Supporting Non-Profit Journalism
As had been promised last year, the Government has moved on it undertaking to support non-profit journalism…a promise which had been viewed as contentious in some circles.
But as we had predicted, the mechanism to implement this scheme was to create a new category of qualified donees.
The key elements of the plans are:
- allowing journalism organizations to register as qualified donees;
- a refundable labour tax credit for qualifying journalism organizations; and
- a non-refundable tax credit for subscriptions to Canadian digital news.
These measures are intended to provide support to Canadian journalism organizations producing original news.
An independent panel will be established to recommend eligibility criteria for the purposes of these measures. Once the panel has made its recommendations, eligibility of organizations will be evaluated and a recognition process will be put in place.
A new category of qualified donee will be styled Qualified Canadian Journalism Organization (QCJO). This status is a necessary condition for each of the three measures. In order to be a QCJO, an organization will be required to be recognized as meeting criteria developed by the independent panel. This recognition will be made by an administrative body that will be established for this purpose.
Note that because the panel has not yet been appointed, there will be a delay in implementation.
A QCJO will be required to be organized as a corporation, partnership or trust. It will need to operate in Canada and meet additional conditions, depending on how it is organized. To qualify as a QCJO, a corporation will be required to be 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.
In addition, an organization will be required to meet the following conditions to be a QCJO:
- it is primarily engaged in the production of original news content and in particular, the 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;
- it regularly employs two or more journalists in the production of its content who deal at arm’s length with the organization;
- it must not be significantly engaged in the production of 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; and
- it must not be a Crown corporation, municipal corporation or government agency.
The proposal then had to deal with the fact that basically a QCJO is carrying on a business and a set of limitations have been put in place.
Any business activities carried on by these organizations will be required to be related to their purposes. For example, the sale of news content and advertising would be considered activities related to journalism. 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); 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 (excluding bequests and one-time gifts made on the initial establishment of the particular registered journalism organization).
Apart from these limitations, generally speaking all the rules relating to registered charities will apply to a QCJO.
But there is more!
The Budget proposes to introduce a 25-per-cent refundable tax credit on salary or wages paid to eligible newsroom employees of qualifying QCJOs. This will be subject to a cap on labour costs of $55,000 per eligible newsroom employee per year, which will provide a maximum tax credit in respect of eligible labour costs per individual per year 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 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.
There are additional requirements which are not immediately germane.
A registered journalism organization, which will be exempt from income tax, may also be entitled to this refundable tax credit in respect of its eligible expenses. This measure will apply to salary or wages earned in respect of a period on or after January 1, 2019. The administrative body will be able to recognize organizations as of that date, in order to ensure the credit is available as intended.
And finally, a tax bonus to subscribers.
The budget proposes a temporary, non-refundable 15-per-cent tax credit on amounts paid by individuals for eligible digital news subscriptions. This will 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 are those that entitle a taxpayer to access content provided in a digital form by a QCJO that is 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.
Amounts paid to an organization will be eligible only if, at the time they are paid, the organization is a QCJO. If an organization ceases to qualify as a QCJO, that will not cause amounts paid by individuals for subscriptions prior to the loss of QCJO status to cease to qualify for the credit.
This credit will be available in respect of eligible amounts paid after 2019 and before 2025.