Keeping Canada’s Economy and Jobs Growing Act (S.C. 2011, c. 24)
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Assented to 2011-12-15
Keeping Canada’s Economy and Jobs Growing Act
S.C. 2011, c. 24
Assented to 2011-12-15
An Act to implement certain provisions of the 2011 budget as updated on June 6, 2011 and other measures
SUMMARY
Part 1 of this enactment implements income tax measures and related measures proposed in the 2011 budget. Most notably, it
(a) introduces the family caregiver tax credit for caregivers of infirm dependent relatives;
(b) introduces the children’s arts tax credit of up to $500 per child of eligible fees associated with children’s artistic, cultural, recreational and developmental activities;
(c) introduces a volunteer firefighters tax credit to allow eligible volunteer firefighters to claim a 15% non-refundable tax credit based on an amount of $3,000;
(d) eliminates the rule that limits the number of claimants for the child tax credit to one per domestic establishment;
(e) removes the $10,000 limit on eligible expenses that can be claimed under the medical expense tax credit in respect of a dependent relative;
(f) increases the advance payment threshold for the Canada child tax benefit to $20 per month and for the GST/HST credit to $50 per quarter;
(g) aligns the notification requirements related to marital status changes for an individual who receives the Canada child tax benefit with the notification requirements for the GST/HST credit;
(h) reduces the minimum course-duration requirements for the tuition, education and textbook tax credits, and for educational assistance payments from registered education savings plans, that apply to students enrolled at foreign universities;
(i) allows the tuition tax credit to be claimed for eligible occupational, trade and professional examination fees;
(j) allows the reallocation of assets in registered education savings plans for siblings without incurring tax penalties;
(k) extends to the end of 2013 the temporary accelerated capital cost allowance treatment for investment in machinery and equipment in the manufacturing and processing sector;
(l) expands eligibility for the accelerated capital cost allowance for clean energy generation and conservation equipment;
(m) extends eligibility for the mineral exploration tax credit by one year to flow-through share agreements entered into before March 31, 2012;
(n) expands the eligibility rules for qualifying environmental trusts;
(o) amends the deduction rates for intangible capital costs in the oil sands sector;
(p) aligns the tax treatment to investments made under the Agri-Québec program with that of investments under AgriInvest;
(q) introduces rules to strengthen the tax regime for charitable donations;
(r) introduces anti-avoidance rules for registered retirement savings plans and registered retirement income funds;
(s) introduces rules to limit tax deferral opportunities for individual pension plans;
(t) introduces rules to limit tax deferral opportunities for corporations with significant interests in partnerships;
(u) extends the tax on split income to capital gains realized by a minor child; and
(v) extends the dividend stop-loss rules to dividends deemed to be received on the redemption of shares held by certain corporations.
Part 1 also implements other selected income tax measures and related measures. Most of these measures were referred to in the 2011 budget as previously announced measures. Most notably, it
(a) accommodates an increase in the annual contribution limit to the Saskatchewan Pension Plan and aligns its tax treatment with that of other tax-assisted retirement vehicles;
(b) clarifies that the “financially dependent” test applies for the purposes of provisions that permit rollovers of the assets of a deceased taxpayer’s registered retirement savings plan or registered retirement income fund to an infirm child or grandchild’s registered disability savings plan;
(c) ensures that the alternative minimum tax does not apply in respect of securities that are subject to the election under section 180.01 of the Income Tax Act;
(d) clarifies the rules applicable to the scholarship exemption for post-secondary scholarships, fellowships and bursaries; and
(e) amends the pension-to-registered retirement savings plan transfer limits in situations where the accrued pension amount was reduced due to the insolvency of the employer and underfunding of the employer’s registered pension plan.
Part 2 amends the Softwood Lumber Products Export Charge Act, 2006 to implement the softwood lumber ruling rendered by the London Court of International Arbitration on January 21, 2011.
Part 3 amends the Customs Tariff in order to simplify it and reduce the customs processing burden for Canadians by consolidating similar tariff items that have the same tariff rates and removing end-use provisions where appropriate. The amendments also simplify the structure of some provisions and remove obsolete provisions.
