CCPC Passive Investment Income Saga Comes to an End
On July 18, 2017, the Department of Finance (“the Department”) released proposals to amend the income tax treatment of certain businesses and in particular Canadian-controlled private corporations (“CCPCs”). The proposals included methods of eliminating the tax deferral advantage that occurs when a CCPC uses its after-tax business income to invest in passive investments that are not used concurrently, or at all, in its business (the “CCPC deferral advantage”). The main thrust of the proposals was to eliminate the refund of corporate tax on investment income earned by a CCPC upon the payment of dividends out of its refundable dividend tax on hand (“RDTOH”).
On October 18, 2017, the Department retreated significantly on the passive investment issue, and announced that a minimum threshold would be exempt from the proposals. The Department indicated that the threshold would be $50,000 of investment income per year, or, as the Department noted, the equivalent to $1 million in invested assets based on a nominal 5% rate of return (the “$50,000 income exemption”). In other words, the CCPC deferral advantage would continue to apply to up to $1 million of after-tax business income (or a different amount, with a different rate of return). The Department also indicated that prior investments retained by CCPCs, including the income earned from such investments, would be grandfathered and not subject to the RDTOH repeal.
In its February 27, 2018 Federal Budget (the “Budget”), the Department confirmed that it was following through with a $50,000 income exemption. As a result, many CCPCs will continue to enjoy the CCPC deferral advantage. The Department retreated on its initial proposal to eliminate the RDTOH refundable tax and replaced it with a rule that will grind down the small business limit for CCPCs that exceed the $50,000 investment income limit. This Budget proposal is discussed below (“First Budget Proposal”). This proposal along with related CCPC passive investment income measures were enacted in Bill C-74, Budget Implementation Act, 2018, No. 1 (“Bill C-74”).
THE CCPC DEFERRAL ADVANTAGE
The CCPC deferral advantage is a direct result of the small business deduction (“SBD”), which reduces the income tax rate on up to $500,000 of active business income earned by a CCPC to around 13%, depending on the province. In contrast, an unincorporated individual carrying on a business in the highest tax bracket pays 50% tax or more on business income. As a result, a shareholder of the CCPC who is in a 50% tax bracket, or would be but for the fact that the business income is earned in the CCPC, enjoys a significant tax deferral since the income is subject to the 13% tax rate rather than the 50% tax rate. A deferral advantage also exists for business income subject to the general corporate tax rate, but the advantage is less pronounced because the general corporate tax rate can be double the SBD rate or more.
Why is the CCPC deferral advantage significant? The answer lies in a well-known principle dealing with the deferral of the taxation of income (the “deferral principle”). The deferral principle holds that the deferral of the taxation of income is the equivalent of not allowing a deferral, but instead exempting from tax the income earned by investing the income. In other words, allowing a tax deferral is the same as allowing an exemption from tax for investment income.
A taxpayer has $200,000 of before-tax business income in year 1. The taxpayer is in a 50% tax bracket. The taxpayer can earn a 5% annual return on investments.
No deferral case: At the end of year 1, the taxpayer invests the after-tax business income of $100,000. By the end of year 2, the amount grows by 5% to $105,000, and net of 50% tax on the investment income, she is left with $102,500 after tax. If the investment income had been tax-exempt, she would have netted $105,000.
Deferral case: At the end of year 1, the taxpayer invests the entire $200,000 amount of business income (it was tax-deferred and not subject to tax in year 1). By the end of year 2, the amount grows by 5% to $210,000, and net of 50% tax on the entire $210,000 amount, she is left with $105,000 after tax.
Conclusion: Deferral is the same as no deferral with tax-exempt investment income. Note that this is the case even though the investment income was nominally subject to 50% tax in the deferral case in year 2.
Turning back to the CCPC issue, consider the income earned by a CCPC when it invests business income that is eligible for the SBD. Owing to the SBD, the first $500,000 of the active business income (“SBD income”) is subject to a tax rate that is typically much lower than the shareholder’s tax rate. For example, if a shareholder is in a 50% tax bracket and the CCPC tax rate on SBD income is 13%, only 26% of that income is not tax-deferred. That is, 50% of 26% of the SBD income equals the 13% CCPC tax. The remaining 74% of the SBD income is tax-deferred. Applying the deferral principal, most of the investment income earned on the SBD income is effectively exempt from tax. Not surprisingly, CCPCs have been marketed and used as tax-deferred retirement savings vehicles in addition to or in lieu of registered retirement savings plans (“RRSPs”) and tax-free savings accounts (“TFSAs”).
