SR&ED and Alberta's Innovation Employment Grant: How They Work Together

Two programs, one set of R&D work

The federal Scientific Research and Experimental Development (SR&ED) program is administered by the Canada Revenue Agency. It provides investment tax credits, refundable for many Canadian-controlled private corporations, for eligible R&D carried out in Canada. If you're new to it, start with What Is the SR&ED Tax Credit?

Alberta's Innovation Employment Grant (IEG) is a provincial incentive for corporations doing R&D in Alberta. It doesn't have a separate definition of eligible work. Instead, eligible spending must match spending that qualifies under the federal SR&ED program. In practice, that means the IEG is built on top of your SR&ED analysis.

Who can claim the IEG?

According to the Government of Alberta, the IEG is available to corporations that carry out research and development in Alberta, with the benefit phasing out for larger corporations based on taxable capital. A few points to know:

• Corporations only. Unlike federal SR&ED, the IEG isn't available to individuals, partnerships or trusts.
• The work must be in Alberta. Expenditures must relate to R&D carried out in the province.
• It isn't limited to CCPCs, but the size of the corporation affects how much support is available.

How the IEG is calculated (in general terms)

The IEG rewards both ongoing R&D and growth in R&D spending. Broadly:

• A base rate applies to qualifying spending up to your corporation's baseline, which is based on its average R&D spending in prior years.
• A higher rate applies to qualifying spending above that baseline, rewarding companies that increase their R&D.
• There is an annual cap on the spending eligible for the grant.

Because rates, caps and thresholds can change with provincial budgets, check the Government of Alberta's IEG page for current figures before relying on a specific number.

How the IEG is claimed

There is no separate application. The IEG is delivered through the corporate tax system:

• The claim is made on Schedule 29 of the Alberta Corporate Income Tax Return (AT1), filed with Alberta's Tax and Revenue Administration.
• The federal SR&ED claim (Form T661 and Schedule 31) is filed with your federal T2 return.
• Alberta generally won't pay the IEG until the qualifying expenditures have been verified by CRA through the federal SR&ED process.
• The IEG has its own claim deadline, which is not the same as the federal SR&ED deadline. Don't assume one deadline covers both.

This is one reason the two claims are usually prepared at the same time as your corporate year-end filings.

How the two programs affect each other

The programs are designed to work together, but they are not independent:

• The IEG is government assistance. For federal purposes, government assistance generally reduces the pool of qualified SR&ED expenditures. The IEG can therefore reduce the federal SR&ED credit somewhat, even as it adds provincial support.
• The same records support both. Because the IEG relies on SR&ED-qualifying expenditures, a well-documented SR&ED claim is the foundation for the IEG. See What Documentation Should You Keep for an SR&ED Claim?
• A federal review can affect the IEG. If CRA adjusts your SR&ED claim, the related IEG amount may also be adjusted.
• Avoid double counting. Expenditures and assistance should be tracked consistently across both claims.

Practical steps for Alberta R&D companies

1. Confirm the work is SR&ED-eligible first, since the IEG depends on it.
2. Track your R&D spending each year. Your history affects the IEG baseline, so consistent records matter.
3. Prepare the claims together with the T2 and AT1 to keep the numbers consistent.
4. Watch the deadlines for each program separately.
5. Plan cash flow realistically. Payment timing depends on CRA's processing of the federal claim.

Common questions

This article is general information only and is not tax or accounting advice for your specific situation. Eligibility and amounts are determined by CRA and the Government of Alberta based on the facts of each claim. See the Government of Alberta's IEG page and CRA's SR&ED pages for current rules.