Eligible Entities for COVID-19 Wage Subsidy

Summary#

The Regulations Amending the Income Tax Regulations (COVID-19 — Eligible Entities) add rules about which organizations count as eligible for the federal COVID‑19 wage subsidy. The rules were published on May 27, 2020 and are treated as coming into force on April 11, 2020.

What it does#

• Adds a new part to the Income Tax Regulations that lists which entities count as an "eligible entity" for the COVID‑19 wage subsidy under the Income Tax Act.
• It specifically says the following can be eligible:
  • A corporation described in paragraph 149(1)(d.5) of the Income Tax Act if 90% or more of its shares (or capital) are owned by one or more Aboriginal governments and it carries on a business.
  • A corporation described in paragraph 149(1)(d.6) if all shares (except directors’ qualifying shares) are owned by one or more Aboriginal governments or by corporations that meet these rules, and it carries on a business.
  • A partnership if every partner is either an eligible entity or an Aboriginal government.
  • A partnership that, during a qualifying period, meets the ownership test A ≤ 0.5B (in plain terms: more than half the partnership’s value must be owned by eligible entities).
  • A person described in paragraph 149(1)(g) or (h) of the Income Tax Act (the regulation refers to those paragraphs without explaining them).
  • A person or partnership that operates a private school or private college.
• The regulations are deemed to have been in force starting April 11, 2020.

Who's affected#

• Aboriginal governments and corporations they own or control.
• Partnerships with ownership tied to Indigenous governments or eligible corporations.
• People or organizations that operate private schools and private colleges.
• Employers and payroll/accounting staff who are trying to determine eligibility for the federal COVID‑19 wage subsidy.
• It is unclear to a general reader exactly which groups are covered by the references to paragraph 149(1)(g) or (h) of the Income Tax Act without consulting that Act.

Why it matters#

• The rules clarify which Indigenous‑owned entities and some private educational institutions can claim the federal wage subsidy. That can directly affect whether those employers receive money to help cover employee wages.
• Because the rules are retroactive to April 11, 2020, eligible entities may be able to claim the subsidy for earlier pay periods.
• The change can influence the cash flow and staffing decisions of Indigenous businesses, partnerships, and private schools during the COVID‑19 economic disruption.