By Terry Lavineway
While last week’s federal budget contained widely anticipated changes to the Scientific Research and Experimental Development (SR&ED) tax credit, it also contained many other aspects of funding and incentives to encourage innovation and commercialization.
$400 million to help increase private sector investments in early-stage risk capital, and to support the creation of large-scale venture capital funds led by the private sector.
The government recognizes that access to capital for small and medium-sized businesses in Canada is both critical for growth and difficult to find. The venture capital and angel investor industries in Canada have been inconsistent for many years for many valid reasons. This budget commits $400 million to help address this problem. At the time of the budget, the government was not clear how, where or when to deploy this capital to incentivize private sector investments, other than to allocate $100 million for Business Development Bank of Canada venture capital activities. Certainly this amount of money is worth tracking to see how it will be deployed to help companies in need achieve their growth objectives.
$110 million per year to the National Research Council to double support to companies through the Industrial Research Assistance Program.
IRAP funding is increased by $110 million per year. This money is to continue the R&D focus of IRAP and provide support to small and medium-sized companies engaged in R&D. While many companies have accessed IRAP many times and made excellent use of the funds, there is a much larger number of companies that have not been successful in accessing funds from IRAP to assist them in achieving their R&D objectives. Doubling NRC’s budget for IRAP should improve access.
Western Innovation Program
The budget introduced a new fund to assist small and medium-sized businesses in western Canada called the Western Innovation Program to be administered by Western Economic Diversification Canada. Interestingly, no budget amount was provided. Nor was any information provided on how businesses in western Canada will be able to access it.
The next three items are focused more on collaboration of industry with researchers and research institutes.
$14 million over two years to double the Industrial Research and Development Internship (IRDI) program.
This program is meant to assist in the creation of opportunities for skilled graduate students and postdoctoral fellows through private-sector, industry experience with businesses that leverage their talents. There is clearly a focus on encouraging the movement of research into the private sector in the hopes of creating economic value.
$12 million per year to make the business-led Networks of Centres of Excellence program permanent.
This builds on the budget allocated for the creation of the program in 2007 to make the program permanent. The purpose of the program is to provide funding to large-scale, business-led networks to enhance innovation in Canada and reap the economic, health, social and environmental benefits. Examples of networks currently receiving funding are those focused on drug discovery, nanotechnology for use in the forestry industry, next-generation aviation technologies and sustainability challenges.
$500 million over five years, starting in 2014–15, to the Canada Foundation for Innovation to support advanced research infrastructure.
Funding is available via many different programs at the Canada Foundation for Innovation (CFI), all of which are targeted at providing funding to eligible research institutes. Some of them require partnership with industry and respective private sectors.
$105 million over two years to support forestry innovation and market development.
The government is proposing a consolidation and refocus of its prior support to forestry innovation and market development. The budget proposes $105 million over two years as incentives to the forestry sector for increased innovation and identification of new market opportunities through two initiatives:
- Expanding Market Opportunities Program: Combines the Canada Wood Export and The North American Wood First, and Leadership for Environmental Advantage in Forestry programs;
- Forest Innovation Program: Combines the Promoting Forest Innovation and Investment and the Value to Wood programs.
$95 million over three years, starting in 2013–14, and $40 million per year thereafter to make the Canadian Innovation Commercialization Program permanent and to add a military procurement component.
This is for businesses with innovations matching the needs of federal government departments that are in later stages of development. Products must be in one of the four priority areas of environment, safety and security, health and enabling technologies. If your business is focused on developing technology for use by the federal government and respective departments, this is a program which might be relevant.
Clearly there are more programs out there to assist companies in achieving their R&D objectives and commercializing their innovations. SR&ED tax credits are definitely a significant aspect of this; but there is much more. It is important for businesses to consider the landscape of what is available to them, how they can leverage multiple programs, yet not become distracted from the real focus of the business.
Terry Lavineway is director of business incentives at Welch LLP, where he helps clients navigate the landscape of tax credits and other government incentives.
