Vol. 138, No. 7 — April 7, 2004

Registration
SOR/2004-45 23 March, 2004

INCOME TAX ACT

Regulations Amending the Income Tax Regulations (2002 Drought Regions)

P.C. 2004-246 23 March, 2004

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 (2002 Drought Regions).

REGULATIONS AMENDING THE INCOME TAX REGULATIONS (2002 DROUGHT REGIONS)

1. Section 7305 of the Income Tax Regulations (see footnote 1) is amended by striking out the word "and" at the end of paragraph (e), by adding the word "and" at the end of paragraph (f) and by adding the following after paragraph (f):

(g) the 2002 calendar year are

(i) in Ontario, the Counties of Bruce, Elgin, Lambton and Middlesex, the Municipality of Chatham-Kent, the District of Cochrane and the Regional Municipalities of Halton and Peel,

(ii) in Manitoba, the Rural Municipalities of Albert, Alonsa, Archie, Argyle, Arthur, Birtle, Blanshard, Brenda, Cameron, Clanwilliam, Coldwell, Cornwallis, Daly, Dauphin, Edward, Ellice, Elton, Eriksdale, Ethelbert, Gilbert Plains, Glenella, Glenwood, Grahamdale, Grandview, Hamiota, Harrison, Hillsburg, Kelsey, Langford, Lansdowne, Lawrence, McCreary, Miniota, Minitonas, Minto, Morton, Mossey River, Mountain, North Cypress, Oakland, Ochre River, Odanah, Park, Pipestone, Riverside, Roblin, Rosedale, Rossburn, Russell, Saskatchewan, Shell River, Shellmouth-Boulton, Shoal Lake, Sifton, Siglunes, Silver Creek, South Cypress, St. Laurent, Ste. Rose, Strathclair, Strathcona, Swan River, Turtle Mountain, Wallace, Whitehead, Whitewater, Winchester and Woodworth, and the unorganized territory that is north of the Rural Municipality of Alonsa, between that rural municipality and the south shore of Lake Manitoba,

(iii) in British Columbia, the Peace River Regional District,

(iv) in Saskatchewan, the Rural Municipalities of Aberdeen, Abernethy, Antelope Park, Antler, Arborfield, Argyle, Arlington, Arm River, Auvergne, Baildon, Barrier Valley, Battle River, Bayne, Beaver River, Big Arm, Big Quill, Big River, Big Stick, Biggar, Birch Hills, Bjorkdale, Blaine Lake, Blucher, Bone Creek, Britannia, Buchanan, Buckland, Buffalo, Calder, Cana, Canaan, Canwood, Carmichael, Caron, Chaplin, Chesterfield, Churchbridge, Clayton, Clinworth, Colonsay, Connaught, Corman Park, Cote, Coteau, Coulee, Craik, Cupar, Cut Knife, Deer Forks, Douglas, Duck Lake, Dufferin, Dundurn, Eagle Creek, Edenwold, Elcapo, Eldon, Elfros, Emerald, Enfield, Enniskillen, Enterprise, Excelsior, Eye Hill, Eyebrow, Fertile Belt, Fertile Valley, Fish Creek, Flett's Springs, Foam Lake, Fox Valley, Frenchman Butte, Frontier, Garden River, Garry, Glen Bain, Glen McPherson, Glenside, Good Lake, Grandview, Grant, Grass Lake, Grassy Creek, Gravelbourg, Grayson, Great Bend, Gull Lake, Happyland, Harris, Hazel Dell, Hazelwood, Heart's Hill, Hillsborough, Hillsdale, Hoodoo, Hudson Bay, Humboldt, Huron, Insinger, Invergordon, Invermay, Ituna Bon Accord, Kellross, Kelvington, Keys, Kindersley, King George, Kingsley, Kinistino, Kutawa, Lac Pelletier, Lacadena, Laird, Lake Johnston, Lake Lenore, Lakeland, Lakeside, Lakeview, Langenburg, Last Mountain Valley, Lawtonia, Leask, Leroy, Lipton, Livingston, Lone Tree, Longlaketon, Loon Lake, Loreburn, Lost River, Lumsden, Manitou Lake, Mankota, Maple Bush, Maple Creek, Mariposa, Marquis, Marriott, Martin, Maryfield, Mayfield, McCraney, McKillop, McLeod, Meadow Lake, Medstead, Meeting Lake, Meota, Mervin, Milden, Milton, Miry Creek, Monet, Montrose, Moose Creek, Moose Jaw, Moose Mountain, Moose Range, Moosomin, Morris, Morse, Mount Hope, Mount Pleasant, Mountain View, Newcombe, Nipawin, North Battleford, North Qu'appelle, Oakdale, Orkney, Paddockwood, Parkdale, Paynton, Pense, Perdue, Piapot, Pinto Creek, Pittville, Pleasant Valley, Pleasantdale, Ponass Lake, Porcupine, Prairie Rose, Prairiedale, Preeceville, Prince Albert, Progress, Reciprocity, Redberry, Redburn, Reford, Reno, Riverside, Rocanville, Rodgers, Rosedale, Rosemount, Rosthern, Round Hill, Round Valley, Rudy, Saltcoats, Sarnia, Saskatchewan Landing, Sasman, Senlac, Shamrock, Shellbrook, Sherwood, Silverwood, Sliding Hills, Snipe Lake, Spalding, Spiritwood, Spy Hill, St. Andrews, St. Louis, St. Peter, St. Philips, Stanley, Star City, Storthoaks, Sutton, Swift Current, Three Lakes, Tisdale, Torch River, Touchwood, Tramping Lake, Tullymet, Turtle River, Usborne, Val Marie, Vanscoy, Victory, Viscount, Wallace, Walpole, Waverley, Wawken, Webb, Wheatlands, Whiska Creek, White Valley, Willner, Willow Creek, Willowdale, Wilton, Winslow, Wise Creek, Wolverine, Wood Creek, Wood River and Wreford, and

(v) Alberta.

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 livestock 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 breeding livestock 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. The Regulations Amending the Income Tax Regulations (2002 Drought Regions) [the Regulations], which amend section 7305 of the Income Tax Regulations, prescribe the regions that are eligible drought regions in 2002. These additions to the list of prescribed drought regions are relieving in nature.

Alternatives

These Regulations are necessary to prescribe drought regions for 2002. The regions prescribed for 2002 were determined by the Minister of Agriculture and Agri-food to have suffered from drought conditions in that year.

Benefits and Costs

These Regulations will allow farmers in the prescribed drought regions to defer income from sales of breeding livestock in 2002 until a subsequent year. The portion of the sale proceeds, which can be deferred by a farmer, increases with the percentage of the farmer's breeding livestock 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 and municipal affairs departments, municipalities, farmers' associations, and crop insurers.

In addition, Canadians were given an opportunity to comment on the regions to be prescribed for 2002 following the publication, by Agriculture and Agri-food Canada, of three news releases on July 24, 2002, and four news releases on February 7, 2003. These releases concern initial and final designations for 2002 and are available at http://www.agr.gc.ca/cb/news/2002/07_e.phtml and at http://www.agr.gc.ca/cb/news/2003/02_e.phtml.

The amendments were also pre-published in the Canada Gazette, Part I, on November 8, 2003, following which no comments were received and no changes were made to the amendments.

Compliance and Enforcement

The Income Tax Act provides the necessary compliance mechanisms. 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
Telephone: (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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