Guidance on the income tax measures to support journalism

Proposed changes to legislation 

On April 17, 2020, the Department of Finance issued a News Release  and draft legislation announcing that changes would be made to the tax measures that support journalism. The Canada Revenue Agency will administer these changes as proposed and has updated the guidance on that basis. 

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1. Background

1.1. Federal Budget 2019 introduced three income tax measures to provide support to Canadian journalism organizations producing original news content, namely:

1.2. The legislation amending the Income Tax Act (the Act) related to the above measures, received Royal Assent on June 21, 2019.

1.3. Budget 2019 also announced that an independent panel of experts would be established for the purpose of providing recommendations and guidance on the administration of the legislative provisions that were introduced to support journalism. On May 22, 2019, the Minister of Canadian Heritage announced the establishment of the Journalism and Written Media Independent Panel of Experts (Panel). The Panel delivered its report containing recommendations on certain aspects of the legislation in July 2019.

1.4. In December 2019, the Minister of National Revenue announced that an independent advisory board would be established to make recommendations on whether an organization meets certain criteria necessary to be designated as a “qualified Canadian journalism organization” (QCJO). The Independent Advisory Board on Eligibility for Journalism Tax Measures (the Board) was established through Order in Council in March 2020. The members of the Board were also announced at that time.

1.5. The “gateway” for eligibility for all the income tax measures is for an organization to first be designated as a QCJO. While designation as a QCJO does not automatically entitle organizations to specific tax measures, it is the necessary first step in determining if any of the three income tax measures could apply.

1.6. The following guidance is intended to provide further information on each of the tax measures, as well as to clarify the requirements that need to be met for QCJO designation.

2. Qualified Canadian journalism organization designation

2.1. The legislative provisions of the Act that govern the designation of an organization as a QCJO are set out in the definition of a QCJO in subsection 248(1).

How to apply

2.2. An organization wishing to apply for designation as a QCJO is required to complete and submit form T625, Application for Qualified Canadian Journalism Organization Designation. The application form and supporting documents can be submitted to the Canada Revenue Agency (CRA) through My Business Account or can be mailed to:

Canada Revenue Agency
Journalism Section
6th floor
Place de Ville, Tower A, 320 Queen Street
Ottawa, ON K1A 0L5

2.3. The review of an organization’s application will be undertaken by the CRA, in consultation with the Board that has been established for this purpose.

2.4. The Board will provide independent recommendations to the Minister of National Revenue regarding the eligibility of organizations to be designated as QCJOs. The Board’s recommendation to the Minister will focus mainly on elements of the legislation dealing with original news content and journalistic processes and principles. A copy of the Board’s recommendation will be provided to the applicant organization with the decision regarding designation. As with most duties and functions related to CRA programs, the Minister’s duties are delegated to the appropriate CRA officials. Information about the delegation of the Minister’s powers is available at: Delegation of Ministerial powers, duties, and functions.

2.5. An organization that meets the criteria for QCJO designation will receive a letter from the CRA confirming the designation and providing a QCJO designation number.

2.6. An organization that does not meet the criteria for QCJO designation will also receive a letter from the CRA confirming the decision. While there are no formal rights under the Act to appeal a QCJO designation decision, an organization may request that the decision be reviewed by the CRA. The decision letter will attach a form that may be completed to request reconsideration of the original decision. The organization should state the reasons why it believes the delegated official’s decision is incorrect and authority has not been properly exercised, and include any new and relevant information to support the application. If the original decision does not change, the organization may apply for judicial review of the decision to the Federal Court of Canada.

Eligibility for designation

2.7. Subsection 248(1) of the Act sets out the definition of a QCJO including the conditions an organization must meet in order to qualify. In addition, the definition provides that the Minister of National Revenue is responsible for designating organizations as a QCJO.

2.8. To be considered for designation as a QCJO, an organization cannot be a Crown corporation, municipal corporation or government agency. Further, an organization must meet a number of criteria, as set out below.

Structure

2.9. The entity must be organized either as a corporation, partnership or trust, as described below.

Corporation

2.10. The corporation must be incorporated under the laws of Canada, a province, or a territory.

2.11. The corporation must be resident in Canada. For more information on determining whether a corporation is resident in Canada, please visit Residency of a corporation.

2.12. It is also necessary that the chairperson (or other presiding officer) and at least 3/4 of the directors or other similar officers be Canadian citizens.

Partnership

2.13. The partnership must be formed under the laws of a province or territory.

2.14. In the case of an organization that is a partnership, there are criteria related to the holding of partnership interests. In particular, individuals who are citizens of Canada, or persons (e.g. a corporation) or partnerships described in any of subparagraphs (a)(i) to (iii) of the definition of QCJO in subsection 248(1), must hold interests in the partnership that:

  1. represent in value at least 75% of the total value of the partnership property; and
  2. result in at least 75% of each income or loss of the partnership from any source being included in the determination of their incomes.

2.15. For more information on registering as a partnership in Canada, please visit Registering a sole proprietorship or partnership.

2.16. For more information about what a partnership is, please see Income Tax Folio S4-F16-C1, What is a Partnership?.

Trust

2.17. The trust must be formed under the laws of a province or territory, and be resident in Canada.

2.18. Additionally, if one or more beneficiaries under the trust is a person (e.g. individual or corporation) or partnership, at least 75% of the fair market value of all interests as a beneficiary under the trust must be held by individuals who are citizens of Canada or by a corporation, a partnership, or a trust as described in paragraph (a) of the definition of QCJO in subsection 248(1) of the Act.

