Business

Equestrian Canada Lobbies for Tax Exemptions for Horse Farms

Horse farms are struggling with the crippling financial consequences of COVID-19; EC is working to get them access to exemptions and relief programs.

An Equestrian Canada survey revealed that 60% of respondents did not have a farm business registration number, and 81% did not qualify for federal short-term income assistance. (u_kysjne0z/Pixabay)

By: Horse Sport staff | July 20, 2020

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you're listening to an article from horse sport.com. equestrian canada lobbies for tax exemptions for horse farms by: horse sport staff. “equestrian riding camp in bethany sells horses due to pandemic” reads the headline on global news, june 25, 2020. while it is speaking specifically about saddlewood equestrian centre in ontario, which has been running their riding camp for over 52 years, it could apply to any number of equestrian facilities across the country who are struggling with the sudden and crippling financial consequences of covid-19. the current pandemic, which is likely to continue to have significant negative impacts on our lives until a successful vaccine is developed, is hitting the canadian equestrian industry hard. while the canadian government has been actively creating funding programs to help individuals and businesses cope with some of the covid-19 financial impacts, the equestrian industry has largely been left out. this, despite a 2010 study for equestrian canada (ec) which states that the horse industry contributes more than $19.6 billion annually to the canadian economy and supports more than 154,000 jobs in canada. advertisement scroll to continue with content the biggest issue facing the horse industry is how the canadian government views equestrian facilities. though horses are mostly classified as livestock in a number of legislation and planning policies, the canada revenue agency (cra) only recognizes maintaining horses for racing under the definition of farming, thereby excluding many other businesses from accessing farm business registration. that means that facilities such as boarding stables and riding schools cannot access relief/funding programs earmarked for agriculture. as part of their work during the pandemic, equestrian canada has been working on changing those definitions so that horse farms can access agricultural relief funding put in place for other farming businesses which might also make them eligible for other ongoing agricultural grants; however, historically, equestrian canada has had the closest ties with the ministry of sport, so their first challenge was getting agriculture and agri-food canada (aafc) to recognise that the horse industry is agriculture-based rather than recreational and under their purview. “not only have we been advocating for funding, but we’ve also been developing relationships with government officials, and educating them about the nature of the horse business,” said kristy house, equestrian canada’s manager of welfare and industry. “we’ve done several years worth of advocacy in a short time frame to have the industry better understood and recognized.”. the initial work was in explaining the life-cycle of a horse. aafc only recognized the breeding portion of the horse industry, considered “primary agriculture” for which the ministry is responsible. aafc assumed that, once a horse was sold, it was a “finished product” and started a new job at which point responsibility would pass on to another ministry, e.g. sport. “in other sectors like beef cattle the animals have a more defined life-cycle but horses remain ‘unfinished’ longer than any other sector,” said house. ec explained that horses could be “unfinished” multiple times in their life as they move through difference careers. for example, a race horse might become a broodmare, then become a competition horse, then be re-trained for trail riding. the second part of the task was establishing the financial need of the horse sector during the pandemic. equestrian canada circulated a survey to gather data about farm expenses to aid in its advocacy which was completed by 660 equestrian farms. the survey revealed that 60% of respondents did not have a farm business registration number, and 81% did not qualify for short-term income assistance either through the federal government or farm credit canada. “as a result of these efforts, aafc has accepted that horses are part of the agricultural community and fully recognize that we are a powerful sector,” said house. further, based on ec’s recommendation, aafc has accepted the following definitions of an active equine and active equine facility:. an active equine facility is a commercial agricultural business that uses farmland, purpose-built structures, and active equines to generate revenue. these facilities offer a mix of services including breeding, raising, training, boarding, and maintaining the health and welfare of active equines. these activities support regional economic development and awareness of local equine activities, including sport and competition, youth and adult development and wellness, therapeutic use, and agri-tourism. an active equine is livestock specifically raised and cared for in an active equine facility. the specific use of these animals may include pedigree development, sport and competition, youth and adult development and wellness, physical exercise, therapeutic use, and local agri-tourism. active equines are key economic drivers that directly contribute to revenue-generating activities and provide benefits to businesses and communities. active equines demand daily care that requires the services of animal care professionals (including veterinarians and farriers) and regular agricultural inputs (including hay, bedding, and grains). an active equine is raised to be a valuable and useable asset throughout the course of its natural life. active equines are not kept or raised for use in the food processing or pharmaceutical industry. next step: ministry of finance. having agreed on these new definitions, aafc has recently confirmed that they will support ec in approaching the ministry of finance (mof) to change part of the income tax act (definition of ‘farming’) to include an equine facility. under the current definitions, most equine businesses don’t qualify as farms and so can’t take advantage of any tax benefits in place for the agricultural sector. the updated definition will make them eligible to declare farming income from breeding, boarding, and training and declare any of their farming losses against other sources of income such as another job, horse sales, competition prize money, etc. the jockey club of canada, which oversees thoroughbred horse racing, has been lobbying for changes to section 31 for decades with little success. most recently, they have been calling for the suspension of section 31 so that horse businesses can deduct the losses from their farming business against other sources of income. in a recent article for canadianthoroughbred.com, catherine willson noted these restrictions are hurting farmers: “it’s worth noting that a taxpayer could start a sideline or secondary business in any industry in canada – except for horse racing or farming – and be able to deduct losses from that business against other income. invest in a restaurant, a car wash, even a racing car; all losses from these businesses are fully deductible. it is manifestly unfair and unsupportable for the farming industry in canada to be singled out alone and denied full deduction of business losses against other income. it hurts farmers across canada.”. historically, mof has been unwilling to make any adjustments to accommodate horse racing for fear of being perceived as catering to an elitist hobby. as ec represents tens of thousands more equestrian enthusiasts, hundreds of thousands more horses, and now has the support of aafc, perhaps they will have more success. &&>

“Equestrian Riding Camp in Bethany Sells Horses due to Pandemic” reads the headline on Global News, June 25, 2020. While it is speaking specifically about Saddlewood Equestrian Centre in Ontario, which has been running their riding camp for over 52 years, it could apply to any number of equestrian facilities across the country who are struggling with the sudden and crippling financial consequences of COVID-19.

