In May 2018, an Artist Taxation committee of the Canadian Arts Coalition formed to address concerns from artists that the Canada Revenue Agency appeared to be reassessing and auditing artists more frequently in recent years. Several artists have come forward with their audit stories, but it was not until a high profile audit of a visual artist last spring that a picture began to form about how common the issue is. We are pleased to report that his story was resolved with a positive outcome, but others have not been so lucky, and many others are still under review.
At this time, it is important for the arts community to also be aware of the progress that has been made since we released an Artist Taxation Briefing Note last year.
In its Recommendations for the 2019 Federal Budget last summer, the Coalition called for the recognition of the professional status of Canadian artists by implementing fair taxation measures. We recommend that the CRA’s reassessment procedures be reviewed to better align with the realities of professional artists working primarily in the not-for-profit sector, and to develop clearer guidance for all officers/auditors, and all granting bodies in reporting to keep the distinction between student scholarships and Artist’s Project Grants distinct.
The Standing Committee on Finance recommended in December 2018 that the government, “Recognize the professional status of Canadian artists by implementing fair taxation, and establishing a more coherent and predictable support and fiscal ecosystem.” We look forward to continued work with the government in this regard.
The Coalition met with the Minister of National Revenue, Diane Lebouthillier last October and asserted that professional income generated from grants, honorariums, and awards is income. We discussed at length the difficulty the arts community has with the CRA’s “reasonable expectation of profit.” The Canada Council for the Arts has been working with the CRA to develop a tax folio for CRA officers and auditors on professional artists specifically. This tax folio will offer detailed information about eligible deductions in various artistic professions.
The Minister confirmed that there will be consultations with National Arts Service Organizations in Summer 2019 about the tax folio to ensure that concerns in the arts community have been addressed. We are pleased to announce that the newly drafted tax folio will soon be open for public comments, it and will be widely shared within our sector for feedback. This special consultation is highly unusual, and the Canadian Arts Coalition welcomes this collaboration with the Canada Council and the CRA.
In May 2019, the Coalition met with CRA to discuss the problems that come from the lack of consistency among public funders regarding where and how grant and award income is reported. Representatives from CRA committed to examining this issue further, including the possibility of funders reporting income in Box 28 on T4As. It was also acknowledged that authors and visual artists receive copyright royalties for reprography, and creators receive T5s for these royalties. It has been noted that writers have been reassessed because of issues in how the CRA audit program seems to default copyright royalty income. The issue may have been mostly solved by the introduction of a tax code (711513) for “independent writers and authors”, but the situation will continue to be monitored by writers as well as artists from other disciplines that are paid copyright royalties.
The parties also discussed concerns that online tax programs automatically place income under Line 130, thereby offering the taxpayer little or no way to override this assumption, even if they are completing a T2125 Statement of Business/Professional Activities form. This issue will continue to be investigated.