2.19. Form T625, Application for Qualified Canadian Journalism Organization Designation, sets out the requirements and documents that an organization must submit to demonstrate eligibility.

2.20. For information on residency of a trust, please visit Income Tax Folio S6-F1-C1, Residence of a Trust or Estate and webpage Residency and how to contact us.

Operating in Canada

2.21. Subparagraph (a)(iv) of the definition of QCJO in subsection 248(1) of the Act requires that an organization operate in Canada which generally includes the requirement that its content is designed, edited, and, except in the case of digital content, published in Canada.

Original news content

2.22. The definition of QCJO, in subparagraph 248(1)(a)(v) of the Act, requires the organization be engaged in the production of original news content.

2.23. Original news content should be primarily focused on matters of general interest and reports of current events, including coverage of democratic institutions and processes. For clarity:

  1. General interest means news content that is aimed at a general audience, as opposed to specialists of a specific field. Content should be diverse and may include a variety of content such as local news, national news, international news, social issues (such as health, education, faith and ethics), business and economy, sports, culture, science and technology, and the environment.
  2. Democratic institutions include legislative bodies, municipal councils, courts of justice, and school boards.
  3. Democratic processes include elections and proceedings in legislative assemblies, such as the House of Commons.

2.24. The Panel has provided recommendations and guidelines on what is meant by original news content. These recommendations have been largely adopted by the CRA and are set out below.

2.25. The term original news content includes the content for which research, writing, editing and formatting are conducted by and for the organization. Original news content includes news, features, investigations, profiles, interviews, and analyses or commentaries, based on journalistic processes and principles, intended for a general audience.

2.26. Journalistic processes and principles include:

  1. a commitment to researching and verifying information before publication;
  2. a consistent practice of providing rebuttal opportunity for those being criticized and presenting alternate perspectives, interpretations and analyses;
  3. an honest representation of sources; and
  4. a practice of correcting errors.

but do not include:

  1. solicitation, design or production of advertising;
  2. advertorials, sponsored content, branded content (any content where a third party, advertising client or business partner, participates in the development of the concept or directs or gives final approval to a large portion of the content);
  3. stories produced primarily for industrial, corporate or institutional purposes; or
  4. editing content that is entirely or principally accumulated or produced by algorithms or by aggregation software.

2.27. The reproduction of material produced by another organization would not be considered original news content of the organization and will factor into the determination of whether an organization is engaged in the production of original news content.

2.28. Activities or publications that focus primarily on the following would not be considered the production of original news content:

  1. industry-specific publications, trade journals, travel magazines, sports or entertainment news;
  2. the rewriting, translation, reproduction or aggregation of news from external sources (including articles from news agencies, a current or previous issue of the same publication or any other publication);
  3. advertisements, listings, catalogues, directories, guides, financial reports, schedules, calendars, timetables, comic books, cartoons, puzzles, games and horoscopes;
  4. internal publications of companies, private or public bodies, or associations; and
  5. publication of content that is illegal in Canada.

2.29. Under subparagraph (a)(vii) of the QCJO definition in subsection 248(1), an organization cannot be significantly engaged in the production of content:

  1. to promote the interests, or report on the activities, of an organization, an association or its members; or
  2. for a government, Crown corporation or government agency.

Regularly employs two or more journalists

2.30. The definition of QCJO, in subparagraph 248(1)(a)(vi) of the Act, requires that an organization regularly employ two or more journalists who deal at arm’s length with the organization in the production of its content.

2.31. For clarity, “regularly employs” refers to the employment of journalists that is regular and continuous, either full-time or part-time, even if the position is temporarily unoccupied. For example, if an organization regularly employs two arm’s length journalists but one leaves, resulting in a temporary period where there is only one such journalist before a replacement is hired, that would not, in and of itself, disqualify the organization.

2.32. Freelance journalists are generally not considered to be employees of an organization, but would be self-employed contractors.

2.33. For more information on determining whether an individual is employed by an employer or is self-employed, please visit Employee or self-employed.

Arm’s length

2.34. As noted above, at least two journalists employed by the organization must deal at arm’s length with the organization in the production of its original news content.

2.35. Arm’s length refers to a relationship or a transaction between persons who act in their separate interests. An arm's length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their separate interests.

2.36. "Related persons" are not considered to deal with each other at arm's length. Related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption (legal or in fact). A corporation and another person or two corporations may also be related persons.

2.37. "Unrelated persons" may not be dealing with each other at arm's length at a particular time. Each case will depend upon its own facts. The following criteria will be considered to determine whether parties to a transaction are not dealing at arm's length:

2.38. For more information on related persons and dealing at arm’s length, please visit Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length, as well as the definition of arm’s length in Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Revocation of QCJO designation

2.39. The Department of Finance released draft legislation to include a mechanism for the Minister of National Revenue to revoke an organization’s designation as a QCJO where the organization no longer meets the requirements to qualify as a QCJO. The CRA will not begin to administer this change to the legislation until Royal Assent is received.

2.40 As noted above, most Ministerial duties under the Act related to CRA programs are delegated to the appropriate CRA officials. Information about the delegation of the Minister’s powers to revoke a QCJO designation will be available at: Delegation of Ministerial powers, duties, and functions once the legislation receives Royal Assent.

3. Canadian journalism labour tax credit

3.1. The purpose of the following guidance is to assist organizations to determine if they may be eligible for the Canadian journalism labour tax credit.

