After almost 10 months of anticipation, the Canadian government laid the groundwork for a new innovation and investment agency last week that’s poised to restructure and streamline how federal R&D assets are allocated.
Called the Canadian Innovation Corporation (CIC), the newly-announced Crown agency will absorb existing programs—namely, the Industrial Research Assistance Program (IRAP)—to create a “large-scale platform of business R&D support” under a single government umbrella.
Despite signaling a significant organizational shift in how the Canadian government vets and supports R&D initiatives, businesses that already take part in IRAP, SR&ED and other government incentive programs shouldn’t be alarmed. Rather, the CIC is looking to offer innovative Canadian businesses even more resources to help accelerate the commercialization of new products and services.
The nuts and bolts of CIC
On its face, the Blueprint for the CIC is wide-ranging and ambitious, allocating almost $2.6 billion toward R&D initiatives from 2023-2027. While this is more than double what was outlined when the program was first teased as part of Canada’s Budget 2022, this new price tag accounts for the existing IRAP budget, which will be moving away from National Research Council (NRC) oversight for the first time in the program’s 70-year history.
While funding R&D projects is a key component of the CIC, the Blueprint takes cues from successful innovation programs established elsewhere (ie. Israel, Finland) to offer participants access to evaluation and advisory programs, as well as a network of innovators. Ultimately, the CIC is aimed at becoming an “outcome-driven organization,” giving a much-needed boost to Canadian R&D following a two-decade decrease in R&D investment compared to global peers.
What are the implications of CIC?
The reorganization of IRAP (and associated reallocation of IRAP funding from the NRC) is arguably the biggest change highlighted in the CIC Blueprint. Fortunately for founders, the Blueprint outlines no meaningful changes for IRAP beyond its administration.
To that end, any businesses that plan to take advantage of IRAP in 2023 can continue to do so without being impacted by this latest announcement. That’s because much of the current CIC Blueprint has yet to be actioned upon.
Legislation will be required to actually establish the CIC and its mandate, while officers who will lead the organization (and report to the minister of innovation, science, and industry) need to be appointed.
In terms of actual funding, the CIC Blueprint outlined a new funding program that would allow for Canadian companies to apply for anywhere between $50,00 and $5 million to offset a portion of their R&D or product development beyond what’s already available via IRAP. The CIC will also have the flexibility to support a select number of large-scale R&D projects by providing support up to $1 million or a maximum contribution of $20 million.
Still, the specifics of the programs are subject to change, as administrative details beyond implementation deadlines for CIC remain scarce. While the government has pledged to launch CIC before the end of 2023, they’ve given themselves a 12-18 month target for shifting IRAP away from NRC oversight—which itself is contingent on legislation that approves the establishment of CIC in the first place.
The big question for founders: Are there any immediate implications on companies interested in claiming both SR&ED and IRAP under this change?
The short answer is no.
Aside from new administrative oversight, customers who take advantage of IRAP shouldn’t be concerned about their funding drying up. To that end, strategies that balance IRAP funding with SR&ED tax credits will remain a pivotal tool for innovative businesses looking to increase their R&D.
At Boast, many of our customers take advantage of both IRAP and SR&ED programs for government grants and tax credits, respectively. The main difference between the two programs is that IRAP is project-based and involves applying for grant money either before or at the onset of R&D. As such, teams taking advantage of IRAP need to work with individuals within the government (ITA) to present their project proposal for approval before they receive funding, which is allocated throughout the year.
SR&ED, on the other hand, allows qualifying founders to receive a cash refund or tax credit when filing corporate taxes at the end of the fiscal year.
When companies stack both the IRAP and SR&ED programs into their strategies, they receive the benefit of continual funding throughout the year as well as at the end of tax season; while there are maximums your business can receive by stacking IRAP and SR&ED claims, there is a net benefit when both are combined.
Navigating these existing funding structures can be complicated and time consuming, however—especially for founders whose time may be better allocated to actually executing on R&D. That’s why Boast AI takes a white glove approach to our partnership with innovative founders to help ensure they are reaping all the possible federal funding and credits they qualify for without exhausting their resources.
To learn more about what the CIC Blueprint implies for Canadian businesses and how teams can start working to maximize their returns, check out our #InnovationLive conversation with VP of Customer Delivery Matt Funk.