2018 BUDGET: FIRST PROPOSAL
In the Budget, the Department retreated on its July 18, 2017 proposal to eliminate the RDTOH and the corporate tax refund for passive investment income. The Budget proposed an alternative approach to the deal with the CCPC deferral advantage. Under the Budget proposal, the maximum business income limit of a CCPC for a taxation year eligible for the SBD (“small business limit”) will be reduced, generally where its passive investment income exceeds $50,000. In particular, the small business limit of the CCPC for a taxation year ending in a calendar year will be reduced on a straight-line basis, with a $5 grind-down in the limit for every $1 in excess of $50,000 of the “adjusted aggregate investment income” (described below) of the CCPC and any corporations associated with the CCPC for their taxation years ending in the preceding calendar year (draft paragraph 125(5.1)(b)).
For example, if the adjusted aggregate investment income is $100,000, the small business limit will be reduced from $500,000 to $250,000. In such a case, a CCPC earning more than $250,000 of active business income will remain eligible for the SBD on the first $250,000, while the excess will be subject to the general corporate tax rate. If the adjusted aggregate investment income is $150,000 or more, the small business limit will be reduced to zero.
The Budget proposal preserves the $50,000 income exemption. Assuming a 5% annual return, a CCPC will be able to invest a total of $1 million of after-tax SBD income that will continue to benefit from the CCPC deferral advantage without a reduction in its small business limit. Obviously, the total after-tax SBD income that will continue to benefit will depend on the annual return—for example, a 2.5% annual return would reflect $2 million of after-tax SBD income rather than $1 million. The $50,000 income exception is annual rather than cumulative, with no carryforward for a shortfall in any particular year. The exception applies regardless of whether the income is invested back into the business or used otherwise.
As can be appreciated, if a CCPC exceeds the $50,000 investment income threshold, its SBD income will be converted (in the 5:1 ratio noted above) into regular business income that is subject to the general corporate tax rate. On average, and depending on the province, SBD income is subject to a tax rate of around 13%, whereas other business income is subject to the general corporate tax rate of around 27%. If all or most of the business income is distributed annually as dividends or salary, the grind-down of the small business deduction should not be significant because there will be no deferral or a limited deferral of the business income. However, to the extent that the business income is re-invested in the business (or as a further passive investment), the grind-down will increase effective tax rates because of the lower amount of tax deferral for general corporate business income relative to SBD income. In such case, the significance of the grind-down will increase with the length of the period of deferral. Given the appropriate assumptions, basic tax arithmetic should allow a tax advisor to determine whether exceeding the $50,000 investment income threshold makes sense from a tax perspective. The practical problem, of course, will lie in the accuracy of the assumptions.
The Budget proposal will apply in conjunction with existing measures that reduce the small business limit where the total taxable capital employed in Canada of a CCPC and corporations associated with the CCPC exceeds $10 million (current subsection 125(5.1)). The reduction in the small business limit will be the greater of the reduction computed under the Budget proposal and that computed under the taxable capital reduction measures.
For the purposes of the proposal, the “adjusted aggregate investment income” (subsection 125(7)) of a CCPC will be computed in the same manner as the “aggregate investment income” currently used for refundable tax purposes (subsection 129(4)), with the following adjustments:
- taxable capital gains and allowable capital losses from the dispositions of “active assets” will be excluded;
- net capital losses carried over from other taxation years will be excluded;
- dividends from non-connected corporations will be included; and
- taxable amounts in respect of a life insurance policy will be included, to the extent they are not otherwise included in aggregate investment income.
The “active assets” of a CCPC at a particular time (draft definition in subsection 125(7)) will include property that is used principally in an active business carried on primarily in Canada by the CCPC or by a related CCPC. It will also include a share of another CCPC that is “connected” with the CCPC where the share would be a “qualified small business corporation share” at the particular time if it were owned by an individual. Among other things, this entails a 24-month holding period of the shares, where at the particular time all or substantially all of the fair market value of the assets of the other CCPC are attributable to assets that are used principally in an active business carried on primarily in Canada or shares or debt in other corporations that meet similar criteria. There is no monetary limit to the active asset exception, meaning that an unlimited number of such investments can benefit from the CCPC deferral advantage without reducing the CCPC’s small business limit.