3.2. Section 125.6 and subsection 248(1) of the Act govern the Canadian journalism labour tax credit.

3.3. The Canadian journalism labour tax credit is effective January 1, 2019. Organizations that may otherwise be eligible for the refundable labour tax credit, and that file their tax returns before the forms for the administration of the tax credits is put in place, are encouraged to file their returns on time and amend them at a later date to claim the credit should they be designated as a QCJO.

Overview

3.4. The Canadian journalism labour tax credit is a refundable tax credit that is available at a rate of 25% of the total qualifying labour expenditure for a taxation year, in respect of an eligible newsroom employee of a qualifying journalism organization, less any amount received from the Aid to Publishers component of the Canada Periodical Fund (Aid to Publishers) in the year. An organization that is a QCJO (as defined in subsection 248(1) of the Act), and that meets certain specific conditions, is a qualifying journalism organization.

Who can claim the Canadian journalism labour tax credit?

3.5. The Canadian journalism labour tax credit is available to an organization that is a corporation, a trust, or a partnership that is a qualifying journalism organization. To be a qualifying journalism organization, the organization must first be designated as a QCJO. It must then meet certain specified conditions, as detailed in paragraph 3.7 below.

3.6. In addition, a registered journalism organization (as defined in subsection 248(1) and 149.1(1) of the Act) that meets the conditions of a qualifying journalism organization as defined in subsection 125.6(1) of the Act, may be entitled to this refundable tax credit in respect of its qualifying labour expenditure.

Qualifying journalism organization

3.7. A qualifying journalism organization (as defined in subsection 125.6(1) of the Act), at any time, means a QCJO that meets the following conditions:

  1. it does not hold a licence, as defined in subsection 2(1) of the Broadcasting Act; and
  2. it must meet one of the following conditions in the definition of Canadian newspaper, in subparagraph 19(5)(e)(iii) of the Act, if it is a corporation having share capital:
    1. if it is a public corporation, a class of shares of its capital stock is listed on a designated stock exchange in Canada, and the corporation is not controlled by non-Canadian citizens or subjects; or
    2. if it is any other type of corporation,
      • at least 75% of shares having full voting rights under all circumstances and, shares having a fair market value in total of at least 75% of the fair market value of all of the issued shares are beneficially owned by Canadian citizens or by public corporations described in (i).
      • special rules apply when the shares are held, or deemed to be held by another corporation (i.e., other than a public corporation a class of shares of its capital stock of which is listed on a designated stock exchange in Canada) or by a partnership in order to determine who shall be deemed to own those shares of the corporation and in what proportion.

3.8. Generally, a QCJO that satisfies the two conditions at any time in the taxation year, will be considered to be a qualifying journalism organization. Refer to Example 1.

Calculation of the Canadian journalism labour tax credit

3.9. The Canadian journalism labour tax credit is a 25% refundable tax credit on the total qualifying labour expenditure incurred in respect of each eligible newsroom employee of a qualifying journalism organization less any amount received from the Aid to Publishers at any time in the year. Specifically, the labour tax credit would be reduced for each dollar received from the Aid to Publishers.

3.10. Qualifying labour expenditures are subject to an annual cap of $55,000 (prorated by the number of days in the taxation year that the organization is a qualifying journalism organization), per eligible newsroom employee. Thus, the maximum credit available is $13,750 per eligible newsroom employee per year, for qualifying labour expenditures incurred for a period beginning on or after January 1, 2019. Refer to Examples 2 to 4.

3.11. Where a qualifying journalism organization is a partnership, the amount of the labour tax credit calculated as per above, is divided between the members of the partnership (qualifying members), other than members who are partnerships or specified members of the partnership. The total amount of the labour tax credit is allocated to the qualifying members based on their relative specified proportions. The qualifying members may then claim their share of the labour tax credit in the taxation year in which the partnership’s fiscal period ends, in respect of this credit.

3.12. A “specified member” is defined in the Act and is essentially any member of a partnership:

  1. who is a limited partner; or
  2. who is neither actively engaged in the activities of the partnership business other than its financing, nor otherwise engaged in a business similar to that carried on by the partnership (e.g. a passive general partner).

3.13. A partner's specified proportion for a fiscal period is that proportion of the partnership's total income or loss for that period that is the member's share. If the partnership's income or loss for the period is nil, the proportion is computed as if the partnership had $1 million of income for the period.

3.14. The labour tax credit for a qualifying member of a qualifying journalism organization that is a partnership is calculated using the following formula:

(0.25(P) – Q)R/S

where

Refer to Example 6.

3.15. While there is a limit on the maximum tax credit that a qualifying journalism organization can claim per eligible newsroom employee annually, there is no limit on the number of eligible newsroom employees employed by the organization in respect of whom this credit may be claimed.

Qualifying labour expenditure

3.16. A qualifying labour expenditure is the amount of salary or wages payable by a qualifying journalism organization to an eligible newsroom employee of the organization for a taxation year, less the amount of any assistance received or can reasonably be expected to be received in respect of salary or wages payable for that employee for the taxation year. These expenditures are subject to an annual cap of $55,000 (prorated for the number of days in the taxation year that the organization is a qualifying journalism organization - Refer to Example 4), per eligible newsroom employee.

3.17. The amount of the qualifying labour expenditure for a taxation year in respect of an eligible newsroom employee is the lesser of the following two amounts:

3.18. Generally, salary or wages of an eligible newsroom employee means the income from an office or employment and includes amounts paid to an employee such as vacation pay, statutory holiday pay, sick leave pay, and certain taxable benefits (e.g., a corporation’s contribution to its employees’ registered retirement savings plan, group insurance plan).

