Yes, of course. I would be happy to. I think it would be a good idea to provide a brief overview of the 2016 proposals.
We have a small business deduction that allows qualifying small businesses, on up to $500,000 of their active business income, to get a small business deduction, but it's commonly thought of as just a low rate of tax. It's currently at 10.5% and, as recently announced, is to be reduced down to 9%. In October, that was announced.
The general policy for the small business deduction is that you get one small business limit of $500,000 per business. The tax planning that had arisen for a partnership in a classic case would have one business where each of the partners—let's say there are 10 partners—would normally have to share that business limit, so instead, each of the partners would incorporate a side company that would provide that partner's services to the partnership, thus multiplying access to the small business deduction by the number of partners. With the 10 in my example, that brings it up from $500,000 to essentially $5 million.
The budget 2016 measure constrained that to provide that when there's one business, there's only going to be one business limit. That didn't just apply to partnerships. It also applied to central corporation structures, which could, in the corporate context, achieve the same multiplication results as you could have gotten in a partnership.
As part of our continuing consultation with stakeholders, we heard from a number of farmers and fishers who had dealings with co-operative organizations, and really, for co-operatives, they have membership interests in a co-operative that are for many purposes, including for the purposes of the small business deduction in the tax system. They're treated like shares, but they're not fundamentally the same as shares. They're different enough to be outside of the policy against the multiplication of the small business deduction.
For example, they often have one vote per member regardless of the number of shares, whereas if you're a shareholder and you're voting, that can allow you to elect members of the board of directors, for example, proportionate to the number of shares you have. Likewise, with a normal company, with the shareholdings representing more of an economic investment, you're looking to participate in the profits of the corporation, and your participation in the profits is going to be determined by your shareholdings.
With membership interests in a co-operative, it's a different system. In these cases where you have farmers or fishers selling their farm products or fishing catches to a co-operative, that would be called I think “specified co-operative income” and excluded from the rules that prevent multiplication of the small business deduction.