+ RMA Rural Municipalities
of Alberta

Resolution 6-02F

Federal Tax Deferral on Livestock Sales

January 1, 2002
Expiry Date:
December 1, 2005
Active Status:
Vote Results:

WHEREAS the Government of Canada recently announced the Livestock Drought Tax Deferral to ease the income tax problem associated with sale of livestock in a year when income is already significantly reduced;AND WHEREAS the program covers sales of breeding animals only, but most ranchers and farmers have had to sell other types of livestock due to the drought;AND WHEREAS some livestock operations have become specialized in recent years (for example, some operators only grass feed cattle and maintain no breeding herd), and while these operations are affected by the drought they are not eligible for assistance under the tax deferral program;AND WHEREAS the deferral is for one year only unless drought conditions continue;AND WHEREAS a herd reduction will have economic impacts lasting several years;AND WHEREAS the aforementioned program guidelines and limitations fail to meet the needs of drought stricken ranchers and farmers;

Operative Clause:

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties urge the Government of Canada to amend the Livestock Drought Tax Deferral program to include all livestock sales, base the herd reduction formula on animal units, and apply the tax deferral to the three years following a federal drought declaration.

Member Background:

The federal tax deferral program is available in Prescribed Drought Regions (PDR). All of Alberta has been declared such for 2002, which means that applicable income tax can be deferred for the 2003 tax year.The deferral is available only if the inventory of breeding animals at the end of the taxation year has been reduced to 85% or less. Reductions between 70% and 85% qualify for a 30% deferral. Reductions below 70% qualify for 90% deferral. Income is deferred to the next taxation year unless the area falls into another declared PDR.A cow/calf operator can expect a loss of income as a result of breeding herd reductions (i.e. less calves to sell) and a delay in getting the breeding herd built up (i.e. minimum two years before calves from retained replacement heifers are sold).The current Federal Tax Deferral program covers Breeding Animals only, (i.e. animals that are more than 12 months old and kept for breeding purposes). Typically this refers to cows and replacement heifers only. If the Programs intent is to help farmers and ranchers retain herds, this program is in fact encouraging the exact opposite. Because of the tax benefits of selling breeding animals, the herd retention aspect of the herd is lost. Farmers and ranchers are forced for financial tax reasons, to retain younger stock for future breeding which is, as stated earlier, two years away from producing a crop. Allowing income from steer sales as well to be tax deferrable will promote the retention of breeding cows and heifers hopefully a primary objective.

RMA Background:

The AAMDC has no resolutions currently in effect on this issue. However, in meetings with federal agricultural officials earlier this year, the AAMDC did urge the federal government to amend the tax deferral program to include the sale of all cattle, and to extend the program for a period of three to five years following the drought.

Federal Ministries and Bodies:
Agriculture and Agri-Food
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