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Feds provide more details on revisions to controversial tax proposals

Last Updated Dec 13, 2017 at 2:00 pm EDT

Minister of Finance Bill Morneau rises during Question Period in the House of Commons on Parliament Hill in Ottawa on Monday, Nov. 20, 2017. THE CANADIAN PRESS/Justin Tang

OTTAWA — The federal government is releasing more details on changes to its controversial tax proposals in hopes of further addressing deep concerns over reforms that have angered the small-business community.

The Liberals are tweaking a proposal that, as of Jan. 1, would tighten existing rules enabling small-business owners to lower their tax burden by distributing earnings among family members who do not make significant contributions to their companies — a practice known as income sprinkling.

The government insists the revisions to income-sprinkling rules contain clear tests to determine whether a relative has made a meaningful contribution to — or investment in — the family business.

The Finance Department says businesses will have until Dec. 31, 2018, to adjust to the changes, which include new qualification rules for family members — such as substantial capital investments as well as minimums for age and the number of hours worked.

Prime Minister Justin Trudeau has argued the income-sprinkling reforms were designed to target only wealthy individuals who have used the incorporation of small businesses to gain an unfair tax advantage.

The changes are among several adjustments the government made to its overall tax-reform package following an onslaught of complaints from doctors, lawyers, accountants, tax experts, farmers, premiers and even some Liberal backbenchers.