Principal Issues: Whether the Canada Emergency Wage Subsidy would meet the exception in paragraph (b) of the definition of "government assistance" under the Ontario Book Publishers Tax Credit?
Position: No, CEWS is a subsidy, not a grant. Therefore it does not meet the noted exception.
XXXXXXXXXX
2020-087310 E. Wirag, CPA, CMA
January 21, 2021
Dear XXXXXXXXXX,
Re: Ontario Book Publishers Tax Credit (OBPTC)
We are responding to your inquiry as to whether the Canada Emergency Wage Subsidy (CEWS) is considered a grant that is not specific to a particular eligible literary work for purposes of the exception in paragraph (b) of the definition of government assistance for purposes of the Ontario Book Publishing Tax Credit (OBPTC) under the Ontario Taxation Act, 2007 (OTA). Your concern is that CEWS amounts that a recipient receives could adversely affect future amounts that recipient may be eligible to receive through the OBPTC in the year following the OBPTC claim.
Our comments
This technical interpretation provides general comments about the provisions of the OTA. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R10, Advance Income Tax Rulings and Technical Interpretations.
Government assistance for purposes of the OBPTC is considered to include a grant and a subsidy. The exception in paragraph (b) of the OBPTC definition of ‘government assistance’ of the OTA pertains to a grant that is not specific to a particular eligible literary work. As CEWS is a subsidy and not a grant, the exception will not apply and subsidy funds received as part of the CEWS program will be considered to be government assistance.
The CRA’s position on the nature of the CEWS payment is found in FAQ #25 at canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-frequently-asked-questions.
We note that you also ask that federal funding be examined to determine the impact on previously established provincial programs and ensure that small businesses are not penalized in the future for funding received now. Although the CEWS is a federal program, the provincial tax implications are the responsibility of each provincial jurisdiction. The Ontario Ministry of Finance is responsible for developing provincial tax policy and amending the legislation for Ontario. Therefore, I would encourage you to contact the Ontario Ministry of Finance to further discuss your concerns.
I trust the information I have provided is helpful.
Yours truly,
Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch