough and well-thought-out tax reform, adding that the modern version of the Income Tax Act came into force in 1972.

“More complexity in the tax system means more creativity for tax advisors,” he says. “I’m not sure if it is good that tax advisors prosper by uncertainly felt by ordinary Canadians.”

Farmers were warned their accounting bills would rise due to the increased complexity and on-and-off changes.

One of the significant changes made by the government is in how it will measure who has meaningfully contributed to the business and therefore deserves remuneration in the form of dividends.

John Mill, a Guelph lawyer who works with farmers and farm advisors on tax reorganization, told the meeting that “family members who meaningfully contribute will not be impacted,” but that there will be little legal flexibility if family members are paid without contributing.

If there hasn’t been a meaningful contribution, then the money will be added to “split income” and taxed at a higher level.

He has concerns about how the amount that’s reasonable to be paid for work will be decided. Would it be possible for the revenue ministry to find someone who would do the work at minimum wage? Then anything above the hours worked at minimum wage rate could be taxed at a much higher rate.

The test for “reasonableness” will take in functions like assets contributed, risks assumed and prior compensation. Documenting hours could become necessary, which is a challenge when farmers live at their work and are on call all the time.

“The CRA is missing the point that farmers grow up in the family business. We train farmers in the family business and on family farms.

“Eight hundred million dollars per year (the total of the revenue increase of the new policy) is idiotic with the enormous societal cost of these idiotic policies,” Mill said.

The question has arisen relating to the payment of children of farmers who farm under a corporate structure.

Sweeney said the new “reasonableness” test will likely drive businesses from paying them through income sprinkling and to making them actual salaried employees of the farm.

Scott Ross, director of business risk management and farm policy with the Canadian Federation of Agriculture, said moving family members to employees, if they deserve to be paid, is one of the main goals of the government.

They want to drive activity away from dividend sprinkling and back to salaries, he says.
There was relief at the meeting that some of the most problematic provisions of the Liberal proposals were off the table, but also anger at the time wasted.

“How much non-billable time have we spent on this since it came out?” asked Oeschlagel, adding that many meetings were held with clients to prepare them for potential quick changes to their business organizations by the end of the year.

There remain a lot of unknowns — which will still mean a lot of work ahead for accountants, advisors and incorporated farms.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

The post Greig: Federal tax backtracks aside, much of impact still unknown appeared first on Alberta Farmer Express.

Prime Minister Justin Trudeau and Finance Minister Bill Morneau appeared side-by-side in Toronto’s far suburbs to announce the tax cut, highlighting their desire to get past what has become a major stumbling block as the two-year-old Liberal government heads into the second half of its mandate.

“Powerful interests have benefited a lot from the current system, and they will fight hard to maintain the status quo. We knew that going in. But nothing will stop us from building an economy that works for more Canadians,” Trudeau said in a sometimes combative news conference.

Earlier this month Morneau had promised the government would make changes to the July proposals that would address concerns expressed by many affected by the changes — including farmers concerned about the implications while saving for retirement, employing family members or selling their operations to the next generation.

“Our goal is not, and will not be, to change the ability to move a family business, a family farm, a fishing business from one generation to the next,” Morneau told reporters Sept. 28, after appearing before the House of Commons finance committee.

In trying to reset the tax debate, the government said Monday the small business tax will be lowered to 10 per cent effective Jan. 1, 2018, and to nine per cent in 2019.

In one example from a background document on the small business tax reductions, the government cited an example of a farm, summing up the example with the statement that “once the small business tax reductions are fully implemented, the business will save an additional $750 which could be used to help pay for new farm equipment.”

Trudeau on Monday shifted the focus away from those using the loopholes toward the tax code itself. “It’s not the people who are the problem, it’s the system,” he said.

At the same time, one of the most reviled parts of the tax reforms proposed in July — measures to limit access to the lifetime capital gains exemption, a move critics said would hurt the ability of families to pass their business on to their children — was abandoned.

When the owners of an incorporated farm sell their operation to family members they currently face a 25 per cent tax bill on the earnings — but under Ottawa’s proposed reforms it would have jumped to 46 per cent, according to several accountancy firms, including MNP.

The government indicated Monday it would still proceed with a crackdown on income-sprinkling — a tax strategy that sees business income transferred from a business owner to a spouse or child, who would be taxed at a lower rate.

In a statement Monday, however, Morneau and Bardish Chagger, the federal minister for small business, said the government now plans to “simplify” its proposal on income-sprinkling.

The “vast majority” of private corporations won’t be impacted by the proposed income-sprinkling measures, they said, including corporations with family members who “meaningfully contribute to the business.”

In July, Morneau proposed tax reforms meant to close loopholes for those that use private corporations to reduce the amount of tax they pay.

