As of January 1st, 2020, Alberta cancelled the provincial Scientific Research and Experimental Development (SR&ED) tax credit.
Instead, as of January 1, 2021, Canadian-controlled private corporations who conduct R&D in Alberta with eligible expenses are able to apply for the Innovation Employment Grant (IEG). The IEG is meant to work hand-in-hand with the Job Creation Tax Cut to support Alberta’s small and medium businesses.
Under the new IEG, small and medium-sized Canadian-owned corporations could be eligible to receive up to 20% against qualifying expenditures from R&D work carried out in Alberta.
What is the Innovation Employment Grant (Alberta)?
The IEG is equal to 8% of eligible expenditures up to the corporation’s base level of spending experienced during the course of scientific research and experimental development (SR&ED) work carried out in Alberta after December 31, 2020.
Qualified corporations will also be eligible to claim an additional amount equal to 12% of eligible expenditures which exceed base level of spending – for a total of 20% total grant funds.
A business’s base level of spending is determined by calculating the average qualifying R&D expenditures over the previous 2 tax years.
The grant provides benefits on up to $4 million in annual R&D spending.
Who is Eligible for the IEG?
The IEG is aimed at helping corporations that undertake R&D in Alberta.
Specifically, the grant will focus on small to medium-sized companies with less than $10 million taxable capital. Corporations making between $10 and $50 million will be incrementally phased out of grant eligibility. Corporations who earn in excess of $50 million in taxable capital are not eligible.
Eligible expenditures must have been incurred in Alberta after December 31, 2020, and match those that qualify for the federal Scientific Research and Experimental Development Tax Incentive Program.
Corporations looking to apply for the Innovation Employment Grant, need only complete a new Schedule 29 to the Alberta Corporate Income Tax Return (AT1), in addition to the AT1 for the respective taxation year
The Innovation Employment Grant funds themselves will be delivered through the corporate tax system once the SR&ED activities have been validated by the federal SR&ED program.
Please note that this new system starts March 29th, 2021. Any tax forms submitted prior to this date will not be processed until after March 29th.
More information:
- Information circular IEG-1 – Alberta Innovation Employment Grant(January 2021)
- Guide to Claiming the Alberta Innovation Employment Grant(PDF, 5.7 MB) (January 2021)
Forms:
- AT1 Schedule 29 (Form AT29) – Alberta Innovation Employment Grant(PDF, 225 KB) (January 2021)
- AT4970 – Listing of SR&ED Projects Carried Out in Alberta(PDF, 111 KB) (January 2021)
Additional help for Small businesses
Canadian-controlled private corporations not in an associated group may also claim a small business deduction on active business income (i.e., non-investment income), up to the small business threshold of $500,000. Canadian-controlled private corporations in an associated group share the maximum small business threshold.
For more information about the small business deduction: