OTTAWA — The federal government hopes to get more companies to invest in research and innovation by making a flagship tax incentive program easier to access, though the budget released Tuesday makes no mention of limiting the scheme to Canadian-headquartered firms.

Plans to revamp the Scientific Research and Experimental Development (SR&ED) tax incentive were stalled last year when the finance minister at the time, Chrystia Freeland, resigned before the document was tabled in Parliament.

The new budget picks up where that plan left off by incorporating the proposed changes, including extending eligibility to public corporations and letting more firms continue to claim the maximum benefit as they grow, and Prime Minister Mark Carney’s election promise to let companies apply the refundable credit to more of their expenses by increasing the annual limit from $3 million to $6 million.

“This additional government investment of $440 million on an ongoing basis is expected to catalyse private sector R&D investment, generating an economic output of $1.2 billion a year—about a three-time return for Canada’s economy,” the budget stated.

The budget also introduces a pre-approval process for businesses that want certainty their claims will be accepted before they spend any money. Pre-approvals will be available in April, and the ambition, according to the budget, is to cut approval times in half, from 180 days to 90 days. 

Ottawa has promised to look at other ways to make the administration of the program less cumbersome, including potential changes to paperwork. The Canada Revenue Agency started talking to companies about how to improve the process earlier this fall, and will release the results of those consultations early next year. 

The previously announced changes, while applauded by many industry groups, fell short for some who had pushed for restrictions on benefits going to foreign firms. In a letter to the House of Commons finance committee ahead of the budget, the Council of Canadian Innovators urged Ottawa to make sure only Canadian companies qualify for the program. 

The government does appear to have taken some steps to try to stop promising tech firms and their IP from being lured abroad.

Digital Innovation Minister Evan Solomon had teased that Ottawa would make a push to keep star talent and IP in the quantum sector, as the U.S. invests heavily in the technology. The budget states that $334.3 million will be set aside over five years to “strengthen Canada’s quantum ecosystem” as part of the government’s new defence industrial strategy, which will be fleshed out later this year. 

There aren’t many details about how that money will be used, but the sum is well short of the $2 billion the federal Quantum Advisory Council recommended was needed to retain promising firms. The recommendation included a $1-billion program to match the U.S. Quantum Benchmarking Initiative, which has offered three Canadian companies—Sherbrooke, Que.-based Nord Quantique, Vancouver-based Photonic and Toronto-based Xanadu—up to US$316 million each.

The government has also renewed funding for two intellectual property programs that were due to end early next year, including $84.4 million over four years for ElevateIP to help startups strategically manage their IP, and $22.5 million over three years for the Innovation Asset Collective’s (IAC) Patent Collective program. IAC’s CEO Mike McLean previously told The Logic his organization had asked for between $10 million and $20 million per year to build a patent portfolio large enough to be a strategic asset to Canada. The government also plans to put $75 million toward the National Research Council’s IP Assist program over the next three years.

Several other Trudeau-era innovation programs that were due to end in the next two years are being cut as Innovation, Science and Economic Development Canada (ISED) reduces its spending as part of budget cuts across the federal government. 

According to the budget, programs that have accomplished their aims or have been superseded by other programs won’t get renewed, though it offers few examples. Some parts of the Global Innovation Clusters and the Strategic Innovation Fund will be cut, including the New Zero Accelerator initiative. Though the program’s website claims the initiative has been in high demand since it launched in 2020, the budget says that demand has dropped. In total, ISED plans to save some $3 billion over four years by “recalibrating” its programs.