Canadian Research Funding Reform Updates

This is the third part in my series on the Jenkins report on the state of innovation funding in Canada (previous posts in the comments). Today, I will address two recommendations: the creation of an organization that would administer IRAP and provide funding concierge services for promising firms, and the call for increased access to risk capital. This is a good time to revisit these ideas, since it appears to finally be happening. The most recent federal budget indicated the creation of the Canadian Innovation Corporation, a Crown corporation that will take over from the NRC in administration of the IRAP program within the next two years. This is an opportunity to address both challenges in a single framework. IRAP funding is an excellent vehicle for getting R&D done, and importantly it works on a pre-approval basis. But access is gated by revenue and job creation requirements and performance metrics based on immediate economic returns that are disconnected from the realities of deep tech development, leaving the same gap as is present in most SME support programs. The shift from NRC to CIC is a chance to address both this and the problem of access to risk capital and encouraging risk-taking by Canadian VCs. CIC should consider taking a page out of the playbook of the Ontario Center of Innovation: OCI has a fund that will invest only following a lead VC, allowing the VC market domain-specific experts running niche funds to handle due diligence while providing leverage for fundraising rounds if the investment aligns with their target sectors. This hands-off approach to diligence amplifies the impact of their funding, since it sidesteps the reality that it is difficult to conduct diligence when investing in deep tech without niche funds run by experts. The CIC could do the same, but match VC funding with non-dilutive input, providing VCs leverage on their investment if they align with strategic areas of high-risk, long-term economic development priorities at a national level. The hands off approach is especially effective when executing a strategy that involves many small investments rather than a few targeted large ones, a key element of IRAP’s current strategy that I hope will persist through the transformation. The use of a Crown corp as a delivery vehicle is an opportunity to address another challenge with the current model. IRAP, and most SME support programs, get variable funding each year, leaving a window of just a few months in which funding is assigned and allocated. CIC should ensure that their budget is known as far in advance as possible, to allow the deep tech firms they support to plan and rely on them as they get through the valley of death. The move from NRC to CIC is an opportunity for positive change that does not come about often. I will be watching with great interest how it unfolds.

🚀 HUGE NEWS for Canadian Innovators! The 2025 Budget just supercharged SR&ED incentives! 🇨🇦 After 16 years of helping companies unlock government funding, I can tell you with confidence—these are some of the most significant SR&ED enhancements we've seen in years. Here's what just changed: 💰 Enhanced Credit Limit INCREASED to $6 MILLION (up from $3M!) This means eligible businesses can now claim the enhanced 35% refundable credit on up to $6M in R&D spending annually. That's potentially $2.1M back in your pocket. 📈 PUBLIC COMPANIES NOW ELIGIBLE Breaking news: Canadian public corporations can now access the enhanced 35% credit. This opens up massive opportunities for publicly-traded innovators who were previously excluded. 🏗️ Capital Expenditures are BACK Remember when you could claim equipment and machinery? It's officially restored. Your R&D infrastructure investments now qualify again. ⚡ Game-Changing Process Improvements: - NEW elective pre-claim approval (get technical approval BEFORE you spend) - Processing time CUT IN HALF to just 90 days - AI-powered reviews = fewer unnecessary audits - Less paperwork, faster decisions The bottom line? The government is investing an additional $440M ongoing to fuel Canadian innovation. They're making it easier, faster, and more valuable to claim SR&ED. If you're developing new products, improving processes, or solving technical challenges—you need to know about this. Question: Are you currently claiming SR&ED? Or leaving money on the table? Drop a comment or send me a message. Let's make sure you're maximizing these new benefits. #SREDTaxCredit #CanadianInnovation #Budget2025 #RAndD #BusinessGrowth #Innovation #TaxIncentives #CanadianBusiness

Significant changes to the Scientific Research and Experimental Development (SR&ED) program are expected in Monday’s 2024 Fall Economic Statement.    Earlier today, the Finance Minister announced several reforms to the program, including: - Increasing the capital phase-out range where companies can qualify for the higher credit to $15 million - $75 million (from $10 million - $50 million) - Raising the spending limit for Canadian private companies to claim a higher 35% tax credit to $4.5 million (from $3 million) - Allowing Canadian public companies to also qualify for the enhanced higher 35% tax credit - Allowing businesses to claim capital expenditures again, reversing a change made back in 2012.   Our KPMG Tax Incentives Practice is following these developments closely and are available to discuss opportunities for your business. 