3.19. An organization that is a qualifying journalism organization at any time in the taxation year generally will be eligible to claim the Canadian journalism labour tax credit for that taxation year in respect of the organization’s qualifying labour expenditures. However, if an organization fails to satisfy either one of the conditions, then salary or wages payable to an eligible newsroom employee are only included in respect of the portion of the taxation year throughout which the organization is a qualifying journalism organization. Refer to Examples 3 and 4.

Eligible newsroom employee

3.20. An eligible newsroom employee (as defined in subsection 125.6(1) of the Act), in respect of a qualifying journalism organization in a taxation year, means an individual who:

  1. is employed by the organization in the taxation year;
  2. works, on average, a minimum of 26 hours per week throughout the portion of the taxation year in which the individual is employed by the organization;
  3. at any time in the taxation year, has been, or is reasonably expected to be, employed by the organization for a minimum period of 40 consecutive weeks that includes that time;
  4. spends at least 75% of their time engaged in the production of original written news content, including researching, collecting information, verifying facts, photographing, writing, editing, designing and otherwise preparing content (including employees who may be editors, photographers or graphic designers); and
  5. meets any conditions that may be prescribed (currently there are no prescribed conditions).

It should be noted that

  1. original written news content requires that the content be in writing. For example, an image, video, or audio, without accompanying text, would not be considered “original written news content”; and
  2. original news content, as described in paragraph 2.23, is produced by the organization.

3.21. Also, an employee who is hired near the end of a taxation year, or who ceased to be employed before the 40-week period expires, could qualify as an eligible newsroom employee in respect of the taxation year provided that there was a reasonable expectation that they would work for more than 40 consecutive weeks.

Assistance

3.22. Assistance is defined in subsection 125.6(1) of the Act for the purpose of the Canadian journalism labour tax credit. For the purpose of “B” in the formula for calculating the qualifying labour expenditure of a qualifying journalism organization, assistance is the amount that the organization has received, is entitled to receive or can reasonably be expected to receive (and that has not been repaid before the end of the year pursuant to a legal obligation to do so), in respect of the salary or wages payable by the organization to an eligible newsroom employee, and in respect of the portion of the taxation year throughout which the organization is a qualifying journalism organization.

3.23. In the calculation of the qualifying labour expenditure, amounts that are considered to be assistance in respect of an eligible newsroom employee reduce the amount of qualifying labour expenditure in the formula “A-B”, in respect of that employee. Such assistance consists of amounts that would be included in computing income of the organization under paragraph 12(1)(x) of the Act.

3.24. Generally, assistance includes amounts such as a refund, reimbursement, contribution, or allowance, whether as a grant, subsidy, forgivable loan, deduction from tax, or any other form of inducement. For example, provincial tax credits earned on the same qualifying labour expenditure would generally be considered assistance. Refer to Example 5.

3.25. While the Canadian journalism labour tax credit of a qualifying journalism organization and any amount received from the Aid to Publishers by the organization in the taxation year, are considered to be assistance that the organization received from a government immediately before the end of the year, they are not considered to be government assistance in the calculation of the qualifying labour expenditure for the purposes of determining the Canadian journalism labour tax credit itself. This means that the Canadian journalism labour tax credit and amounts received from the Aid to Publishers will not be included in “B” in the formula for calculating the qualifying labour expenditure for a qualifying journalism organization. See Examples 2 to 5.

Income inclusion

3.26. The amount of the Canadian journalism labour tax credit for a taxation year is considered to be assistance received by a qualifying journalism organization from a government, immediately before the end of the year (other than for the purpose of determining the Canadian journalism labour tax credit itself), and must be included in the income of the qualifying journalism organization for that year, as set out in paragraph 12(1)(x) of the Act. However, the organization may elect under subsection 12(2.2) of the Act to reduce the amount of the salary or wages incurred in the year by all or part of the government assistance received in the year in respect of the expense.

Examples

3.27. The following examples are intended to help understand the calculation of the qualifying labour expenditure and the Canadian journalism labour tax credit, by a qualifying journalism organization under different scenarios.

Example 1 – Qualifying journalism organization

3.28. XYZ Ltd. is designated as a QCJO and during its taxation year, January 1 – December 31, 2019, it met all the conditions to be a qualifying journalism organization. Its qualifying labour expenditure for the taxation year is $50,000. It also received $10,000 from the Aid to Publishers on December 1, 2019. For the 2019 taxation year, the Canadian journalism labour tax credit for XYZ Ltd. is calculated as follows:

Qualifying labour expenditure for the year = $50,000

Amount received from the Aid to Publishers = $10,000

Amount of the refundable labour tax credit (25% x $50,000) -$10,000 = $2,500*

*This amount will be included in income.

3.29. Note: If XYZ Ltd. received an amount in excess of 25% of its qualifying labour expenditure ($12,500 in the above example), from the Aid to Publishers in the taxation year, its labour tax credit would be reduced to $0. Refer to Example 3.

Example 2 – Qualifying labour expenditure

3.30. ABC Ltd. is designated as a QCJO with four eligible newsroom employees, Mohammed, Claire, Zhang and Sara. Mohammed and Claire are paid an annual salary of $60,000 while Zhang and Sara are paid an annual salary of $40,000. ABC Ltd. has a January 1 to December 31 taxation year and has remained a qualifying journalism organization throughout its 2019 taxation year. ABC Ltd. did not receive any assistance in respect of amounts payable to these employees. Further, it did not receive any amount from the Aid to Publishers in 2019. The qualifying labour expenditure and the Canadian journalism labour tax credit for ABC Ltd., are calculated as follows:

Qualifying labour expenditure
- Mohammed Claire Zhang Sara

Total qualifying labour expenditure of ABC Ltd. = $190,000

Amount received from the Aid to Publishers = $0

Amount of the refundable labour tax credit (25% x $190,000) −$0 = $47,500*

* This amount will be included in income.