The active asset exemption as it applies to capital gains on shares in other CCPCs presumably reflects the Department’s announcement on October 18, 2017 that it will ensure that “incentives are in place so that Canada’s venture capital and angel investors can continue to invest in the next generation of Canadian innovation.” The Department provides no explanation as to why such incentives are required (perhaps it views that point as a given), or why non-CCPC investors are not provided with parallel incentives. The CCPC deferral advantage clearly provides a leg-up for CCPCs with SBD income relative to other investors. In short, if the Department believes that further tax incentives are required for investments in “Canadian innovation”, it is curious that the active asset exception targets a small minority of potential investors with no similar incentive for the majority of potential investors. Of course, a similar incentive for other investors would come at a high price in terms of lost tax revenues.
Adjusted aggregate investment income will not include investment income that is incidental to or pertains to an active business. Adjusted aggregate investment income will include income earned on CCPC investments accumulated before the Budget proposals, and not just on investments made afterwards. In other words, the grandfathering proposals in the Department’s October 18, 2017 announcement discussed earlier (see Background) do not apply for the purposes of this proposal. However, they do apply in terms of the RDTOH and the refundable tax paid out of that account, as provided in the second Budget proposal discussed below.
One potentially unfair part of this Budget proposal relates to the fact that adjusted aggregate investment income over $50,000 per year will reduce the CCPC small business limit, whether the investment income was earned out of after-tax SBD income or otherwise. Income earned by investing after-tax business income that was subject to the general corporate tax rate will reduce the small business limit, even though the deferral advantage in respect of this type of income is less advantageous than that with respect to SBD income. More significantly, investment income earned by a CCPC by investing a shareholder’s after-tax income that was contributed to the CCPC (e.g., paid-up capital) will reduce the small business limit even if the shareholder is in the top tax bracket. From a policy perspective, the latter type of investment income should not be subject to the new proposal, simply because the amount invested was already subject to top marginal tax rates, meaning that there was no tax deferral. If the Department were to remedy the situation, the solution would likely involve at least another investment income or refundable tax account, with the added complexity of allocating the source of the investment to each account. Assuming the proposal remains as is, a planning point for associated CCPCs is to make passive investments out of after-tax SBD income to the extent possible (say, where one CCPC has all SBD income and an associated CCPC has no SBD income). The point is somewhat circular because the extra retained investment income may in turn reduce tax-deferred SBD income that can be used to earn investment income in the future.
The above proposal is scheduled to apply to taxation years that begin after 2018. An anti-avoidance rule (found in the draft transitional rules) provides that it will also apply to a taxation year that begins before 2019 and ends after 2018 if the preceding taxation year was, because of a transaction or event or series of transactions or events, shorter than it would have been otherwise, and one of the reasons for the transaction, event, or series was to defer the application of the proposal.
2018 BUDGET: SECOND PROPOSAL
The 2018 Budget proposed another measure that was not explicitly discussed in the July 18, 2017 proposals. Under current rules, a CCPC may receive a refund out of its RDTOH when it pays eligible dividends, which provide an enhanced dividend tax credit. The enhanced credit for eligible dividends is provided on the premise that the dividends were paid out of business income that was subject to the general corporate tax rate, rather than SBD income or investment income that formed part of the RDTOH. To correct this apparent anomaly, the second Budget proposal provides that a refund out of RDTOH will be allowed only in the case where the CCPC pays non-eligible dividends, which qualify for a less generous dividend tax credit. However, an exception, discussed below, provides that the payment of certain eligible dividends can generate the refund.
In order to differentiate between the two types of income that can generate a refund, the RDTOH account of a CCPC will be split into two accounts. One account, the “eligible RDTOH” of the CCPC, will include the Part IV tax payable by the CCPC in respect of eligible dividends that it receives from a non-connected corporation, sometimes called eligible portfolio dividends. It will also include Part IV tax payable by the CCPC on dividends that it receives from a connected corporation that received a refund of its Part IV tax because of the payment of the dividends out of its eligible RDTOH. This latter rule effectively tracks the payment of Part IV tax down a corporation chain, and preserves the refundable tax where one CCPC receives eligible portfolio dividends and then pays dividends to its corporate shareholder. For example, if a subsidiary CCPC receives eligible portfolio dividends, it will have Part IV tax payable on those dividends, and if it receives a refund of the Part IV tax when it pays taxable dividends to its parent CCPC, the Part IV tax payable by the parent CCPC will form part of the eligible RDTOH account of the parent. A refund of tax will be generated by the parent’s payment of either eligible dividends or non-eligible dividends by a CCPC out of its eligible RDTOH.
