IP monitor: Innovation and industry after COVID-19: Canada’s 2021 budget

The 2021 federal budget includes commitments to investing in innovation and growing businesses as a means to recover from the COVID-19 pandemic. 

The federal government published its 2021 budget, titled Budget 2021: A Recovery Plan for Jobs, Growth, and Resilience (Budget 2021). Budget 2021 is the first budget presented in over two years due to the COVID-19 pandemic. The primary focus of Budget 2021 is to finish the ongoing battle against the pandemic. To that end, Budget 2021 prioritizes investing in industry and innovation to facilitate Canada’s economic recovery. 

Helping small and medium-sized businesses recover and grow

The federal government aims to help small businesses grow and expand by encouraging them to, among other things, embrace new technologies.

Immediate expensing for eligible investments in digital assets and intellectual property

Budget 2021 proposes to allow Canadian-controlled private corporations to immediately expense the full cost of certain depreciable property, including eligible investments in digital assets and intellectual property. This measure is intended to allow businesses to immediately deduct the cost of assets (once available for use), making investment in productive assets more attractive. A business may expense up to a maximum of $1.5 million per taxation year for such properties acquired on or after budget day (April 19, 2021) and which become available for use before 2024. For a more detailed analysis of the tax impacts of Budget 2021, see our publication 2021 Canadian Federal Budget: Advancing in a new reality.

Enhanced financing and expanded loan class eligibility to include lending against intellectual property

Budget 2021 proposes to improve the Canada Small Business Financing Program through amendments to the Canada Small Business Financing Act and its regulations. Proposed amendments include expanding loan class eligibility to include lending against intellectual property and start-up assets and expenses, increasing maximum loan amounts from $350,000 to $500,000, and extending loan coverage from 10 to 15 years for equipment and leasehold improvements. 

Support for projects led by Canadian businesses in collaboration with colleges, CEGEPs, and polytechnics

Over a two-year period starting in 2021-22, Budget 2021 proposes to provide $46.9 million to support research partnerships between colleges, CEGEPs, polytechnics, and businesses, and $5.7 million to enable businesses to access equipment, facilities, and expertise at college-affiliated Technology Access Centres.

Investing in Canada’s entrepreneurs

The federal government aims to reinvigorate the entrepreneurial spirit to help revitalize the economy.

Funding entrepreneurship

Starting in 2021-22, Budget 2021 proposes additional funding to support Canadian entrepreneurs: 

• Entrepreneurship Development: Up to $101.4 million over five years to Innovation, Science and Economic Development Canada (ISED) for the Small Business and Entrepreneurship Development Program. 
• Innovation Services: $500 million over five years and $100 million per year ongoing, to expand the Industrial Research Assistance Program to support up to 2,500 additional innovative small and medium-sized firms.
• Venture Capital: Up to $450 million on a cash basis over five years for a renewed Venture Capital Catalyst Initiative that would increase venture capital available to entrepreneurs.  

Supporting equity deserving entrepreneurs

Budget 2021 includes a welcome acknowledgement that the barriers faced by entrepreneurs from equity deserving groups hold the economy back. To combat this, starting in 2021-22, Budget 2021 proposes specific funding and measures to support entrepreneurs from these groups:  

• Women Entrepreneurs: Up to $146.9 million over four years to strengthen the Women Entrepreneurship Strategy.
• Black Entrepreneurs: Up to an additional $51.7 million over four years to ISED and the regional development agencies for the Black Entrepreneurship Program.
• Indigenous Entrepreneurs: 

• Invest $42 million over three years to expand the Aboriginal Entrepreneurship Program.
• Invest $22 million over three years to support the National Aboriginal Capital Corporations Association’s Indigenous Women’s Entrepreneurship Initiative by providing tools, services, and resources to increase the number of Indigenous women entrepreneurs.

Investing in world-leading research and innovation

The federal government aims to help entrepreneurs and businesses translate Canada’s world-class leadership in research into innovative products and services.

Investing in specific innovation areas

Starting in 2021-22, Budget 2021 proposes to provide funding to support a variety of innovative fields through new or existing funds and strategies: 

• Life Sciences, Automotive, Aerospace, Agriculture, and others: An incremental $2.2 billion over seven years on a cash basis and $511.4 million ongoing to support innovative projects across the economy through the Strategic Innovation Fund.
• Clean Tech: An incremental $5 billion over seven years on a cash basis to increase funding for the Strategic Innovation Fund’s Net Zero Accelerator. 
• Artificial Intelligence: Up to $443.8 million over ten years to support the Pan-Canadian Artificial Intelligence Strategy.
• Quantum Computing: $360 million over seven years to launch a National Quantum Strategy. 
• Photonics: $90 million over five years on a cash basis to the National Research Council to retool and modernize the Canadian Photonics Fabrication Centre. 
• Genomics: $400 million over six years in support of a Pan-Canadian Genomics Strategy.
• Health Research Sector and Pharmaceuticals: $250 million over three years to the Canadian Institutes of Health Research to implement a new Clinical Trials Fund. 
• Innovation Supercluster: $60 million over two years to the Innovation Superclusters Initiative.

Promoting access to expert intellectual property services

Budget 2021 proposes to promote access to expert intellectual property services: 

• Start-ups: $90 million over a two-year period starting in 2022-23 to create ElevateIP, a program to help accelerators and incubators provide start-ups with access to expert intellectual property services.
• High-growth client firms:  $75 million over a three-year period starting in 2021-22 for the National Research Council’s Industrial Research Assistance Program to provide high-growth client firms with access to expert intellectual property services. 

Budget 2021 provides innovative organizations with tax incentives, financing opportunities, and enhanced access to expert intellectual property services. These measures will provide innovators with new opportunities to improve their IP positioning, which they can leverage as the pandemic recedes.