Salary – Jan 1-Dec 31, 2019 (A) $60,000 $60,000 $40,000 $40,000
Less: Assistance received in respect of (A) (B) $0 $0 $0 $0
Adjusted annual salary (A-B) (1) $60,000 $60,000 $40,000 $40,000
Maximum eligible salary per employee (2) $55,000 $55,000 $55,000 $55,000
Qualifying labour expenditure – Lesser of (1) and (2) - $55,000 $55,000 $40,000 $40,000

Example 3 – Qualifying journalism organization for a portion of the year

3.31. In the scenario described in Example 2, consider the situation where ABC Ltd. holds a licence, as defined in subsection 2(1) of the Broadcasting Act, as of June 1, 2019 (thereby ceasing to be a qualifying journalism organization from that date). In this situation, ABC Ltd. does not satisfy one of the four conditions to be a qualifying journalism organization beginning June 1, 2019. Therefore, it is a qualifying journalism organization only from January 1 to May 31, 2019 (151 days). Actual salary paid to the employees for the period January 1 to May 31, 2019 is $25,000 each for Mohammed and Claire, and $16,500 each for Zhang and Sara. Further, ABC Ltd. received $20,000 from the Aid to Publishers in July 2019. For the purpose of calculating its qualifying labour expenditure, salary or wages paid for the period June 1 to December 31, 2019 will not be considered. For the 2019 taxation year, the qualifying labour expenditure and the Canadian journalism labour tax credit for ABC Ltd., are calculated as follows:

Qualifying journalism organization for a portion of the year
- Mohammed Claire Zhang Sara

Total qualifying labour expenditure for ABC Ltd. = $78,506

Amount received from the Aid to Publishers = $20,000

Amount of the refundable labour tax credit = (25% x $78,506) -$20,000= $0

Salary - Jan 1-May 31, 2019 (A) $25,000 $25,000 $16,500 $16,500
Less: Assistance received in respect of (A) (B) $0 $0 $0 $0
Adjusted annual salary (A-B) (1) $25,000 $25,000 $16,500 $16,500
Maximum eligible salary per employee - $55,000 $55,000 $55,000 $55,000
$55,000 prorated for 151 days that ABC Ltd. was a qualifying journalism organization (2) $22,753 $22,753 $22,753 $22,753
Qualifying labour expenditure – Lesser of (1) and (2) - $22,753 $22,753 $16,500 $16,500

Example 4 – Taxation year with less than 365 days

3.32. QRS Ltd. commences business on May 1, 2019. It has chosen to have a January 1-December 31 taxation year. Its first taxation year from May 1 to December 31, 2019, is a short taxation year. QRS Ltd. is a qualifying journalism organization throughout its first three months, May - July (92 days), of the taxation year. QRS Ltd. has two eligible newsroom employees, Claire and Sara. They are each paid a salary of $40,000 for the period May 1, to December 31, 2019. QRS Ltd. did not receive any assistance in respect of salaries paid to these employees. Further, QRS Ltd. did not receive any amount from the Aid to Publishers in 2019. For the 2019 taxation year, the qualifying labour expenditure of QRS Ltd. and its Canadian journalism labour tax credit are calculated as follows:

Taxation year with less than 365 days
- Claire Sara

Total qualifying labour expenditure for QRS Ltd. = $27,726

Amount received from the Aid to Publishers = $0

Amount of the refundable labour tax credit = (25% x $27,726) - $0 = $6,932*

*This amount will be included in income.

Salary - May 1-July 31, 2019 (A) $40,000 $40,000
Less: Assistance received in respect of (A) (B) $0 $0
Adjusted annual salary (A-B) (1) $40,000 $40,000
Maximum eligible salary per employee - $55,000 $55,000
$55,000 prorated for 92 days that QRS Ltd. was a qualifying journalism organization
($55,000 x 92/365)
(2) $13,863 $13,863
Qualifying labour expenditure – Lesser of (1) and (2) - $13,863 $13,863

Example 5 – Assistance received

3.33. ABC Ltd. is a qualifying journalism organization with four eligible newsroom employees, Mohammed, Claire, Zhang and Sara. Mohammed and Claire are paid an annual salary of $85,000 and $75,000 respectively, while Zhang and Sara are paid annual salaries of $40,000. ABC Ltd. has a January 1 to December 31 taxation year and has remained a qualifying journalism organization throughout its 2019 taxation year. Further, in 2019, ABC Ltd. received a provincial tax credit of $26,250 each for Mohammed and Claire, and $14,000 each for Zhang and Sara. The provincial tax credit is equal to 35% of the salary or wages, subject to a salary cap of $75,000 per employee, for each eligible newsroom employee, in connection with the qualifying labour expenditure. The provincial tax credit that ABC Ltd. received in 2019 is considered assistance for the purpose of calculating the qualifying labour expenditure. ABC Ltd. did not receive any amount from the Aid to Publishers in 2019.

For the 2019 taxation year, the qualifying labour expenditure for ABC Ltd. with respect to each eligible newsroom employee, and the Canadian journalism labour tax credit are calculated as follows:

Assistance received
- Mohammed Claire Zhang Sara

Total qualifying labour expenditure of ABC Ltd. = $155,750

Amount received from the Aid to Publishers = $0

Amount of the refundable labour tax credit (25% x $155,750) = $38,938*

*This amount and the provincial tax credit will be included in income.