Part 4 amends the Customs Tariff to introduce new tariff items to facilitate the processing of low value non-commercial imports arriving by post or by courier.
Part 5 amends the Canada Education Savings Act to make the additional amount of a Canada Education Savings grant that is available under subsection 5(4) of that Act available to more than one of the beneficiary’s parents, if they share custody of the beneficiary, they are eligible individuals as defined in section 122.6 of the Income Tax Act and the beneficiary is a qualified dependant of each of them.
Part 6 amends the Children’s Special Allowances Act and a regulation made under that Act respecting payments relating to children under care.
Part 7 amends the Canada Student Financial Assistance Act to provide that the maximum aggregate amount of outstanding student loans is to be determined by regulation, to remove the power of the Minister of Human Resources and Skills Development to deny certificates of eligibility, and to change the limitation period for the Minister to take administrative measures. It also authorizes the Minister to forgive portions of family physicians’, nurses’ and nurse practitioners’ student loans if they begin to work in under-served rural or remote communities.
Part 7 also amends the Canada Student Loans Act to authorize the Minister to forgive portions of family physicians’, nurses’ and nurse practitioners’ guaranteed student loans if they begin to work in under-served rural or remote communities.
Part 8 amends Part IV of the Employment Insurance Act to provide a temporary measure to refund a portion of employer premiums for small business. An employer whose premiums were $10,000 or less in 2010 will be refunded the increase in 2011 premiums over those paid in 2010, to a maximum of $1,000.
Part 9 provides for payments to be made to provinces, territories, municipalities, First Nations and other entities for municipal infrastructure improvements.
Part 10 amends the Canadian Securities Regulation Regime Transition Office Act so that funding for the Canadian Securities Regulation Regime Transition Office may be fixed through an appropriation Act.
Part 11 amends the Wage Earner Protection Program Act to extend in certain circumstances the period during which wages earned by individuals but not paid to them by their employers who are bankrupt or subject to receivership may be the subject of a payment under that Act.
Part 12 amends the Canadian Human Rights Act to repeal certain provisions that provide for mandatory retirement. It also amends the Canada Labour Code to repeal a provision that denies employees the right to severance pay for involuntary termination if they are entitled to a pension. Finally, it amends the Conflict of Interest Act.
Part 13 amends the Judges Act to permit the appointment of two additional judges to the Nunavut Court of Justice.
Part 14 provides for the retroactive coming into force of section 9 of the Nordion and Theratronics Divestiture Authorization Act in order to ensure the validity of pension regulations made under that section.
Part 15 amends the Canada Pension Plan to include amounts received by an employee under an employer-funded disability plan in contributory salary and wages.
Part 16 amends the Jobs and Economic Growth Act to replace the reference to the Treasury Board Secretariat with a reference to the Chief Human Resources Officer in subsections 10(4) and 38.1(1) of the Public Servants Disclosure Protection Act.
Part 17 amends the Department of Veterans Affairs Act to include a definition of dependant and to provide express regulation-making authority for the provision of certain benefits in non-institutional locations.
Part 18 amends the Canada Elections Act to phase out quarterly allowances to registered parties.
Part 19 amends the Special Retirement Arrangements Act to permit the reservation of pension contributions from any benefit that is or becomes payable to a person. It also deems certain provisions of An Act to amend certain Acts in relation to pensions and to enact the Special Retirement Arrangements Act and the Pension Benefits Division Act to have come into force on December 14 or 15, 1994, as the case may be.
Part 20 amends the Motor Vehicle Safety Act to allow residents of Canada to temporarily import a rental vehicle from the United States for up to 30 days, or for any other prescribed period, for non-commercial use. It also authorizes the Governor in Council to make regulations respecting imported rental vehicles, as well as their importation into and removal from Canada, and makes other changes to the Act.
Part 21 amends the Federal-Provincial Fiscal Arrangements Act to clarify the legislative framework pertaining to payments under tax agreements entered into with provinces under Part III.1 of that Act.
Part 22 amends the Department of Human Resources and Skills Development Act to change the residency requirements of certain commissioners.