The three-pronged tax reform plan, which affected those who sprinkled income among family members or used passive investment income in order to be taxed at a lower rate, had sparked outrage among doctors, farmers and family businesses.

At its news conference Monday, the government was silent on the topic of passive investment income.

Farm organizations including the Canadian Federation of Agriculture and Canadian Cattlemen’s Association on Monday hailed the government’s announcements as a positive sign that their concerns have been heard.

The CCA said it “look(s) forward to reviewing the technical changes” relating to income-sprinkling, while the CFA said its members “look forward to more clarity” on the matter.

The CFA added its farmer members “remain apprehensive about other proposed tax measures, particularly on passive investments, which are vital for managing year-over-year risks due to weather or market-related volatility.”

The CFA said it has also noted concern with plans that would affect conversion of income into capital gains.

— Includes files from Gord Gilmour, Allan Dawson, AGCanada.com Network staff and Reuters.

The post Feds pledge lower small business tax rate appeared first on Alberta Farmer Express.

After 35 years of travel there has never been an incident with takeoff — but the landings have been mixed. There were quite a few times when we could not land because of weather, and times when the pilot realized he might overshoot the runway and had to hit the brakes. This is a jolt to the system and can be unsettling especially if the fog is so bad that no one can see the runway anyway!

I often think of flying — the pure miracle of it and the opportunity that the disruptive technology of the invention of the plane has afforded us. In terms of business, I see that we spend a lot of time planning the takeoff and enjoying the ride, and very little time preparing to land. The runway is only so long, it takes a flight plan to change, close or transfer business and that cannot be done from the air. At some time, our feet need to be firmly planted on the ground.

Landing in business is not just succession planning, it is planning for when the bank says no, when the business fails, when our health fails, or when the world around us changes. It is the mitigation of risk and the knowing of when we are safe after the wheels hit the ground. Young entrepreneurs, especially women, should look at this very carefully.

More than half of small and medium-size businesses in Canada are owned by women (a small or medium business is defined as under $25 million) while the food product from those make up over 80 per cent of our items for trade. As a consumer, she buys and sells food, clothes, houses and cars, appliances, vacations, tools, trucks, tractors, feed, seed, welders and combines. Yet accessing money for continued growth is often difficult.

Even though women and men face the same challenges when accessing finance, research in this area has found that even in developed countries only 58 per cent of all equally eligible loans applied for by women were approved and at a higher interest rate than the same proposal by men. (In the United States, the rate is 20 per cent less approval rate than men and only four per cent of venture capital funding has been allocated to women.) The study found that the reason for credit refusal was that lenders do not wish to be associated with specific types of borrowers such as women, racial minorities, classes and castes. In short, commercial banks and village money men did not loan to women because they presented a bigger perceived risk, they did not loan to women because they were women.

• More with Brenda Schoepp and the Alberta Farmer Express: Women in agriculture bank on change

A true lack of access to credit often hinders growth in what could be a thriving agricultural practice. Women in particular continue to be tied to their husband’s financial performance, permission or signature, even when they are solely responsible for the production of food or for the business. What needs to be done for young men and women to access financing for business (the takeoff) and how do businesses access additional funding for growth or mitigate their financial risk (the landing)?

Asking the right questions ahead of time is important. What do I need to prepare? What are the asset requirements needed to satisfy the lender? What are the perceived risks? How much weight is on past history and credit score or on receivables and cash flow? And the list goes on.

But the point is that the plane cannot and will not take off without the appropriate preparation and pilot check.

Compared to their male colleagues, women often face the additional challenge of not asking for enough money. Many commercial banks look to larger long-term loans attached to a sound business plan that is clearly articulated both in writing and orally. And repeatedly we see evidence that cash flow is not king, men and women need to own something concrete — an office building, factory, ship or any other asset. When it comes to farming, ladies who wish to build their enterprises must have deeded land in their name.

For example, the Montreal Gazette recently ran a story of two women with an 11-year-old company generating $4 million in home party clothing sales. Because they did not own the factory in which the clothing was produced they were ineligible for a meagre $500,000 line of credit for the past three years and were forced to use personal savings.

In this scenario, the women are obviously fighting an outdated system that is discriminatory but I also see it as preparing for a landing. Like these ladies, at any point in time in our business if we do not have collateral, capital assets, receivables and cash we can run out of runway. Paving the way for success includes takeoff, a flight plan, and a long runway.

The post Women should take measures to avoid a hard landing appeared first on Alberta Farmer Express.

“We figure that if you’re not growing, you’re dying,” said Kevin Meier, who owns and operates the business with partner Jeff Senger.

“If you do 10 different things and nine of them are failures, but one of them sticks, then it’s worth it.”

