Tax breaks, labour rebates and, at long last, the possibility of charitable support for news

The federal government announced three new tax measures to support Canadian journalism on Tuesday, including a refundable tax credit for wages paid to journalists and a plan to allow eligible journalism organizations to issue tax receipts.

The measures open the door for non-profit publications, such as The Narwhal, to start issuing charitable tax receipts in 2020.

To qualify for any of the tax incentives, news outlets will need to be recognized as “qualified Canadian journalism organizations” or QCJOs (possibly the worst acronym in today’s budget).

Who qualifies?

A yet-to-be-determined independent panel will finalize eligibility criteria, but the federal budget (fast forward to page 373) gets a headstart on outlining who’s in and who’s out. First of all, the organization must be Canadian-controlled and “engaged in the “production of original news content.”

Content must be “primarily focused on matters of general interest and reports of current events, including coverage of democratic institutions and processes” and “must not be primarily focused on a particular topic such as industry-specific news, sports, recreation, arts, lifestyle or entertainment.”

The latter point is troublingly vague and already raising questions for outlets that focus on specific topics — here’s hoping the independent panel clarifies that pronto.

The qualification list goes on: organizations must employ two or more journalists in the production of content “who deal at arm’s length with the organization.”

Margaret Mason, a charities lawyer at Norton Rose Fulbright, said that clause is in place to ensure journalists operate at arm’s length from boards of directors or other control structures.

The budget also states that qualifying organizations must not produce content to “promote the interests, or report on the activities, of an organization, an association or their members,” “for a government, Crown corporation or government agency” or “to promote goods or services.”

Phew.

Refundable labour tax credit

Ottawa is proposing to introduce a 25-per-cent refundable tax credit on wages paid to journalists at qualifying organizations, effective January 1, 2019 (as in, starting three months ago).

The rebate will max out at $13,750 per individual per year and at least initially will only apply to employees (not freelancers). Employees will need to work at least 26 hours per week and spend at least 75 per cent of their time “engaged in the production of news content.”

These criteria seem reasonable, although we hope the independent panel will consider including freelancers in future as they serve a vital role for many publications, including The Narwhal.

Charitable tax receipts

In the long term, this proposed change stands to have the largest impact.

The promise of qualified donee status for Canadian news organizations will allow eligible outlets to issue charitable tax receipts and to receive gifts from Canadian registered charities. This will bring Canada up to speed with the U.S., which is home to more than 200 non-profit news organizations, thanks in part to tax breaks supporting journalism.

Eligibility criteria to become a qualified donee — understandably — becomes more stringent.

“It’s going to have an application process similar to that of a registered charity,” Mason, who sits on the technical issues working group of the charities directorate for the Canada Revenue Agency, told The Narwhal.

Organizations will not be permitted to distribute their profits or allow income to be distributed to owners or directors.

“It has to function as a non-profit, which means individuals can be employees, can get paid, but they’re not like shareholders sitting back and taking dividends and receiving payments out of the company,” Mason said.

Organizations will be required to have a board of directors who are arm’s length from one another, must not be “factually controlled by a person” and “must generally not, in any given year, receive gifts that represent more than 20 per cent of its total revenues, including donations, from any one source.”

This is where the rubber will hit the road for many organizations, which receive a large chunk of funding from a single funder.

“If you’re an existing organization and you’ve had one primary funder, you’d basically have to say that person will be limited no more than 20 per cent,” Mason said. “How do you manage that?”

As The Narwhal continues to diversify its funding sources, especially through monthly memberships, we expect to qualify as an eligible donee when this measure comes into force on January 1, 2020.

Registered journalism organizations will be disclosed on a government website and will also be required to disclose the names of any donors who make donations of more than $5,000. (The Narwhal has been disclosing donors who give more than $5,000 since 2016.)

Tax credit for digital subscriptions

The final tax measure in Tuesday’s budget proposes a temporary 15 per cent tax credit on digital news subscriptions. This will allow individuals to claim up to $500 in costs paid toward eligible digital subscriptions for a maximum tax credit of $75 annually.

Because The Narwhal doesn’t have a paywall, this incentive won’t apply to us — but rest easy, if we qualify as an eligible donee, your contributions to The Narwhal will earn you a charitable tax receipt within a year.

Much is left to be determined by the committee, but at this stage we are optimistic about our eligibility for both the labour tax credit and eligible donee status. Stay tuned!