The second account, the “non-eligible RDTOH” of a CCPC, will include current refundable Part I taxes on aggregate investment income. It will also include Part IV taxes as under the current rules, other than Part IV taxes that form part of the eligible RDTOH. For example, Part IV tax payable on a non-eligible portfolio dividend received by a CCPC will form part of its non-eligible RDTOH. A refund of tax will be generated by the payment of non-eligible dividends by the CCPC out of its non-eligible RDTOH.
An ordering rule provides that the payment of a non-eligible dividend by the corporation will generate a refund from its non-eligible RDTOH account before it obtains a refund from its eligible RDTOH account. The ordering rule should be beneficial, in that it works to preserve the eligible RDTOH account ahead of the non-eligible RDTOH, and as noted, the eligible RDTOH can generate a refund upon the payment of either eligible or non-eligible dividends.
The proposal is scheduled to apply to taxation years that begin after 2018. As with the first Budget proposal, an anti-avoidance rule provides that it will also apply to a taxation year that begins before 2019 and ends after 2018 if the preceding taxation year was, because of a transaction or event or series of transactions or events, shorter than it would have been otherwise, and one of the reasons for the transaction, event, or series was to defer the application of the proposal.
A transitional rule for the new RDTOH(s) applies for the first taxation year of a CCPC that is subject to the Budget proposal. Out of the CCPC’s existing RDTOH at the end of the previous taxation year, an amount equal to 38⅓ per cent of the CCPC’s general rate income pool at the end of the previous year (basically, taxable income that was subject to the general corporate rate) will be allocated to its eligible RDTOH. The remainder of the existing RDTOH, if any, will be allocated to the CCPC’s non-eligible RDTOH. For non-CCPC corporations, the existing RDTOH will be allocated in full to eligible RDTOH. The Department feels that this transitional rule fulfills its previous commitment regarding the grandfathering of CCPC investments made prior to the application of the proposal. CCPC investments made prior to the proposal will continue to generate a refund out of their RDTOH accounts, thus preserving the CCPC deferral advantage, albeit at the price of reducing their small business limits under the first Budget proposal. However, if the previous CCPC investments are significant in amount, the trade-off will be well worthwhile.
Example 1—Deferral v. No Deferral
Assume a taxpayer in a 50% personal tax bracket earns $200,000 of business income in year 1, either personally (Case 1) or through a CCPC (Case 2). The after-tax income is invested at the end of year 1. The return on investment income is 5% per year. The CCPC tax rate on SBD income is 13%. There is perfect integration between the corporate tax and the personal tax. The CCPC refundable tax rate on passive income is 50%. (To keep numbers simple, I have used a 50% CCPC rate on investment income. The CCPC rate may be slightly more—for example, it is 50.17% in Ontario. Still, the same analysis would apply using a different rate, as long as there was perfect integration.)
Case 1: Taxpayer carries on the business personally, and the after-tax business income of $100,000 is invested in a non-registered account. By the end of year 2, the amount grows by $5,000 before tax and to a total of $102,500 after tax.
Case 2: Taxpayer carries on the business through a CCPC, which invests the after-tax SBD income of $174,000 ($200,000 net of 13% tax). By the end of year 2, the amount grows by 5% to $182,700. The maximum dividend is paid to the taxpayer / shareholder. Assuming perfect integration, the $174,000 amount is subject to a further tax of $74,000 (37% of the initial $200,000 SBD income, which was already taxed at 13%), while the $8,700 of investment income is subject to total corporate and personal tax of 50%, or $4,350. The total tax of $78,350, when subtracted from the $182,700 amount, nets $104,350 after tax. Alternatively, instead of receiving a dividend, the taxpayer could receive a salary at the end of year 2, which would provide a similar result.
