Carbon Credit

Recognizing that many farmers use natural gas and propane in their operations, and consistent with the Budget 2021 commitment, the government proposes to return fuel charge proceeds directly to farming businesses in backstop jurisdictions via a refundable tax credit, starting for the 2021-22 fuel charge year.

Eligible Farming Businesses
The return of fuel charge proceeds would be available to corporations, individuals, and trusts that are actively engaged in either the management or day-to-day activities of earning income from farming (i.e., the raising of animals and harvesting of plants in a controlled environment) and incur total farming expenses of $25,000 or more, all or a portion of which are attributable to backstop jurisdictions which include Alberta and Saskatchewan.

Credit Determination
The credit amount in respect of an eligible farm business for an applicable fuel charge year would be equal to the eligible farming expenses in the calendar year when the fuel charge year starts, multiplied by a payment rate. Credit amounts would be included in the taxable income of the business in the taxation year the credit is claimed.

Eligible Farming Expenses
For the purposes of calculating this tax credit, eligible farming expenses are amounts deducted in computing income from farming for tax purposes, excluding any deductions arising from mandatory and optional inventory adjustments and transactions with non-arm’s length parties.
Where taxation years do not align with the calendar year, eligible farming expenses would be allocated to each calendar year based on the number of days in each calendar year over the total days in the taxation year, and subjected to the applicable payment rate for the calendar year.

Payment Rates
Businesses can claim these refundable tax credits through their tax returns that include the 2021 and 2022 calendar years. Amount per $1,000 in eligible farming expenses 2021: $1.47 2022: $1.73. The rate is 1.86 for the 2023 calendar year for Ontario, Manitoba, Saskatchewan and Alberta.  For yearends that end in 2024 the rebate is prorated for the number of days in 2023.