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Ratifying the Tax-Deferred Co-operative Share Program as a Permanent Fiscal Measure

Co-operatives and Mutuals Canada (CMC) is advocating to make the Tax-deferred Co-operative Share Program (TDCS) Program permanent, for the benefit of agriculturalco-operatives throughout Canada, before it expires at the end of 2025. 

This Program was created in 2005 for a 10-year period. It has already been renewed twice due to the recognition of its importance: in 2015 for a period of five years, and again in the Fall of 2020, when it was extended to shares issued through the end of 2025. Its purpose is to help agricultural co-operatives meet their capitalization needs and was based on the December 2004 report of the House of Commons entitled Study on Small Business Tax Measures: Canada’s Agricultural Co-operatives”. 

The Program allows agricultural co-operatives to pay a patronage dividend in the form additional shares of the co-operative. For tax purposes, the inclusion of the dividend for the recipient is deferred to the year in which the shares are redeemed. Furthermore, the co-operative is not required to withhold tax when it pays the dividend in shares when conditions are met, such as a five-year hold on the ability to redeem the shares. 

The TDCS is a crucial capitalization and resilience mechanism for agricultural co-operatives, who form an integral part of Canada’s rural economy and supply Canada’s Food System. This small but impactful $3 to $5 million per year tax deferral program provides increased stability and helps the business model remain a viable option for agribusinesses, while allowing Canadian co-operatives to be stronger in the face of international competitors and economic challenges. 

The uncertainty around the renewal TDCS program beyond 2025 creates issues for agricultural co-operatives, who cannot wait until the last minute to consider it in their financial planning. For this reason, CMC is recommending, on their behalf, that this Program become a permanent fiscal measure. 

Letter for the Tax Deferred Profit Sharing (TDP) Program - August 30, 2024

On August 30, 2024, CMC and a group of agricultural co-operatives collaborated to send a collective letter asking the federal government to make the Tax Deferred Share Program permanent.