Salary - Jan 1-December 31, 2019 (A) $85,000 $75,000 $40,000 $40,000
Less: Assistance received in respect of (A) (B) ($26,250) ($26,250) ($14,000) ($14,000)
Adjusted annual salary (A-B) (1) $58,750 $48,750 $26,000 $26,000
Maximum eligible salary per employee (2) $55,000 $55,000 $55,000 $55,000
Qualifying labour expenditure – Lesser of (1) and (2) - $55,000 $48,750 $26,000 $26,000

Example 6 – Partnerships

3.34. A partnership that is a qualifying journalism organization, has three members (Mohamed, Claire and Zhang), each of who shares equally in the profits (losses) of the partnership (i.e., their specified proportions are each ⅓). Mohamed is a specified member of the partnership. Claire and Zhang are qualifying members (as they are eligible to claim the credit). The partnership has $10,000 in qualifying labour expenditures for its fiscal period, and has received no amount from the Aid to Publishers.

To calculate the labour tax credit for a qualifying member of the partnership, the formula provided is (0.25(P) – Q)R/S.

P is $10,000, the qualifying labour expenditure of the partnership.

Q is nil, as no amount from the Aid to Publishers has been received in the fiscal period.

R is ⅓, the specified proportion of a qualifying member of the partnership.

S is ⅔, the total of all specified proportions of all qualifying members of the partnership.

The amount of the refundable labour tax credit for each qualifying member is:(0.25 x ($10,000) - $0) x (0.3333) / (0.6667) = $1,250

How to claim the Canadian journalism labour tax credit if you are incorporated

3.35. Subsection 125.6(2) of the Act requires a qualifying journalism organization to file a prescribed form containing prescribed information with its return of income for the year in order to claim the Canadian journalism labour tax credit. However, the prescribed form for claiming this credit has yet to be released.

3.36. Until such time as the prescribed form is made available, attach with the T2 corporation income tax return all the following information/ documents in order to claim the tax credit:

  1. a letter that states the name of the organization, its business number, the taxation year for which it is claiming the refundable labour tax credit, and the dollar amount of the credit it is claiming;
  2. any amount the corporation may have received from the Aid to Publishers in the taxation year;
  3. the period for which the organization was a qualifying journalism organization in the taxation year;
  4. a schedule showing all the following information in respect of each eligible newsroom employee:
    • the employee’s name;
    • the employee’s social insurance number;
    • the salary or wages payable to the employee for the portion of the taxation year (on or after January 1, 2019) throughout which the organization was a qualifying journalism organization; and
    • the amount of any assistance received in the year in respect of the employee that had not been repaid before the end of the year pursuant to a legal obligation to do so; and
  5. a copy of the letter from the CRA designating the organization to be a QCJO.

3.37. If you file a paper T2 corporation income tax return, send the supporting documents and the required attachments with the return to your tax centre.

3.38. If you file the T2 corporation income tax return electronically, you may be able to attach the supporting documents using the T2 Attach-a-doc service. The T2 Attach-a-doc service allows corporations to attach supporting documentation when filing their T2 corporation income tax return or within 24 hours of its filing.

3.39. If you cannot use the T2 Attach-a-doc service to file the supporting documents with the T2 corporation income tax return, send them to your tax centre. In any case, CRA will consider the filing requirement in subsection 125.6(2) of the Act to have been met if your supporting documents are received on or before the day that is 30 days after the filing due date of your income tax return.

3.40. Members of partnership (that is a qualifying journalism organization), and trusts that are qualifying journalism organizations will also be required to provide similar information to claim the Canadian journalism labour tax credit as the prescribed form for claiming this credit has yet to be released.

3.41. Further, with respect to a partnership that is a qualifying journalism organization, the credit will be effectively divided between the members of the partnership, other than members who are partnerships and or specified members of the partnership, on its specified proportions (as explained in paragraph 3.11. and in Example 6).

Timing for filing a tax return

3.42. The Canadian journalism labour tax credit is effective as from January 1, 2019. Organizations that may otherwise be eligible for this refundable labour tax credit, and that must file their tax returns before the prescribed forms for claiming this tax credit is available, are encouraged to file their returns on time and amend them at a later date to claim the credit should they be designated as a QCJO.

3.43. Subsection 164(1) of the Act provides a taxpayer up to three years from the end of the taxation year to file its tax return in order to request a refund of an overpayment of tax. Therefore, to claim the Canadian journalism labour tax credit, the qualifying journalism organization is required to file its return within three years from the end of the taxation year.

3.44. Further, the Canadian journalism labour tax credit results in an adjustment under paragraph 12(1)(x) of the Act to include the amount of the credit in the taxpayer’s income. Where the organization has filed its return of income, but did not claim the labour tax credit at the time of filing the return, an amendment to the return is required to report the income and claim the credit. The organization may amend its return of income within the normal reassessment period (within three years from the date of the original notice of assessment, or of an original notification that no tax was payable for the year and, within four years for a mutual fund trust or a corporation that is not a Canadian-controlled private corporation) to claim the Canadian journalism labour tax credit.