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
SHORT TITLE
Marginal note:Short title
1. This Act may be cited as the Keeping Canada’s Economy and Jobs Growing Act.
PART 1AMENDMENTS TO THE INCOME TAX ACT AND RELATED REGULATIONS
R.S., c. 1 (5th Supp.)Income Tax Act
2. (1) Paragraph 18(11)(g) of the Income Tax Act is repealed.
(2) Subsection (1) applies after 2009.
3. (1) Section 34.2 of the Act is replaced by the following:
Marginal note:Definitions
34.2 (1) The definitions in this subsection apply in this section.
“adjusted stub period accrual”
« montant comptabilisé ajusté pour la période tampon »
“adjusted stub period accrual” of a corporation in respect of a partnership — in which the corporation has a significant interest at the end of the last fiscal period of the partnership that ends in the corporation’s taxation year in circumstances where another fiscal period (in this definition referred to as the “particular period”) of the partnership begins in the year and ends after the year — means
(a) if paragraph (b) does not apply, the amount determined by the formula
[(A – B) × C/D] – (E + F)
where
- A
- is the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for a fiscal period of the partnership that ends in the year (other than any amount for which a deduction is available under section 112 or 113),
- B
- is the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for a fiscal period of the partnership that ends in the year,
- C
- is the number of days that are in both the year and the particular period,
- D
- is the number of days in fiscal periods of the partnership that end in the year,
- E
- is the amount of the qualified resource expense in respect of the particular period of the partnership that is designated by the corporation for the year under subsection (6) in its return of income for the year filed with the Minister on or before its filing-due date for the year, and
- F
- is an amount designated by the corporation in its return of income for the year (other than an amount included in the description of E) and filed with the Minister on or before its filing-due date for the year; and
(b) if a fiscal period of the partnership ends in the corporation’s taxation year and the year is the first taxation year in which the fiscal period of the partnership is aligned with the fiscal period of one or more other partnerships under a multi-tier alignment (in this paragraph referred to as the “eligible fiscal period”),
(i) where a fiscal period of the partnership ends in the year and before the eligible fiscal period, the amount determined by the formula
[(A – B) × C/D] – (E + F)
where
- A
- is the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the first fiscal period of the partnership that ends in the year (other than any amount for which a deduction is available under section 112 or 113),
- B
- is the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for the first fiscal period of the partnership that ends in the year,
- C
- is the number of days that are in both the year and the particular period,
- D
- is the number of days in the first fiscal period of the partnership that ends in the year,
- E
- is the amount of the qualified resource expense in respect of the particular period of the partnership that is designated by the corporation for the year under subsection (6) in its return of income for the year filed with the Minister on or before its filing-due date for the year, and
- F
- is an amount designated by the corporation in its return of income for the year (other than an amount included in the description of E) and filed with the Minister on or before its filing-due date for the year, and
(ii) where the eligible fiscal period of the partnership is the first fiscal period of the partnership that ends in the corporation’s taxation year, the amount determined by the formula
(A – B – C) × D/E – (F + G)
where
- A
- is the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the eligible fiscal period (other than any amount for which a deduction is available under section 112 or 113),
- B
- is the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for the eligible fiscal period,
- C
- is the corporation’s eligible alignment income for the eligible fiscal period,
- D
- is the number of days that are in both the year and the particular period,
- E
- is the number of days that are in the eligible fiscal period that ends in the year,
- F
- is the amount of the qualified resource expense in respect of the particular period of the partnership that is designated by the corporation for the year under subsection (6) in its return of income for the year filed with the Minister on or before its filing-due date for the year, and
- G
- is an amount designated by the corporation in its return of income for the year (other than an amount included in the description of F) and filed with the Minister on or before its filing-due date for the year.
