CAIS: STICKING IT OUT TO 2006
Originally published on March 23, 2006
Federal agriculture minister Chuck Strahl told the Canadian Federation of Agriculture convention on March 2 that the Canadian Agricultural Income Stabilization program will continue to function for the 2006 crop year.
He indicated that "it's simply not possible, nor in the farmer's best interest to scrap CAIS without a proper replacement that's been agreed to by all of us."
Hearing this news, farmers who devote a tremendous amount of time, energy and money to file their annual CAIS forms gave out monumental sighs.
For the most part, the program has not been well-received. A survey by the Canadian Federation of Independent Business of its agri-business members found that 58 percent of those participating in CAIS were dissatisfied with the program because of the complexity and volume of paperwork.
Before farmers and ranchers throw up a white flag, however, there are a few things they can do to ensure they get the most out of the existing CAIS program:
■ Ensure that their CAIS reference margins are accurate.
CAIS calculates your production margin of allowable income minus allowable expenses for each of your previous five years and determines the reference margin using an olympic average.
This is your average production margin over the previous five-year period, where the year with the highest margin and the year with the lowest margin are dropped. The reference margin is important because it represents your future level of protection under the program.
The higher the reference margin, the higher your CAIS coverage and the higher your chance of being covered by CAIS in years when your income drops.
If there are errors in your reference margin, you should work to correct them, particularly if they occur before 2003. There is nothing in the CAIS Producer Handbook that prevents prior year margin adjustments. For unadjusted margins before 2003, all adjustments are processed with little or no consequence for CAIS. There is a risk to those who received CAIS payments in 2003 or 2004 and who attempt to increase their reference margin by filing adjustments.
If the CAIS adjustment triggers an overpayment for any one of these years, then CAIS will work through its collection arm to recover these newly minted overpayments.
■ Review CAIS Calculation of Program Benefits from previous years.
Farmers should review their CAIS Calculation of Program Benefits as soon as it arrives. CAIS automatically "locks down" the fiscal year ending inventory values 90 days after the COPB issue date, which means inventory amounts can be adjusted if CAIS is informed within the 90-day adjustment period.
For example, if we realize on our 2005 CAIS form that our 2004 ending inventory was overstated and that the 2004 CAIS payment was underfunded, then a 2004 CAIS adjustment will not trigger an increase to the 2004 CAIS entitlement unless it was done within the 90-day adjustment period.
Unfortunately, the inverse is not true. If your 2004 ending inventory was understated and you inform CAIS, then any resulting 2004 CAIS overpayment will be passed on to collections for recovery.
For farmers whose 2004 CAIS payments were underfunded, we encourage them to file CAIS error adjustments and, as a last resort, submit an appeal in writing to the appeals sub-committee, care of the CAIS program administration.
Our office has had some success in appeals, sometimes referred to as the producer review committee under the old Canadian Farm Income Program-Agriculture Income Disaster Assistance rules.
Appeals take a long time and we are just now getting follow-up correspondence on CAIS appeals from 2003.
■ All farmers should file their 2005 CAIS Harmonized Form with their individual or corporate income tax returns in the current year.
For 2005, farmers have the option of filing their CAIS forms with their individual or corporate tax returns. We believe farmers should file their tax information on these harmonized CAIS forms.
While we expect the new federal government will make changes to the CAIS program, it is likely that future ad hoc assistance, proposed as target advance payments, will be distributed only to those who file a harmonized CAIS form.
If you want to be in this lottery, then your harmonized CAIS form is your ticket.
In short, you can't give up on your past or current CAIS filing.
It's here for 2006 and if we don't all agree on the implementation of a new program, it may be around for 2007 as well.
Allyn Tastad, chartered professional accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon at 306-653-5100, e-mail at firstname.lastname@example.org or website www.hth-accountants.ca. All data and information provided is for informational purposes only. Readers are cautioned that laws and regulations are subject to change. Consult your accountant for current professional advice tailored to your situation.