Vol. 135, No. 1 — January 3, 2001

Registration
SOR/2001-3 13 December, 2000

INCOME TAX ACT

Regulations Amending the Income Tax Regulations (Drought Regions)

P.C. 2000-1769 13 December, 2000

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 221(see footnote a) of the Income Tax Act (see footnote b) hereby makes the annexed Regulations Amending the Income Tax Regulations (Drought Regions).

REGULATIONS AMENDING THE INCOME TAX REGULATIONS (DROUGHT REGIONS)

AMENDMENTS

1. Section 7305 the Income Tax Regulations(see footnote 1) is amended by deleting the word "and" at the end of paragraph (b), by adding the word "and" at the end of paragraph (c) and by adding the following after paragraph (c):

(d) the 1999 calendar year are

2. The Regulations are amended by adding the following after section 7305:

7305.01 For the purposes of subsection 80.3(4) of the Act, the prescribed drought regions in respect of a year include any particular area that is surrounded by a region or regions prescribed under section 7305 in respect of the year.

APPLICATION

3. Section 1 applies after 1998.

4. Section 2 applies after 1987.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

Section 80.3 of the Income Tax Act permits farmers who dispose of animals in their breeding herds due to drought conditions existing in a prescribed drought region in a year to exclude a portion of the sale proceeds from their taxable income until the following year, or the year following a consecutive series of drought years, as the case may be. As a result, the full amount of the proceeds eligible for the deferral will be available to replenish their herds at that time.

Prescribed drought regions are those regions of Canada that are designated, on the advice of the Minister of Agriculture and Agri-Food, as suffering from drought conditions during a year. This Regulation, which amends section 7305 of the Regulations, prescribes the regions which are eligible drought regions for 1999. It also introduces section 7305.01, which ensures that lands that are surrounded by prescribed regions are also considered to be prescribed regardless of the municipal status of those lands. It is relieving in nature and applies retroactively.

Alternatives

This Regulation is necessary to prescribe eligible drought regions for 1999. The regions prescribed for 1999 were determined by the Minister of Agriculture and Agri-Food to have suffered from drought conditions in that year. The other amendment made by this Regulation provides a clarification of the Regulations with respect to drought regions.

Benefits and Costs

This Regulation will allow farmers in the prescribed drought regions to defer the tax payable on sales of breeding animals in a year until a subsequent year. The portion of the sale proceeds, which can be deferred by a farmer, increases with the percentage of his or her herd which has been sold. In this manner, the tax deferral program is targeted at those farmers most severely disadvantaged by drought conditions.

Consultation

This list of prescribed regions was developed through consultations held by Agriculture and Agri-Food Canada with various parties, including provincial agriculture departments, farmers' associations, and crop insurers.

In addition, Canadians were given an opportunity to comment on the regions to be prescribed for 1999 following the publication, by Agriculture and Agri-Food Canada, of initial lists of drought regions on November 16, 1999 and of a final list on March 10, 2000. Finally, the text of the proposed amending Regulations was published in the Canada Gazette, Part I on October 7, 2000. No comments were received from the public with respect to the final list or the publication in the Canada Gazette.

Compliance and Enforcement

The Income Tax Act provides the necessary compliance mechanisms for Regulation 7305. These mechanisms allow the Minister of National Revenue to assess and reassess tax payable, conduct audits and seize relevant records and documents.

Contact

Kerry Harnish
Tax Legislation Division
Department of Finance
L'Esplanade Laurier
140 O'Connor Street
Ottawa, Ontario
K1A 0G5
Tel.: (613) 992-4385

Footnote a

S.C. 2000, c. 12, s. 142 (Sch. 2, par. 1(z.34))

Footnote b

R.S., c. 1 (5th Supp.)

Footnote 1

C.R.C., c. 945

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