Alberta and Quebec administer their own provincial incentives, with filing requirements outside the federal T2 schedules. Alberta collects its own corporate income tax, and its support for SR&ED carried out in the province is the Innovation Employment Grant, delivered through the Alberta corporate tax system and administered by Alberta Tax and Revenue Administration. Although it is called a grant, it works like a refundable provincial credit built on the federal SR&ED claim, and it reduces the federal qualified expenditures in the same way.
Overview
| Item | Innovation Employment Grant (IEG) |
|---|---|
| Nature | A refundable tax credit deducted from Alberta tax otherwise payable, under Division 7 of Part 6 of the Alberta Corporate Tax Act |
| Rate | 8% of eligible expenditures up to the expenditure limit, plus 12% of the amount above the base, for up to 20% in total |
| Base | The average of the eligible expenditures for the two preceding taxation years |
| Expenditure limit | C$4 million a year, prorated for a short year and shared among associated corporations that claim the grant |
| Size test | Reduced where taxable capital exceeds C$10 million and eliminated at C$50 million |
| Who can claim | A corporation with a permanent establishment in Alberta that has eligible expenditures for SR&ED carried out in Alberta |
| Federal link | Eligible expenditures match those that qualify for federal SR&ED and must be incurred in Alberta after 31 December 2020 |
| How it is claimed | AT1 Schedule 29 (Form AT29), filed with the Alberta corporate income tax return (AT1) |
| Administered by | Alberta Tax and Revenue Administration |
Who can claim
A corporation qualifies where it has a permanent establishment in Alberta and SR&ED that was actually performed in Alberta. There is no requirement in the published guidance to be a CCPC, but the taxable capital test confines the grant to smaller groups: it is reduced above C$10 million of taxable capital employed in Canada and is not available at C$50 million or more. For a corporation in an associated group, the taxable capital of the whole group for the preceding year is used.
The expenditures must already be SR&ED expenditures for federal purposes. For taxation years ending after 15 December 2024, the Alberta calculation starts from the federal current SR&ED expenditures on Form T661, not from qualified expenditures that include capital.
Rate and calculation
The grant has two parts. The first is 8% of the Alberta eligible expenditures up to the limit. The second, 12%, rewards growth: it applies only to the amount by which this year's eligible expenditures exceed the base, the average of the two preceding years. Where the federal claim uses the prescribed proxy amount, an Alberta proxy amount is substituted. The result is then reduced by the taxable capital grind.
The grant is government assistance for federal purposes, entered on Form T661 to reduce the federal expenditures. Alberta avoids a circular calculation by computing the grant on federal amounts before the reduction and then adding it back on Form AT29.
Illustrative example. Bow River Analytics Ltd., a hypothetical CCPC that is not associated with any other corporation and has taxable capital below C$10 million, has C$1,000,000 of eligible expenditures for SR&ED carried out in Alberta this year. Its eligible expenditures were C$600,000 and C$800,000 in the two preceding years, and its federal qualified expenditures before the grant are C$1,000,000.
| Step | Amount |
|---|---|
| Alberta eligible expenditures | C$1,000,000 |
| 8% portion (within the C$4 million limit) | C$80,000 |
| Base: average of C$600,000 and C$800,000 | C$700,000 |
| 12% portion on C$300,000 above the base | C$36,000 |
| Innovation Employment Grant | C$116,000 |
| Federal qualified expenditures after the grant | C$884,000 |
| Federal credit at 35% | C$309,400 |
How to claim
- Prepare Form T661 and Schedule 31 for the federal claim, recording which projects and costs relate to work performed in Alberta.
- List the Alberta projects on Form AT4970, which is kept on file and provided to Alberta Tax and Revenue Administration on request.
- Complete AT1 Schedule 29, including the associated corporation agreement where the limit is shared.
- Enter the grant as provincial government assistance on Form T661 and recompute the federal amounts.
- File Schedule 29 with the AT1. A claim must reach Alberta Tax and Revenue Administration within 15 months after the AT1 filing due date for the year.
Working with the federal claim
The grant depends on the federal determination. Payment follows verification of the qualifying expenditures. A CRA review that reduces the federal expenditures therefore reduces the grant, and the federal credit is recomputed on the revised net figure.
The growth element adds a record-keeping point of its own. Because the 12% portion depends on the two preceding years, the Alberta eligible expenditures for each year should be kept as their own series, and corrected when a past year is reassessed.
Common questions
Is the grant claimed on the T2? No. It is claimed on Schedule 29 to the Alberta return, although it depends on the federal Form T661 figures.
Does a first-time claimant get the 12% portion? Where there were no eligible expenditures in the two preceding years the base is zero, so the 12% applies to all eligible expenditures up to the limit.
Do associated corporations each get C$4 million? No. They share one limit and allocate it on Form AT29.
Does the grant reduce the federal credit? Yes. Provincial R&D tax credits are government assistance that reduces the qualified expenditures on which the federal investment tax credit is calculated, under subsection 127(18).
Related pages
Official sources
- Innovation Employment GrantGovernment of Alberta
- Guide to Claiming the Alberta Innovation Employment GrantAlberta Tax and Revenue Administration
- Information Circular IEG-1, Alberta Innovation Employment GrantAlberta Tax and Revenue Administration
- Alberta Corporate Tax ActAlberta King's Printer
- Income Tax Act, subsection 127(18)Justice Laws Website
Educational content only, not tax advice. See the disclaimer.