*** 2025 #SRED Overhaul: What to Expect *** Episode 3: SR&ED From The Shed - Major government figures have now confirmed SR&ED updates are on the way, and they might be even better than first announced in December as we covered in Episode 2, last week! Here’s What To Expect: 🟢 Cap on Eligible Expenses Upgraded: December’s Fall Economic Statement proposed a $4.5M cap for eligible SR&ED expenditures—but recent word from Parliament is that the new number could rise to $6 million. That’s a substantial boost for Canadian innovators. 🟢 Capital Expenditures Status: The return of capital expenses as eligible costs for SR&ED remains firmly “on the table.” Watch this space for when the change becomes law. 🟢 Refundable Credits Public Companies: Canadian public companies could soon gain access to refundable (cash-back) SR&ED credits—no matter the source of their capital. This opens new doors for R&D investment, especially in sectors where capital scarcity holds companies back. 🟢 Patent Box and IP Protections: For the first time, there’s a nod to Patent Box-style incentives—supporting not just innovation, but also the protection and retention of Canadian intellectual property on home soil. ⚠️ A Caution ⚠️ Now, of course, these notes were based on a fireside chat had at a recent event with the Parliamentary Secretary of the Ministry of Finance, MP Ryan Turnbull, and are NOT legislated yet - or even tabled - but they certainly provide us with an updated sense of where this current government is taking the SR&ED program. We recommend companies begin planning scenarios around this information, but that they don’t take any major actions simply because of it. As we saw in December, until things are legislated… things can change! ✳️ Why It Matters ✳️ 🔹 Real, Confirmed Momentum: This is not just rumor—senior government representatives have publicly confirmed this direction for the SR&ED program. 🔹 Potential Game Changers: Higher caps, capital expenditures, cash for public companies, and new IP incentives could reshape the SR&ED landscape in Canada - making it much more useful for many more companies! The focus now turns to the fall legislative session for this direction to become law. Until then, stay tuned for verified updates—not hype! 🎥 Catch all the updates, analysis, and industry insights in Episode 3 – now live! #SRED #SR&ED #Innovation #R&D #TaxCredits #CanadianInnovation #PolicyUpdate #PatentBox #PublicCompanies #UpcomingChanges #LinkedInUpdate

If you want change you’ve got to be part of making it happen, which is why I shared my insights on how to improve the Canadian R&D tax credit along with Lori Weir, CEO of Four Eyes Financial, Benjamin Alarie, CEO of Blue J, and Nicole Janssen, co-CEO of AltaML, in a recent op-ed piece in The Globe and Mail. The Canadian government plans to review the Scientific Research and Experimental Development (SR&ED) tax credit, which offers a significant incentive for companies to invest in research and development (R&D). As CEOs and members of the Council of Canadian Innovators | Conseil Canadien des Innovateurs, we highlight the importance of reshaping the SR&ED program to better align with the realities of the modern innovation economy. Here are some takeaways from the piece: - The SR&ED program needs to be transparent. Criteria for eligible expenses should be simplified and clarified.  - Misuse by consulting firms that guide companies through the SR&ED claim process must be weeded out. - Foreign multinationals should be carefully examined before benefiting from subsidized R&D work in Canada – support should focus on homegrown Canadian companies. - Funding should not be limited to a few companies. Implementing these changes has the potential to benefit the Canadian economy without significantly increasing the cost of the tax credit. Now is the opportune time to reform the SR&ED program to support Canadian companies at the forefront of technological development and research commercialization, ultimately driving economic growth for all Canadians. To read the full article, click here: #economicgrowth #technology #research #Canada Lightspeed Commerce