Case 2 (with deferral) would be the equivalent of Case 1 (with no deferral), if the $5,000 of investment income in Case 1 was subject to 13% tax instead of 50% tax ($650 tax), leaving net investment income of $4,350. Stated another way, Case 2 would be the equivalent of Case 1, if $1,300 of the investment income in Case 1 was subject to the shareholder’s 50% rate of tax while the remaining $3,700 was tax-exempt.
The above example assumes perfect integration between the corporate tax and the personal tax. Under current law, there is some under-integration in most provinces, such that less investment income, but still a significant amount, is effectively exempt from taxation. The exact amount of tax-exempt income depends on the province, the rate of return, and the length of the deferral. See also Example 2 below, regarding the distinction between tax-exempt simple income and compound income.
Example 2—Simple v. Compound Income
Although the CCPC deferral advantage is significant, there is one notable difference between it and the RRSP (or TFSA) tax exemption. The RRSP tax exemption defers the taxation of the initial income contributed to the plan and the annual investment income earned on that income, which, pursuant to the deferral principle, results in an exemption from tax for all of the investment income, both simple income (earned on the deferred initial income) and compound income (earned on the deferred annual investment income). The CCPC advantage defers the taxation of much of the initial after-tax business income, but nominally taxes the investment income earned on that income on an annual basis. Thus, the CCPC scenario results in an exemption from tax for the simple investment income earned on the deferred business income (because that income was tax-deferred), but not the compound income earned on the simple investment income (because the simple income was not tax-deferred). The simple / compound income distinction is discussed in Frankovic, “The Taxation of Prepaid Income”, Canadian Tax Journal (2002) vol. 50, no 4, at 1254. A more detailed and algebraic explanation is found in the Hanna article mentioned in note 3. The distinction is illustrated in the following example.
Assume a taxpayer in a 50% tax bracket earns $200,000 of business income in year 1. It is invested at the end of year 1 until the end of year 3. The return on investment income is 5% per year.
Case 1 (deferral of all income; RRSP-type situation): The taxpayer invests the $200,000 deferred income, which grows to $220,500 by the end of year 3 ($10,000 investment income in year 2 plus $10,500 investment income in year 3). In year 3, she is subject to 50% tax on the entire amount, leaving her with $110,250 after tax. The treatment is equivalent to not deferring the taxation of the initial income—that is, taxing the $200,000 in year 1, leaving $100,000—and then exempting from tax both the 5% simple return on the $100,000 investment ($5,000 per year, or $10,000 in total) and the compound return (additional $250 earned in year 3).
Case 2 (deferral of initial income but not resulting investment income; CCPC-type situation): The taxpayer invests the $200,000 deferred income, except the investment income is taxed annually. At the end of year 2, the amount grows to $205,000 after tax ($10,000 investment income, 50% tax). By the end of year 3, this amount grows to $210,125 after tax (another $10,250 investment income, 50% tax). Net of the $100,000 tax payable in year 3 on the initial $200,000 amount, the taxpayer is left with $110,125 after tax. This treatment is equivalent to not deferring the taxation of the initial income, leaving $100,000 in year 1, and then exempting from tax the 5% simple return on the $100,000 investment ($10,000 total) but subjecting the compound return ($250) to 50% tax.
Example 3—Carrying on Business Personally v. Through a CCPC
The following cases consider a business carried on personally, and alternatively where the business is carried on through a CCPC but without the refundable corporate tax. The taxpayer / shareholder is in a 50% personal tax bracket and the business earns $200,000 in year 1. The after-tax business income is invested at the end of year 1. The return on investment income is 5% per year. The tax rate on SBD income is 13%.
Case 1: Taxpayer carries on the business personally. The after-tax amount of $100,000 ($200,000 business income net of 50% tax) is invested in a non-registered account. At the end of year 2, the amount grows 5% to $105,000, and net of 50% tax on the return, she is left with $102,500.
