Corporate Tax Deduction For Political Contributions To Be Replaced With Proposed Tax Credit
Change Necessitated by Harmonization of Corporate Tax Collection, Saving Time, Money and Paperwork for Business
Starting in 2009, Ontario will move to the single administration of corporate income tax, resulting in savings to businesses of $190 million a year.
As a result of this harmonization with the federal tax system, the current corporate income tax deduction for political contributions will expire for taxation years ending after 2008. The Ontario government proposes to introduce legislation this spring to convert the existing tax deduction into a non-refundable tax credit.
If approved by the legislature, the government would provide a 14 per cent non-refundable tax credit for corporations making eligible Ontario political contributions. This tax credit, which would be effective for taxation years ending after December 31, 2008, would maintain a similar level of support as that provided under the current tax deduction.
Eligible Ontario political contributions would be contributions made under the Election Finances Act to Ontario parties and constituency associations or to candidates in an Ontario election. Unused contributions, including those from pre-2009 taxation years, would be available to be carried forward and claimed for up to 20 years. Similar to the current deduction, the annual contribution limit would be indexed according to the manner and schedule set out in the Election Finances Act.
- This technical amendment is required because Ontario is harmonizing its corporate income tax system with the federal government.
- The proposed tax credit for corporate political contributions would have a similar cost to the Ontario government as the current deduction.
- Federal administration of Ontario corporate taxes for taxation years ending after 2008 will save Ontario businesses up to $100 million a year in compliance costs and a further $90 million a year in Ontario corporate income tax from harmonizing with the federal income tax base.
- Ontario provides a refundable personal income tax credit for political contributions.
“The current corporate income tax deduction for political contributions will soon expire as a result of federal administration of Ontario’s corporate income tax. The proposed tax credit would ensure that businesses continue to receive a similar level of tax support for these contributions as they do now.”