Budget 2019 offers more details of the Liberals’ previously-announced, three-pronged plan to support Canadian journalism, amidst the challenges of a huge shift to digital advertising.
The pillars of the $595 million, five-year plan include a new refundable labour tax credit for qualifying journalism organizations; a new non-refundable tax credit for subscriptions to Canadian digital news; and access to charitable tax incentives for not-for-profit journalism.
As previously announced in November, an independent panel of experts from the Canadian journalism sector will be established to assist the government in implementing the new measures, including recommending eligibility criteria.
“Given the importance of ensuring that media outlets are able to operate with
full independence, the Government proposes to establish an independent
administrative body that will be responsible for recognizing journalism
organizations as being eligible for any of the three measures,” the budget states.
Which outlets will qualify for the new measures? While the criteria for Qualified Canadian Journalism Organization (QCJO) status will be developed by the independent panel, the budget indicates that the measures are aimed at supporting Canadian journalism organizations producing original news, which means online news sites or media organizations that aggregate content from other sources would not qualify. The news content must be primarily focused on general interest current events, including coverage of democratic institutions and processes. Association, government, trade, and industry-specific publications or programming won’t be eligible, including those focused on sports, recreation, arts, lifestyle or entertainment.
A QCJO will be required to be organized as a corporation, partnership or trust, incorporated and resident in Canada. In addition, its chairperson (or other presiding officer) and at least 75 per cent of its directors must be Canadian citizens. In general, in order for a partnership or trust to qualify, such corporations, along with Canadian citizens, must own at least 75 per cent of the interests in it.
#Budget2019 contains some promising measures to aid Cdn newsrooms but action is needed now to set up the independent agency to facilitate much needed aid for local journalism. #SaveLocalNews pic.twitter.com/8nr2esbnt3
— Unifor Canada (@UniforTheUnion) March 19, 2019
Qualified Donee Status
Budget 2019 proposes to add registered, not-for-profit journalism organizations as a new
category of tax-exempt qualified donee.
In order to qualify for registration, a QCJO will be required to apply to the Canada Revenue Agency (CRA) to be registered. These organizations will not be permitted to distribute their profits, if any, or allow their income to be available for the personal benefit of certain individuals connected with the organization.
To ensure that registered journalism organizations are not used to promote the views or objectives of any particular person or related group of persons, a registered journalism organization:
• will be required to have a board of directors or trustees, each of whom deals
at arm’s length with each other;
• must not be factually controlled by a person (or a group of related persons);
• 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
(excluding bequests and one-time gifts made on the initial establishment of
the particular registered journalism organization).
To provide transparency, the names of all registered journalism organizations will
be listed on the website of the Government of Canada. Registered journalism
organizations will be required to file an annual return with the CRA and disclose, in their information returns, the name(s) of any donors that make donations of over $5,000 and the amount donated. Similar to registered charities and registered Canadian amateur athletic associations, these information returns will be made public along with certain additional information.
Labour tax credit for print media
Budget 2019 also proposes to introduce a 25 per cent refundable tax credit on salary
or wages paid to eligible newsroom employees of qualifying QCJOs, subject to a cap on labour costs of $55,000 per eligible newsroom employee per year, which would provide a maximum tax credit of $13,750. To qualify for this credit, a QCJO must be a
corporation, partnership or trust primarily engaged in the production of original
written news content. A QCJO carrying on as a broadcasting undertaking (as
defined in the Broadcasting Act) will not qualify for this credit. A QCJO will also
not qualify for this credit in a taxation year if it receives funding from the Aid to
Publishers component of the Canada Periodical Fund in that taxation year.
A QCJO that is a corporation will be required to meet the following additional
requirements in order to qualify:
• if it is a public corporation, it must be listed on a stock exchange in Canada
and not be controlled by non-Canadian citizens; and
• if it is a private corporation, it must be at least 75-per-cent owned by
Canadian citizens or by public corporations described above.
Initially, an eligible newsroom employee will generally be an employee of a QCJO who works for a minimum of 26 hours per week, on average, and is employed by or is expected to be employed for at least 40 consecutive weeks. In addition, the employee will be required to spend at least 75 per cent of their time engaged in the production of news content, including researching, collecting information, verifying facts, photographing, writing, editing, designing and otherwise preparing content.
Eligible expenses will include salary or wages paid to eligible newsroom
employees in respect of a taxation year and will be reduced by the amount of
any government or other assistance received by the QCJO in the taxation year.
— Holly Doan (@hollyanndoan) March 19, 2019
Personal Income Tax Credit for Digital Subscriptions
Budget 2019 proposes a temporary, non-refundable 15 per cent tax credit on eligible digital news subscriptions. It would allow individuals to claim up to $500 in costs paid towards eligible digital subscriptions in a taxation year, for a maximum tax credit of $75 annually. In the case of combined digital and newsprint subscriptions, individuals will be limited to claiming the cost of a stand-alone digital subscription.
Eligible digital subscriptions will be contained to media primarily engaged in the production of written content. A subscription with a QCJO carrying on a broadcasting undertaking (as defined in the Broadcasting Act) will not qualify for this credit. Subscriptions paid after 2019 and before 2025 will be eligible.
Trudeau “oblivious to magnitude of crisis”: FRIENDS
FRIENDS of Canadian Broadcasting was quick to call the journalism bailout too little, too late and also denounced a lack of action to close what it terms an advertising “loophole” that allows deductibility of foreign ad expenses under the Income Tax Act.
“Canadian journalism is in a death spiral, with serious consequences for democracy. Today’s budget ignores this reality and demonstrates that the Trudeau government is completely oblivious to the magnitude of this crisis and its consequences,” said Daniel Bernhard, executive director of the watchdog group, in a press release.
“Additionally, this budget takes no action to address the internet advertising loophole that disadvantages Canadian media to the benefit of Google, Facebook, and other online advertising platforms which do not contribute to Canadian journalism.”
FRIENDS estimates Canada has lost nearly 20,000 journalism jobs since 2006.
News Media Canada, which represents 800 newspapers across the country, said the budget measures will make a difference in newsrooms.
“It is significant support for journalism. We thank the government for recognizing the challenges faced by the industry and giving us a helping hand to create the newsrooms of the future, providing quality, independent news and information that strengthens their communities,” said the organization’s board chair Bob Cox.