Case 2: Taxpayer carries on the business through a CCPC. The after-tax amount of $174,000 ($200,000 business income net of 13% tax) is invested and retained in the corporation. At the end of year 2, the amount grows by 5% or $8,700 to $182,700 before tax, and the maximum after-tax amount of this income is distributed to the taxpayer as a dividend. Assuming perfect integration, the $174,000 amount is subject to a further tax of $74,000 (37% of the initial $200,000 business income, which was already taxed at 13%), leaving $100,000 after tax on this portion of the dividend. The $8,700 investment income is subject to a non-refundable tax of 50%, or $4,350. This $4,350 portion of the dividend is subject to a shareholder tax rate of 42.53% (again, I am assuming perfect integration), leaving $2,500 after tax for this portion of the dividend. The taxpayer / shareholder is left with $102,500, the same amount as in Case 1. So the effective tax rate in Case 2 is 50% as with case 1, even though the nominal tax rate on the $8,700 investment income in Case 2 is 71% ($4,350 + 42.53 X $4,350 = $6,200 nominal tax).
| “Minister Morneau Announces Next Steps in Improving Fairness in the Tax System by Closing Loopholes and Addressing Tax Planning Strategies” (along with draft legislation and consultation documents), Department of Finance, July 18, 2017.
 “Targeted Tax Fairness Measures Will Protect Middle Class Small Business Owners”, Department of Finance, October 18, 2017.
 Light was first shed on the principle in the seminal article written by MIT professor Carey Brown, “Business-Income Taxation and Investment Incentives”, in Income, Employment and Public Policy: Essays in the Honor of Alvin H. Hanson, 300 (1948). The principle is well-entrenched in the tax policy literature. Perhaps the most comprehensive article is Christopher Hanna, “Demystifying Tax Deferral”, vol. 52, no. 2 SMU Law Review 383. More recently, a shorter but important article was written by Harvard Law professors Daniel Halperin and Alvin C. Warren, “Understanding Income Tax Deferral”, 67 Tax L. Rev. 317 (2014).
 The example assumes that the 5% return is available for the entire $200,000 amount in the deferral case, and not just the $100,000 amount from the no deferral case. Where the return is different on the invested amount between $100,000 and $200,000, the amount of tax-exempt income will differ. This point is also entrenched in the tax policy literature, and is discussed in some detail in the Halperin and Warren article cited in note 3 above.
 See Example 1 in the Appendix.
 See Example 2 in the Appendix.
 Using the deferral principle and basic tax arithmetic (see also the text in and around notes 5 and 6 above), it can be shown that owners of CCPCs who use the investment income exemption retain a tax subsidy that can potentially add up to the equivalent of hundreds of thousands of dollars of extra RRSP room. The Department knows this and appears to be willing to live with it: “The tax benefit of saving within a private corporation can also exceed the tax benefits that individuals can receive from passive investments in RRSPs or TFSAs” (“Limitations of the Current System”, July 18 Consultation Document).
 The definition of “qualified small business corporation share” is found in subsection 110.6(1). The definition of “connected corporations” is found in subsection 186(4) and is discussed in note 22.
 The active asset definition also contains a look-through rule that applies where a partnership owns such assets or shares and the CCPC has an interest in the partnership whose fair market value is 10% or more of the fair market value of all of the interests in the partnership.
 Note 2 above.
 Current tax incentives are listed in note 13.
 In the Budget documents, “Growth / A Fair Tax System for all Canadians”, the Department indicates that it did follow through with grandfathering provisions: “No existing savings will face any additional tax upon withdrawal, thereby maintaining the Government’s commitment to protect the tax treatment of all past savings and investments.” What the Department means is that income from past investments will continue to be eligible for the RDTOH, not that the past investments will be grandfathered from the SBD reduction proposal. As indicated in an analysis by the law firm McCarthy Tetrault, the SBD reduction proposal “may have an impact on those corporations that were otherwise eligible for the small business tax rate and that had significant investment assets at the time that these changes were proposed (which is to some extent inconsistent with the Government’s October 18, 2017, statement).” (McCarthy Tetrault website, “2018 Canadian Federal Budget Commentary—Tax Initiatives”, February 28, 2018).
 See note 12 regarding the proposals in the July 18 Consultation Document.
 A connected corporation means a corporation that is controlled by the CCPC, and a corporation in which the CCPC owns 10% or more of the shares of the corporation on a votes and fair market value basis; see subsection 186(4). A non-connected corporation is a corporation other than a connected corporation.
 See note 20.
 For CCPC investments accumulated before 2019 and paid out in 2019 or subsequent years as dividends, the CCPC deferral advantage will be diminished somewhat owing to the decrease in the dividend tax credit beginning in 2019. The decrease coincides with, and is a result of, the decrease in the SBD rate in 2019.