Thanks to its unique marketing approach and its innovative animal-handling system, the business is now the biggest employer in the hamlet of 325 an hour’s drive northwest of Edmonton.

Meier, 40, grew up in Sangudo, and remembers when the town used to be bigger than Mayerthorpe. But over the years, businesses closed and people moved away.

“I’m working away, out in Whitecourt and out in the (oil) patch and I’m watching this little town just implode,” said Meier.

A few years ago, about 30 concerned citizens formed the Sangudo Opportunity Development Co-operative (SODC) to revitalize business in the town, increase volunteer action and acquire government support for programs to better the town. When a 27-year-old meat-packing business came up for sale, a plan was developed and Meier, who had a retail meat-cutting licence from the Northern Alberta Institute of Technology came on board. He was joined by Senger, 37, who was also working in Whitecourt as an accountant, but wasn’t happy with his career.

“With all 30 people, we could really push the meat shop,” said Meier.

• From the Manitoba Co-operator: New on-farm meat shop near Miami not swayed by regulation

So he and Senger purchased the land, building and business, and then convinced the SODC to buy it back and act as landlords. The two parties hatched a deal so the rent stayed low, with the co-op getting a six per cent share of profits.

“That way we have the whole group selling the meat shop, because they wanted to grow their interest rate so their ROI (return on investment) gets better at the end of the year,”said Meier.

Hiring spree

Business was so good, Senger and Meier were soon overwhelmed by the workload and began adding staff.

“Pretty soon we had seven people hired out of this tiny little community,” said Meier. “That’s a big percentage out of 300.”

They focused on hiring young people in order to entice them to stay in the community.

“We want to get them to buy a house in town, realize they have a job here, stay here and earn a living,” said Meier.

Senger became the sales manager and began talking to businesses and restaurants in Edmonton, leaving Meier to run things back in Sangudo. They began selling meat to Edmonton-area restaurants and developed different kinds of sausages and jerkies.

“At first it was just little things, but pretty soon the orders got bigger and bigger,” he said. “All of a sudden, running to the city became our second business. That’s when the business started to feel more like a business. Jeff was selling and I was running the crew.”

The guys started buying the local 4-H champion each June and began giving a 20 per cent discount off cut and wrap off every 4-H animal brought to their shop.

“I brought my stock trailer, and I offered to take the beef home, store it at my place and fed it until we had room to kill it,” said Meier. “My dad would hold onto it, and we’d slowly chisel away at it, killing about eight at a time.”

In the first couple of years, the shop processed wild game from September to December.

“The first two years were ballistic. We wanted to make money and we didn’t care about time, so we just asked everyone to bring it all in.”

Eventually, the workload proved to be too much, so Senger and Meier made livestock from local farmers their priority.

“Now if we have a slow week with killing, we bring in a few deer and a few moose,” he said.

January to June was the slow season, so Senger and Meier searched for something to kill during this time. They found out winter was the peak season for elk. A year after opening, Senger and Meier received a grant from Growing Forward to redevelop their handling system.

Handling revamp

The existing handling equipment was outdated and poorly designed, and was dangerous for both animals and employees.

“The animals were scared to death back there and every kill day was nasty,” said Meier.

Working with elk farmer Don Bamber and bison rancher Neil Hochstein, Meier and Senger designed a system equipped to handle both elk and bison. Their current system includes slider gates, pusher panels, and strong steel, enabling them to handle beef, lamb and pigs easily and effectively.

The system uses many of Temple Grandin’s design principles, including round corners and solid wood panels. Senger’s father-in-law, an electrician, created a lighting system that could be adjusted to suit the preferences of each animal.

When animals are slaughtered, they are held in a padded hydraulic squeeze and killed using stun guns that knock the animal out in seconds.

“It goes in, disrupts their brain and the animal just drops,” said Meier.

The new system was so efficient that it enabled Sangudo Custom Meats to increase its kills from eight cattle to 18 each kill day.

Senger and Meier are proud of the way they operate and are open to letting anyone see what they do. They even host guest kill days and open their kill floor to viewers.

“We’ve been really transparent and have invited people in so they can see what’s going on,” said Meier.

Curious customers and chefs have been invited to watch as animals are slaughtered and meat is cut.

The duo also collaborated with Kevin Kossowan, the co-owner of Shovel and Fork, a group which teaches people skills like butchery and foraging. Sangudo Meats showed participants how to kill and butcher pigs, cattle, and alpaca.

“A lot of them were chefs, and they brought all this food and stuff and it was this big smorg. It was wild,” said Meier.

The two men would eventually like to move to more managerial roles and further expand the business. Future plans include creating a new kitchen for more processed meats, and developing smoked turkeys.

The post Small-town meat shop creating a name for itself appeared first on Alberta Farmer Express.