“eligible alignment income”
« revenu d’alignement admissible »
“eligible alignment income”, of a corporation, means
(a) if a partnership is subject to a single-tier alignment, the first aligned fiscal period of the partnership ends in the first taxation year of the corporation ending after March 22, 2011 (in this paragraph referred to as the “eligible fiscal period”) and the corporation is a member of the partnership at the end of the eligible fiscal period,
(i) where the eligible fiscal period is preceded by another fiscal period of the partnership that ends in the corporation’s first taxation year that ends after March 22, 2011 and the corporation is a member of the partnership at the end of that preceding fiscal period, the amount determined by the formula
A – B – C
where
- A
- is the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the eligible fiscal period (other than any amount for which a deduction is available under section 112 or 113),
- B
- is the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for the eligible fiscal period, and
- C
- is, where an outlay or expense of the partnership is deemed by subsection 66(18) to be made or incurred by the corporation at the end of the eligible fiscal period, the total of all amounts each of which is an amount that would be deductible by the corporation for the taxation year under any of sections 66.1, 66.2, 66.21 and 66.4 determined as if each such outlay or expense were the only amount relevant in determining the amount deductible, or
(ii) where the eligible fiscal period is the first fiscal period of the partnership that ends in the corporation’s first taxation year ending after March 22, 2011, nil; and
(b) if a partnership is subject to a multi-tier alignment, the first aligned fiscal period of the partnership ends in the taxation year of the corporation (in this paragraph referred to as the “eligible fiscal period”) and the corporation is a member of the partnership at the end of the eligible fiscal period, the amount determined by the formula
A – B – C
where
- A
- is the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the eligible fiscal period, other than any amount
(i) for which a deduction is available under section 112 or 113, or
(ii) that would be included in computing the income of the corporation for the year if there were no multi-tier alignment,
- B
- is the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of a partnership for the eligible fiscal period, and
- C
- is, where an outlay or expense of the partnership is deemed by subsection 66(18) to be made or incurred by the corporation at the end of the eligible fiscal period, the total of all amounts each of which is an amount that would be deductible by the corporation for the taxation year under any of sections 66.1, 66.2, 66.21 and 66.4 determined as if each such outlay or expense were the only amount relevant in determining the amount deductible.
“multi-tier alignment”
« alignement pour paliers multiples »
“multi-tier alignment”, in respect of a partnership, means the alignment under subsection 249.1(9) or (11) of the fiscal period of the partnership and the fiscal period of one or more other partnerships.
“qualified resource expense”
« dépense admissible relative à des ressources »
“qualified resource expense”, of a corporation for a taxation year in respect of a fiscal period of a partnership that begins in the year and ends after the year, means an expense incurred by the partnership in the portion of the fiscal period that is in the year and that is described in any of the following definitions:
(a) “Canadian exploration expense” in subsection 66.1(6);
(b) “Canadian development expense” in subsection 66.2(5);
(c) “foreign resource expense” in subsection 66.21(1); and
(d) “Canadian oil and gas property expense” in subsection 66.4(5).
“qualifying transitional income”
« revenu admissible à l’allègement »
“qualifying transitional income”, of a corporation that is a member of a partnership on March 22, 2011, means the amount that is the total of the following amounts, computed in accordance with subsection (15),
(a) the corporation’s eligible alignment income in respect of the partnership, and
(b) the corporation’s adjusted stub period accrual in respect of the partnership for
(i) if there is a multi-tier alignment in respect of the partnership, the corporation’s taxation year during which ends the fiscal period of the partnership that is aligned with the fiscal period of one or more other partnerships under the multi-tier alignment, or
(ii) in any other case, the corporation’s first taxation year that ends after March 22, 2011.
“significant interest”
« participation importante »
“significant interest”, of a corporation in a partnership at any time, means a membership interest of the corporation in the partnership if the corporation, or the corporation together with one or more persons or partnerships related to or affiliated with the corporation, is entitled at that time to more than 10% of
(a) the income or loss of the partnership; or
(b) the assets (net of liabilities) of the partnership if it were to cease to exist.
“single-tier alignment”
« alignement pour palier unique »
“single-tier alignment”, in respect of a partnership, means the ending of a fiscal period of the partnership under subsection 249.1(8).