The current pandemic, which is likely to continue to have significant negative impacts on our lives until a successful vaccine is developed, is hitting the Canadian equestrian industry hard.

While the Canadian government has been actively creating funding programs to help individuals and businesses cope with some of the COVID-19 financial impacts, the equestrian industry has largely been left out. This, despite a 2010 study for Equestrian Canada (EC) which states that the horse industry contributes more than $19.6 billion annually to the Canadian economy and supports more than 154,000 jobs in Canada.

Scroll to continue with content

The biggest issue facing the horse industry is how the Canadian government views equestrian facilities. Though horses are mostly classified as livestock in a number of legislation and planning policies, the Canada Revenue Agency (CRA) only recognizes maintaining horses for racing under the definition of farming, thereby excluding many other businesses from accessing Farm Business Registration. That means that facilities such as boarding stables and riding schools cannot access relief/funding programs earmarked for agriculture.

As part of their work during the pandemic, Equestrian Canada has been working on changing those definitions so that horse farms can access agricultural relief funding put in place for other farming businesses which might also make them eligible for other ongoing agricultural grants; however, historically, Equestrian Canada has had the closest ties with the Ministry of Sport, so their first challenge was getting Agriculture and Agri-Food Canada (AAFC) to recognise that the horse industry is agriculture-based rather than recreational and under their purview.

“Not only have we been advocating for funding, but we’ve also been developing relationships with government officials, and educating them about the nature of the horse business,” said Kristy House, Equestrian Canada’s Manager of Welfare and Industry. “We’ve done several years worth of advocacy in a short time frame to have the industry better understood and recognized.”

The initial work was in explaining the life-cycle of a horse. AAFC only recognized the breeding portion of the horse industry, considered “primary agriculture” for which the Ministry is responsible. AAFC assumed that, once a horse was sold, it was a “finished product” and started a new job at which point responsibility would pass on to another ministry, e.g. Sport.

“In other sectors like beef cattle the animals have a more defined life-cycle but horses remain ‘unfinished’ longer than any other sector,” said House. EC explained that horses could be “unfinished” multiple times in their life as they move through difference careers. For example, a race horse might become a broodmare, then become a competition horse, then be re-trained for trail riding.

The second part of the task was establishing the financial need of the horse sector during the pandemic.
Equestrian Canada circulated a survey to gather data about farm expenses to aid in its advocacy which was completed by 660 equestrian farms. The survey revealed that 60% of respondents did not have a farm business registration number, and 81% did not qualify for short-term income assistance either through the federal government or Farm Credit Canada.

“As a result of these efforts, AAFC has accepted that horses are part of the agricultural community and fully recognize that we are a powerful sector,” said House.

Further, based on EC’s recommendation, AAFC has accepted the following definitions of an active equine and active equine facility:

An active equine facility is a commercial agricultural business that uses farmland, purpose-built structures, and active equines to generate revenue. These facilities offer a mix of services including breeding, raising, training, boarding, and maintaining the health and welfare of active equines. These activities support regional economic development and awareness of local equine activities, including sport and competition, youth and adult development and wellness, therapeutic use, and agri-tourism.

An active equine is livestock specifically raised and cared for in an active equine facility. The specific use of these animals may include pedigree development, sport and competition, youth and adult development and wellness, physical exercise, therapeutic use, and local agri-tourism. Active equines are key economic drivers that directly contribute to revenue-generating activities and provide benefits to businesses and communities. Active equines demand daily care that requires the services of animal care professionals (including veterinarians and farriers) and regular agricultural inputs (including hay, bedding, and grains).

An active equine is raised to be a valuable and useable asset throughout the course of its natural life. Active equines are not kept or raised for use in the food processing or pharmaceutical industry.

Next Step: Ministry of Finance

Having agreed on these new definitions, AAFC has recently confirmed that they will support EC in approaching the Ministry of Finance (MOF) to change part of the Income Tax Act (definition of ‘Farming’) to include an equine facility.

Under the current definitions, most equine businesses don’t qualify as farms and so can’t take advantage of any tax benefits in place for the agricultural sector. The updated definition will make them eligible to declare farming income from breeding, boarding, and training and declare any of their farming losses against other sources of income such as another job, horse sales, competition prize money, etc.

The Jockey Club of Canada, which oversees thoroughbred horse racing, has been lobbying for changes to Section 31 for decades with little success. Most recently, they have been calling for the suspension of Section 31 so that horse businesses can deduct the losses from their farming business against other sources of income.

In a recent article for CanadianThoroughbred.com , Catherine Willson noted these restrictions are hurting farmers:
“It’s worth noting that a taxpayer could start a sideline or secondary business in any industry in Canada – except for horse racing or farming – and be able to deduct losses from that business against other income. Invest in a restaurant, a car wash, even a racing car; all losses from these businesses are fully deductible. It is manifestly unfair and unsupportable for the farming industry in Canada to be singled out alone and denied full deduction of business losses against other income. It hurts farmers across Canada.”

Historically, MOF has been unwilling to make any adjustments to accommodate horse racing for fear of being perceived as catering to an elitist hobby. As EC represents tens of thousands more equestrian enthusiasts, hundreds of thousands more horses, and now has the support of AAFC, perhaps they will have more success.