Liberals unveil tax breaks for media companies — and subscribers

Liberals unveil tax breaks for media companies — and subscribers
OTTAWA — Buried within the federal budget Tuesday were details of how the federal government plans to prop up Canada’s struggling print media industry.

“Concerns have been expressed that, without government intervention, there may be a decline in the quantity and quality of journalism available to Canadians, including a significant loss of local news coverage,” said the government’s statement last November.

However, many of the specifics of the measures — and definitions of what the government considers “qualified Canadian journalism organizations” and “eligible newsroom employees” — were not made public until Tuesday.

The tax breaks fall under three categories: allowing non-profit journalism organizations to register for something similar to charitable status, so they can receive donations and be exempt from income tax; giving news organizations a labour tax credit applied to the salaries of journalists they employ; and offering a tax credit to Canadians who subscribe to “Canadian digital news.”

The labour tax credit, which applies as of Jan. 1, allows journalism employers to apply a 25-per-cent refundable tax credit to the salaries of editorial employees at a cap of $55,000 per person, or a maximum credit of $13,750. Broadcasters and outlets that receive funding from the Canada Periodical Fund will not be eligible.

Canadians who buy digital news subscriptions between 2019 and 2025 will be able to claim an annual 15-per-cent tax credit on up to $500 in costs, for a maximum credit of $75. This credit, too, isn’t applicable to content produced by broadcasters.

The way definitions are set out in the budget, news outlets will only benefit from tax measures if they are registered as a corporation, partnership or trust; if they are incorporated and resident in Canada; if their chairperson and at least 75 per cent of directors are Canadian citizens; and in the case of partnerships or trusts, if they own at least a 75-per-cent share.

The organizations must employ at least two journalists who operate at an “arm’s length” from management and be “primarily engaged in the production of original news content.” The news must fit into “matters of general interest and reports of current events, including coverage of democratic institutions and processes.” Publications focused on industry-specific news, sports, arts or entertainment are excluded.

Similar to registered charities, “qualified” news outlets will be required to make public filings with the Canada Revenue Agency that contain information about their activities.

As of 2020, the non-profit news outlets that qualify as donees must publicly report large donations and issue tax receipts to donors. Any one source of gifts or donations can’t be responsible for more than 20 per cent of total revenue — unless it’s by bequest, or the minister of finance specifically approves it, according to a draft of the legislative changes that would be required.

For the labour tax credit, additional criteria apply. Public corporations must be listed on a stock exchange in Canada and not be controlled by non-Canadian citizens. Private corporations must be at least 75-per-cent owned by Canadian citizens or by public corporations described above.

Similar to registered charities, qualified news outlets will be required to make public filings with the Canada Revenue Agency

The budget document also sets out what constitutes an “eligible newsroom employee” for the purposes of that credit — the journalist needs to work for the organization at least 26 hours a week, and must be, or expected to be, an employee for a minimum of 40 consecutive weeks.

The “eligible” journalists must spend at least 75 per cent of their time “engaged in the production of news content, including by researching, collecting information, verifying facts, photographing, writing, editing, designing and otherwise preparing content.”

The definitions are not necessarily set in stone. An “independent panel,” about which few details are yet available, will have the ability to make recommendations on eligibility criteria. It is expected to be formed soon, more likely within weeks rather than months.

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