4. Information for organizations providing digital news subscriptions

4.1. The legislation governing the digital news subscription tax credit is set out in section 118.02 of the Act.

Overview

4.2. The digital news subscription tax credit is a non-refundable tax credit for amounts paid by individuals after 2019 and before 2025 for qualifying subscription expenses. The credit is calculated by multiplying the lowest personal income tax rate (15%) by the total of all amounts paid by individuals for qualifying subscription expenses in the year up to $500.

4.3. As a result of draft legislation released by the Minister of Finance in April 2020, a new form, T622, Digital News Subscription Tax Credit – Eligible Subscription, and process have been released to allow organizations to seek confirmation that the digital subscription(s) they offer may be eligible as a qualifying subscription expense for the digital news subscription tax credit for individuals. Organizations whose digital subscriptions meet the criteria will have their names, the names of their subscriptions and the publications associated with the subscriptions listed on Canada.ca.

How to apply

4.4. An organization wishing to request a determination that the digital subscription it offers may be eligible as a qualifying subscription, should complete and submit form T622, Digital News Subscription Tax Credit – Eligible Subscription. The form can be submitted to the CRA through My Business Account or can be mailed to:

Canada Revenue Agency
Journalism Section
6th floor
Place de Ville, Tower A, 320 Queen Street
Ottawa, ON K1A 0L5

4.5. The review of an organization’s request will be undertaken by the CRA, in consultation with the Board. Organizations can submit the T622, Digital News Subscription Tax Credit – Eligible Subscription, either at the time that they apply for designation as a QCJO, or at a later date.

Qualifying subscription expense

4.6. A qualifying subscription expense is the amount paid in the year by an individual to a QCJO for a "digital news subscription". In the case of combined digital and newsprint subscriptions, or if the digital news subscription provides access to content other than content of QCJOs, only the cost of a comparable stand-alone digital news subscription offered by the QCJO is an eligible expense. If there is no comparable stand-alone digital news subscription available, then only one half of the amount paid is an eligible expense. Amounts paid to an organization will be eligible only if, at the time they are paid, the organization is a QCJO.

Digital news subscription

4.7. A digital news subscription is an agreement entered into between an individual and a QCJO if the agreement entitles the individual to access content of the QCJO in digital form and the content is primarily original written news and the QCJO does not hold a licence as defined in subsection 2(1) of the Broadcasting Act.

Supporting documents

4.8. The QCJO that received the payments for a qualifying subscription expense should provide its subscribers with a receipt showing information about the services provided. The receipt should include:

4.9. Subscribers should keep all their receipts in case the CRA asks to see them at a later date.

How do I know if my subscription qualifies?

4.10. Individuals wanting to know if their digital news subscription is eligible as a qualifying subscription expense will be able to check the Canada.ca webpages that will be created for this purpose.

4.11. A QCJO will complete form T622, Digital News Subscription Tax Credit – Eligible Subscription, for a determination of whether their subscriptions listed on the form meet the eligibility criteria for the credit. Qualifying subscriptions will be published on Canada.ca webpages created for this purpose.

4.12. Organizations whose subscriptions cease to qualify for the credit are required to inform subscribers. Existing subscriptions whose names have been published on Canada.ca as eligible subscriptions will continue to qualify until the end of the year in which the CRA amends the webpage to indicate that the subscription is no longer eligible.

5. Registered journalism organizations requirements for registration

Purpose

5.1. This guidance provides information on the requirements for obtaining and maintaining qualified donee status as a registered journalism organization (RJO) under the Act.

5.2. The relevant parts of the Act and Regulations governing RJOs are set out as follows:

Overview

5.3. Budget 2019 announced the creation of RJOs as a new type of qualified donee under the Act. RJOs are exempt from income tax. As qualified donees, they can issue donation receipts for gifts they receive. Donors may use these receipts to claim a charitable donation tax credit (for individuals) or a deduction from taxable income (for corporations) on their income tax return. The Act also allows registered charities to make gifts to qualified donees.

5.4. Registration as an RJO is a two-step process. To be eligible for registration as an RJO, a journalism organization must first apply for and receive designation as a QCJO by the CRA. The second step is to apply for RJO status and meet the registration criteria set out under subsection 149.1(1) of the Act (the registration criteria are further detailed below in “Eligibility criteria”). If the journalism organization meets the registration criteria for RJO status, the Minister of National Revenue may then register it as an RJO. The organization’s name, address, registration date, registration number and registration status will then be included on a publicly available list maintained by the CRA.

5.5. An RJO’s registration may be revoked if it no longer meets the eligibility criteria for registration or fails to meet its other obligations as a qualified donee under the Act. Examples of these obligations include the requirement to:

Application process

5.6. Designation as a QCJO is separate from registration as an RJO. A QCJO must apply to the CRA and meet additional criteria to qualify for registration as an RJO. To apply to become an RJO, an organization must complete and submit form T624, Application to Register a Journalism Organization Under the Income Tax Act, along with any supporting documents. The RJO application can be submitted to the CRA with the QCJO application. For more information on the application process go to QCJO/RJO registration process.

5.7. An organization that is denied registration as an RJO may file an objection with the CRA Appeals Branch if it disagrees with the CRA's decision. For more information, go to Objections.

Eligibility criteria

5.8. To be registered as an RJO, an organization must meet all the following criteria, as set out in subsection 149.1(1) of the Act:

  1. it must be designated as a QCJO;
  2. it must be a corporation or a trust;
  3. it must be constituted and operated for purposes exclusively related to journalism;
  4. any business activities it carries on must be related to its purposes;
  5. it has trustees or a board of directors, each of whom deals with each other at arm’s length;
  6. it cannot be controlled, directly or indirectly in any manner whatever, by a person or group of persons that do not deal with each other at arm’s length;
  7. generally, in a taxation year, it cannot accept gifts from any one source that represent more than 20% of its total revenue (including donations);
  8. no part of its income can be payable to, or otherwise available for the personal benefit of, any proprietor, member, shareholder, director, trustee, settlor or like individual; and
  9. it is primarily engaged in the production of original news content.

