Alberta SR&ED Tax Credit Program:
Innovation Employment Grant (IEG)
Receive Retroactive Research Tax Credits on R&D Projects.
The Innovation Employment Grant (IEG) is an Alberta provincial variant of the Canadian federal Scientific Research and Experimental Development (SR&ED) program. Businesses eligible to apply for the federal SR&ED program may also be eligible to apply for funding through the Alberta provincial Innovation Employment Grant (IEG) program. Funding through these federal and provincial programs can be stacked with other small business grants in Alberta.
Funding Amount
Depending on a corporation’s circumstances, they may be eligible for a refundable tax credit worth up to 20% of up to a maximum of $4 million of qualifying expenditures.
Eligible Applicants
Corporations with a permanent establishment in Alberta performing SR&ED approved activities in this province, subject to size tests.
Eligible Activities
Eligible expenditures must have been incurred in Alberta after December 31, 2020 and parallel those that qualify for the federal SR&ED program.
Program Deadlines
IEG claim must be filed within 21 months of year end and is contingent on the federal SR&ED claim being filed within 18 months of year end.
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Alberta Scientific Research and Experimental Development (SR&ED)
Amount of Tax Credits
The Innovation Employment Grant (IEG) parallels the federal SR&ED rules for eligible expenses and activities. The IEG is applied for in the corporation’s tax return for tax years ended after December 31, 2020. The filing deadline for the IEG is 21 months after year end and it is contingent on filing a federal SR&ED claim within 18 months of year end.
- Receive up to a 20% refundable tax credit on a maximum annual expenditure limit of $4 million.
- Up to an 8% refundable tax credit for eligible R&D spending carried out in Alberta, up to the corporation’s base level of spending.
- Up to an additional 12% refundable tax credit for eligible R&D spending that exceeds the corporation’s base spending level.
- A firm’s base level of spending is determined by calculating the corporation’s average qualifying R&D spending over the previous 2 years.
- The IEG is linearly reduced if the prior year’s taxable capital exceeds $10 million and is NIL at $50 million of taxable capital.
- IEG is considered government assistance and will reduce the federal pool of deductible SR&ED expenditures and qualified SR&ED expenditures.
Alberta Scientific Research and Experimental Development (SR&ED)
Eligible Applicants
The Innovation Employment Grant (IEG) is available to Alberta businesses investing in research and development activities in Alberta. The eligibility requirements for the program require that the business is eligible for tax credits through the federal SR&ED funding program:
- Available to corporations that undertake R&D in Alberta. Partnerships, trusts, and individuals are not eligible to claim the IEG
- The IEG is gradually phased out for firms with between $10 million and $50 million in taxable capital to ensure that the support targets small and medium-sized companies.
- Firms with $50 million or more in taxable capital are not eligible for the credit.
- Eligible expenditures must have been incurred in Alberta after December 31, 2020 and parallel those that qualify for the federal SR&ED program.
Alberta Scientific Research and Experimental Development (SR&ED)
Eligible Expenditures
The Innovation Employment Grant (IEG) parallels the federal SR&ED rules for eligible expenses and activities. Many of the expenses shown here are similar to the expenses that the business can get funded through the federal SR&ED funding program. The IEG can be stacked with the federal SR&ED program.
- Labour: Based on time spent on eligible activities in Alberta.
- Contractors: Portion of contract related to SR&ED performed on the business’ behalf. Must be a Canadian contractor and work must be performed within the province of Alberta.
- Third Party Payments: Payments (money or in-kind) to an entity to carry on SR&ED in the province of Alberta.
- Materials: Materials can be purchased from outside Alberta but must be used in the prosecution of SR&ED in Alberta.
- Overhead: Calculated using the Proxy (Quick) or Traditional (Detailed) method.
Alberta Scientific Research and Experimental Development (SR&ED)
Program Deadlines
Eligible expenditures must have been incurred for SR&ED in Alberta after December 31, 2020.
- Available for tax years ending after December 31, 2020. The filing deadline for the IEG is 21 months after year end and it is contingent on filing a federal SR&ED claim within 18 months of year end.
- The former Alberta SR&ED program ended on December 31st, 2019. That program provided a 10% tax credit on costs incurred for work classified as SR&ED in Alberta up to a $4 million annual expenditure limit. There is no Alberta program for SR&ED expenditures incurred during the 2020 calendar year.
To determine whether your business is eligible for benefitting through the Federal or Alberta Scientific Research and Experimental Development (SR&ED) tax credit programs, consider speaking with the Mentor Works team of Canadian government funding experts.
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