“specified percentage”
« pourcentage déterminé »
“specified percentage”, of a corporation for a particular taxation year in respect of a partnership, means
(a) if the first taxation year for which the corporation has qualifying transitional income ends in 2011 and the particular year ends in
(i) 2011, 100%,
(ii) 2012, 85%,
(iii) 2013, 65%,
(iv) 2014, 45%,
(v) 2015, 25%, and
(vi) 2016, 0%;
(b) if the first taxation year for which the corporation has qualifying transitional income ends in 2012 and the particular year ends in
(i) 2012, 100%,
(ii) 2013, 85%,
(iii) 2014, 65%,
(iv) 2015, 45%,
(v) 2016, 25%, and
(vi) 2017, 0%; and
(c) if the first taxation year for which the corporation has qualifying transitional income ends in 2013 and the particular year ends in
(i) 2013, 85%,
(ii) 2014, 65%,
(iii) 2015, 45%,
(iv) 2016, 25%, and
(v) 2017, 0%.
Marginal note:Income inclusion — adjusted stub period accrual
(2) Subject to subsections (5) and (9), a corporation (other than a professional corporation) shall include in computing its income for a taxation year its adjusted stub period accrual in respect of a partnership if
(a) the corporation has a significant interest in the partnership at the end of the last fiscal period of the partnership that ends in the year;
(b) another fiscal period of the partnership begins in the year and ends after the year; and
(c) at the end of the year, the corporation is entitled to a share of an income, loss, taxable capital gain or allowable capital loss of the partnership for the fiscal period referred to in paragraph (b).
Marginal note:Income inclusion — new partner designation
(3) Subject to subsection (5), if a corporation (other than a professional corporation) becomes a member of a partnership during a fiscal period of the partnership (in this subsection referred to as the “particular period”) that begins in the corporation’s taxation year and ends after the taxation year but on or before the filing-due date for the taxation year and the corporation has a significant interest in the partnership at the end of the particular period, the corporation may include in computing its income for the taxation year the lesser of
(a) the amount, if any, designated by the corporation in its return of income for the taxation year, and
(b) the amount determined by the formula
A × B/C
where
- A
- is the corporation’s income from the partnership for the particular period (other than any amount for which a deduction is available under section 112 or 113),
- B
- is the number of days that are both in the corporation’s taxation year and the particular period, and
- C
- is the number of days in the particular period.
Marginal note:Deduction in following year
(4) A corporation may deduct in computing its income for a taxation year each amount that was included in computing its income in respect of a partnership for the immediately preceding taxation year under subsection (2) or (3).
Marginal note:Character of amounts
(5) For the purposes of this Act, the following rules apply:
(a) in computing the income of a corporation for a taxation year,
(i) an adjusted stub period accrual included under subsection (2) in respect of a partnership for the year is deemed to be income and taxable capital gains having the same character and to be in the same proportions as any income and taxable capital gains that were allocated by the partnership to the corporation for all fiscal periods of the partnership ending in the year,
(ii) an amount included under subsection (3) in respect of a partnership for the year is deemed to be income and taxable capital gains having the same character and to be in the same proportions as any income and taxable capital gains that were allocated by the partnership to the corporation for the particular period referred to in that subsection,
(iii) an amount deductible under subsection (4) in respect of a partnership for the year is deemed to have the same character and to be in the same proportions as the income and taxable capital gains included in the corporation’s income for the immediately preceding taxation year under subsection (2) or (3) in respect of the partnership,
(iv) an amount deductible as a reserve under subsection (11) in respect of a partnership for the year is deemed to have the same character and to be in the same proportions as the qualifying transitional income in respect of the partnership for the year, and
(v) an amount included in income under subsection (12) in respect of the partnership for the year is deemed to have the same character and to be in the same proportions as the amount deducted under subsection (11) for the immediately preceding taxation year; and
(b) a corporation is deemed to have realized at the end of a taxation year an allowable capital loss equal to the amount determined by the formula
A – (B – C)
where
- A
- is the amount deductible by the corporation under subsection (4) for the year in respect of taxable capital gains of a partnership,
- B
- is the amount that is the total of
(i) all taxable capital gains allocated by the partnership to the corporation for the year,
(ii) the amount included in the corporation’s income under subsection (2) for the year in respect of taxable capital gains of the partnership, and
(iii) the amount included in the corporation’s income under subsection (12) for the year in respect of taxable capital gains of the partnership, and
- C
- is the amount, if any, that is the lesser of
(i) the amount that is the total of all allowable capital losses allocated by the partnership to the corporation for the year, and
(ii) the amount determined under subparagraph (i) of the description of B.
