The provincial budget of February 9 has some interesting items that directly relate to the life sciences industry in Alberta. I have pulled a summary of items from the budget and listed them below.
Perhaps most notable is that the government has listened to our message regarding the Alberta Scientific Research and Experimental Development Tax Credit (SRED). BioAlberta as a whole, but specifically the Policy Committee, has worked for the past two years to effect a change to this program. We as an industry spoke, and they listened!
Below are excerpts from the budget pertaining to our industry.
SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT TAX CREDIT
Since 2009, companies conducting research and development in Alberta have been eligible for a provincial tax credit. The government introduced the Scientific Research and Experimental Development (SR&ED) Tax Credit to encourage more research and development in Alberta. Because knowledge is easily transferable, research undertaken by one company often benefits other companies. This reduces the incentive for companies to undertake research. Research and development tax credits encourage companies to increase the amount of research to more socially optimal levels. Alberta’s credit is worth 10 per cent of eligible expenditures up to $4 million, for a maximum credit of $400,000. The credit is refundable to all companies, which is especially helpful for start-up and early-stage companies because these companies can benefit from the credit even if they do not earn enough income to pay income taxes.
During 2011, the government undertook an internal review of the program to consider whether the original focus of targeting small start-up businesses is still appropriate, whether there are deficiencies in the program, and whether there are changes to the credit design that would better align the program with the intended goals. The government invited stakeholders to make written submissions with respect to the program. Overall, the program seems to be working as intended. One of the things the government consistently heard from stakeholders, though, is that deducting the federal investment tax credit when calculating Alberta’s credit (called the "grind") reduces the competitiveness of Alberta’s program in comparison to other provinces. It also adds complexity to both program compliance and administration. The government believes that the credit would be more effective and less complicated without the grind. As a result, Alberta will eliminate the grind, effective for tax years ending after March 31, 2012. This will enhance the program by about $25 million annually, or roughly 35 per cent
- Bioenergy Producer Credit Program. The Bioenergy Producer Credit Program provides incentives to develop bioenergy products, helping to support the Renewable Fuels Standard implemented in April 2011. The program is being revised, to exclude stand-alone operations producing ethanol from cereal grains. Budget 2012 includes $444 million in support for bioenergy initiatives over three years, including $66 million in 2012-13.
- The Agriculture Financial Services Corporation (AFSC) budget is $696 million in 2012-13. In addition to delivering the government’s agriculture insurance and income stabilization programs, financial services provided by AFSC support the development and expansion of agriculture, agri-businesses, value-added enterprises and commercial operations.
- The Alberta Livestock and Meat Agency Ltd. (ALMA) continues to implement the Alberta Livestock and Meat Strategy. With a total budget of $39 million in 2012-13, ALMA programs are designed to help build an internationally respected, competitive and profitable livestock and meat industry.
- Innovation. There is nearly $275 million budgeted for research, innovation and technology commercialization in 2012-13, a $9-million increase from 2011-12. This increase will allow for more capacity in key areas such as agriculture, energy and environment research. Operating support for the four agencies under the umbrella of Alberta Innovates is $216 million in 2012-13.
- Alberta’s International Strategy. Funding in the Ministry of Intergovernmental, International and Aboriginal Relations for international relations is $24 million in 2012-13 (an increase of nearly 60 per cent from 2011-12), to provide more capacity to deal with international and intergovernmental advocacy. In addition, this budget includes funding for externships, where competitive placements will be negotiated in international organizations, foundations and the private sector to provide Albertans with opportunities to gain valuable international experience early in their careers.
$273 million is forecast to be spent to complete projects in 2011-12, including:
- The Edmonton Clinic Health Academy at the University of Alberta, accommodating 682 students in health care programs;
- The Energy, Environment and Experiential Learning facility at the University of Calgary, accommodating 1,000 students and including a new power co-generation facility that will reduce the university’s carbon footprint.