It should be noted that “primarily” generally means that an organization’s original news content represents at least 50% of its overall editorial content.

Structure, purposes and activities

5.9. To be eligible for qualified donee status as an RJO, an organization must first be designated as a QCJO by the CRA. For more information on the requirements for QCJOs and how to apply for the designation see the section on Qualified Canadian journalism organization.

5.10. An RJO, can be incorporated under a federal, provincial or territorial statute or it can be formed as a trust. A journalism organization formed as a partnership will not qualify for registration.

5.11. An RJO must be constituted for purposes exclusively related to journalism. This means that it must have stated purposes in its incorporation or trust documents and they must all relate to journalism. The RJO must also be operated to further those purposes. An organization with a mix of journalism related purposes and other non-journalism related purposes will not qualify. To fulfill the exclusivity requirement, an RJO must use its resources (financial, personnel and property) to further its journalism purposes. To determine if an organization is constituted and operated for purposes exclusively related to journalism its activities will be examined to see whether they further its purposes.

5.12. RJOs must focus on producing original news content. Complementary content normally associated with producing and publishing news content could also be acceptable, however this content must remain subordinate to producing and publishing news content. Complementary content includes items such as financial reports, listings, guides, directories, calendars, comic strips, cartoons, puzzles, games and horoscopes. Activities that fall outside of these categories may not be related to journalism, and will be considered by the CRA on a case-by-case basis.

5.13. An RJO may also carry on business activities that are related to its purposes. Carrying on a business usually means the continuous or regular operation of a commercial activity with the intention to earn a profit. A business activity will not be considered related simply because it generates profits that the organization can use to fund its programs. The organization must be able to demonstrate the link between the business activity and its purposes. The sale of news content, advertising and subscriptions are examples of business activities that would be considered to be related to journalism. There may be other business activities related to journalism. The CRA will consider these activities on a case-by-case basis. RJOs may not carry on business activities that are not related to journalism.

5.14. An RJO can hold an interest in a partnership and it will not be considered to be carrying on a business activity if it meets all of the following conditions:

5.15. An RJO that acquires and holds a partnership interest beyond these limits would be considered to be carrying on the business of the partnership. In this circumstance, the business would need to be related to the RJO’s purposes in order to meet the registration requirements under the Act.

Control

5.16. An RJO should not be used to promote the views or objectives of any particular person or related group of persons. There are limitations on who can control an RJO and how much funding it can receive from one source.

5.17. The members of an RJO’s board of directors or its trustees must all deal with each other at arm’s length. Arm’s length refers to a relationship or a transaction between persons who act in their own separate interests. Related persons are not considered to deal with each other at arm’s length. Persons include individuals, corporation or trusts. Related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption (legal or in fact).

5.18. For further information on arm’s length relationships and the concept of control, please see Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arms Length.

5.19. An organization will not qualify as an RJO if a person who is not dealing with the RJO at arm’s length controls it, directly or indirectly in any manner whatever. It also will not qualify if it is controlled by a group of persons that do not deal with each other at arm’s length.

5.20. An RJO may not accept gifts from any one source that represents more than 20% of its total revenues (including donations) for a taxation year, unless the gift is made by bequest or made within 12 months after the organization is first registered. Gifts from a source that represents more than 20% of the RJO’s total revenue may also be approved on a case-by-case basis. Generally speaking, the CRA will consider such a gift to be acceptable, where it is exceptional and is not an ongoing source of revenue. The RJO would also need to demonstrate that it will not be controlled by the source that made the gift.

5.21. A source includes any one person, such as an individual, corporation or trust. It can also be a group of persons that do not deal with each other at arm’s length.

Limitation on income distribution

5.22. An RJO must have purposes exclusively related to journalism, so it must use its resources to further its purposes. As such, an RJO cannot distribute its profits. Also, it cannot allow its income to be payable, or otherwise available for the personal benefit of any proprietor, member or shareholder, director, trustee, settlor or like individual at any time, including during dissolution or winding up. An RJO’s governing document should include a statement to this effect to address this limitation.

5.23. An RJO can compensate a proprietor, member or shareholder, director, trustee, settlor or like individual for services they provide for the benefit of the RJO, as long as the compensation is fair and reasonable. Any paid services they provide should be necessary in order for the RJO to carry on its journalism activities. Compensation that does not meet these conditions could be viewed as a personal benefit and the organization would not qualify for registration as an RJO. An RJO may also reimburse expenditures these persons incur on behalf of the organization.

Requirements for maintaining registration

5.24. To maintain its registration, an RJO must continue to meet the eligibility criteria set out in this guidance along with its other obligations as a qualified donee under the Act. These obligations include:

5.25. The CRA monitors the operations of qualified donees to determine whether they comply with their obligations under the Act. If an RJO is audited and found to be non-compliant, the CRA will generally give the RJO a chance to correct its non-compliance through education or a compliance agreement before imposing penalties or revoking registration. Where an RJO receives a notice from the CRA proposing to revoke its registration, the RJO may file an objection with the CRA Appeals Branch. If it disagrees with the Appeals Branch’s decision, the RJO can appeal the decision to the Federal Court of Appeal. For more information, go to Compliance for other qualified donees.

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