Small Business Tax Break for Campgrounds

Summary#

This bill changes the federal Income Tax Act so that a “campground business” is not treated as a “specified investment business” (Bill, s.1; ITA s.125(7)). In practice, this lets many incorporated campgrounds have their profits treated as active business income, which can qualify for the small business tax rate instead of higher rates on investment or rental income. The bill text provided does not define “campground business,” which may affect how the rule is applied.

• Reclassifies income of incorporated campgrounds as active business income (Bill, s.1).
• Makes more campground corporations eligible for the small business deduction on up to $500,000 of income, subject to existing limits (ITA s.125(7)).
• No direct change for unincorporated owners, employees, or campers.
• Does not change provincial taxes; this is a federal change only.
• Effective date not stated in the provided text; timing details are unknown.

What it means for you#

• Households (campers)

  • No direct change to camping fees, availability, or services under this bill. It changes how corporate campground income is taxed at the federal level. Indirect effects are uncertain.

• Campground owners (incorporated)

  • Your campground’s profits would be treated as active business income, not investment income, even if you have five or fewer full‑time employees (Bill, s.1; ITA s.125(7)).
  • That change can allow access to the federal small business tax rate of 9% instead of the general 15% rate on up to $500,000 of active business income, subject to the existing small business limit rules (Dept. of Finance, corporate tax rates).
  • If you already had more than five full‑time employees all year, you may already avoid “specified investment business” status under current law; this bill may not change your eligibility (ITA s.125(7)).

• Campground owners (unincorporated sole proprietors/partnerships)

  • No change. Personal income tax rules for unincorporated businesses are unchanged.

• Other property‑rental businesses (e.g., storage, general real estate rental)

  • No change. The carve‑out applies only to a “campground business” as added to the definition (Bill, s.1).

• Accountants and tax preparers

  • You would reclassify qualifying campground corporations’ income as active business income. You may need to review prior positions and adjust installment planning and dividend planning accordingly. The bill text provided does not define “campground business,” so guidance or case law may be needed.

• CRA (tax administration)

  • You would need to issue guidance on what qualifies as a “campground business” and update forms and audit criteria. Disputes are possible if the term is not defined in the Act.

• Timing

  • Effective date and application (e.g., which taxation years) are not stated in the provided text. Data unavailable.

Expenses#

Estimated net cost: Data unavailable.

• No official fiscal note or Parliamentary Budget Officer estimate identified. Data unavailable.
• Federal rate differential: small business rate 9% vs general 15%; maximum federal tax reduction up to CAD $30,000 on the first $500,000 of active business income per corporation, subject to existing small business limit rules (Dept. of Finance, corporate tax rates).
• Number of affected corporations and aggregate federal revenue impact: Data unavailable.
• CRA implementation/admin costs: Data unavailable.

Proponents' View#

• Aligns tax treatment with the nature of campground operations by treating them as active businesses, not passive rental, broadening access to the small business deduction (Bill, s.1; ITA s.125(7)).
• Lowers federal corporate tax for small, seasonal campgrounds that often have fewer than six full‑time employees, by up to $30,000 on the first $500,000 of income (Dept. of Finance, corporate tax rates).
• Reduces a perceived unfairness where similar service businesses qualify for the small business rate, but campgrounds can be denied due to “specified investment business” status (ITA s.125(7)).
• Simplifies compliance by removing the need to structure employment to exceed five full‑time employees solely to avoid “specified investment business” classification (ITA s.125(7)).
• Supports rural tourism businesses that face short operating seasons and tight margins by allowing retention of more after‑tax income for reinvestment. Quantified sector‑wide impacts: Data unavailable.

Opponents' View#

• Creates an industry‑specific carve‑out that reduces tax neutrality and may prompt other property‑based sectors to seek similar exceptions, increasing complexity (Bill, s.1).
• Unknown fiscal cost; the bill has no cap or size test beyond existing rules, so large corporate‑owned campgrounds could benefit. No official estimate is available (Data unavailable).
• Undermines the policy intent that the small business deduction target active, job‑creating firms; campgrounds could qualify even with few or no full‑time employees (ITA s.125(7)).
• “Campground business” is not defined in the provided text, raising interpretation and enforcement risks and potential disputes over what qualifies (Bill, s.1).
• Could enable tax planning or reclassification efforts by businesses near the boundary (e.g., RV parks with long‑term rentals), increasing audit demands. This relies on how CRA and courts define “campground business.” Assumptions noted.