Extended Drought Tax Deferral

Res #: 8-23A
Number: 8
Year: 2023
Midterm: No
Expired: No
Responses Received: Yes
Departments: Agriculture and Agri-Food Canada

WHEREAS the federal government grants a one-year tax deferral on the proceeds of sale of breeding stock sold due to drought for producers operating in designated drought zones.

WHEREAS one year is often insufficient time for grasslands to recover from drought.

WHEREAS returning livestock to drought damaged grasslands before they have recovered is detrimental to long term sustainability.

BE IT RESOLVED that SARM lobby the federal and provincial government to extend the drought tax deferral to a minimum of two years.

BE IT FURTHER RESOLVED that in cases where a municipality is designated as a drought zone in consecutive years, that the deferral be extended to one year following the removal of that municipality from designated drought zone status.

Responses From: Agriculture and Agri-Food Canada

November 3, 2023

Thank you for your letter regarding the Saskatchewan Association of Rural Municipalities’ 2023 Annual Convention Resolution regarding the Livestock Tax Deferral (LTD).

As you are aware, the Livestock Tax Deferral is an important tool for livestock producers who are faced with the tough decision to sell breeding livestock as a result of forage shortages due to drought or excess moisture. The LTD is designed to respond to events based on specific criteria as outlined in the Income Tax Act. As there is a tax benefit under the Income Tax Act, it is important that the designation criteria be clearly defined and applied consistently among livestock farmers.

As you know, regions are LTD-designated when forage yields are less than 50 percent of the long-term average yield due to drought, excess moisture or flooding. The Income Tax Act then allows for a one-year deferral on the income from the sales of breeding herds.

I understand that drought can have multi-year impacts. The LTD provision is applied every year to determine whether regions qualify for the provision. If the drought causes challenges for more than one year and pastures are not able to recover, the affected regions will be designated for the Livestock Tax Deferral as long as the criteria are met.

I assure you that I am committed to ensuring producers have the tools they need to manage the risks they face. Again, thank you for writing.

The Honourable Lawrence MacAulay – Minister, Agriculture and Agri-Food Canada