Issue 430, June 2017

On May 5, 2017, the Department of Finance proposed changes to the new rules relating to the multiplication of the small business deduction. Applicable to taxation years that begin after March 21, 2016, these proposals aim to ensure that a farmer’s or fisher’s corporation selling farming products or fishing catches to an arm’s length agricultural or fisheries cooperative is not inappropriately denied access to the small business deduction.

To achieve this goal, a new category of income has been introduced, “specified cooperative income”. Essentially, if income meets the description of this term, it will be excluded from being tainted by the "specified corporate income" rules (Subsection 125(7), definition of “specified corporate income”, Subparagraph (a)(i)).

To qualify as "specified cooperative income" of a corporation (referred to as the "selling corporation"), the income must be from the sale of the farming products or fishing catches of the corporation’s farming or fishing business to a qualifying "purchasing corporation".

whether the purchaser meets the definition of a co-op

A purchasing corporation will qualify under Subparagraph (b)(i) if it is a cooperative corporation (as defined in Subsection 136(2), but extended to include fishing businesses) with which the selling corporation deals at arm’s length. A purchasing corporation can also qualify under Subparagraph (b)(ii) where such a cooperative corporation holds a direct or indirect interest in it.

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