Marginal note:Designation — qualified resource expense
(6) A corporation may designate an amount for a taxation year in respect of a qualified resource expense under the definition “adjusted stub period accrual” in subsection (1) subject to the following rules:
(a) the corporation cannot designate an amount for the year in respect of a qualified resource expense in respect of a partnership except to the extent the corporation obtains from the partnership, before the corporation’s filing-due date for the year, information in writing identifying the corporation’s qualified resource expenses described
(i) in paragraph (h) of the definition “Canadian exploration expense” in subsection 66.1(6), determined as if those expenses had been incurred by the partnership in its last fiscal period that ended in the year,
(ii) in paragraph (f) of the definition “Canadian development expense” in subsection 66.2(5), determined as if those expenses had been incurred by the partnership in its last fiscal period that ended in the year,
(iii) in paragraph (e) of the definition “foreign resource expense” in subsection 66.21(1), determined as if those expenses had been incurred by the partnership in its last fiscal period that ended in the year, and
(iv) in paragraph (b) of the definition “Canadian oil and gas property expense” in subsection 66.4(5), determined as if those expenses had been incurred by the partnership in its last fiscal period that ended in the year; and
(b) the amount designated for the year by the corporation is not to exceed the maximum amount that would be deductible by the corporation under any of sections 66.1, 66.2, 66.21 and 66.4 in computing its income for the year if
(i) the amounts referred to in paragraph (a) in respect of the partnership were the only amounts relevant in determining the maximum amount, and
(ii) the fiscal period of the partnership that begins in the year and ends after the year had ended at the end of the year and each qualified resource expense were deemed under subsection 66(18) to be incurred by the corporation at the end of the year.
Marginal note:No additional income — bankrupt
(7) Subsections (2) and (3) do not apply in computing a corporation’s income for a taxation year in respect of a partnership if the corporation becomes a bankrupt in the year.
Marginal note:Foreign affiliates
(8) This section does not apply for the purposes of computing, for a taxation year of a foreign affiliate of a corporation resident in Canada,
(a) the foreign accrual property income of the affiliate in respect of the corporation; and
(b) except to the extent that the context otherwise requires, the exempt surplus or exempt deficit and the taxable surplus or taxable deficit (as those terms are defined in subsection 5907(1) of the Income Tax Regulations) of the affiliate in respect of the corporation.
Marginal note:Special case — multi-tier alignment
(9) If a corporation is a member of a partnership subject to a multi-tier alignment, subsection (2) does not apply to the corporation in respect of the partnership for taxation years preceding the taxation year that includes the end of the first aligned fiscal period of the partnership under the multi-tier alignment.
Marginal note:Designations
(10) Once a corporation makes a designation in calculating its adjusted stub period accrual in respect of a partnership for a taxation year under any of the description of E or F of paragraph (a), the description of E or F of subparagraph (b)(i) and the description of F or G of subparagraph (b)(ii) of the definition “adjusted stub period accrual” in subsection (1), the designation cannot be amended or revoked.
Marginal note:Transitional reserve
(11) A corporation that has qualifying transitional income in respect of a partnership for a particular taxation year may deduct in computing its income, as a reserve, for the particular year such amount as the corporation claims not exceeding the least of
(a) the specified percentage for the particular year of the corporation’s qualifying transitional income in respect of the partnership,
(b) if, for the immediately preceding taxation year, an amount was deductible under this subsection in computing the corporation’s income in respect of the partnership, the amount that is the total of
(i) the amount included under subsection (12) in computing the corporation’s income for the particular year in respect of the partnership, and
(ii) the amount by which the corporation’s qualifying transitional income in respect of the partnership is increased in the particular year because of the application of subsections (16) and (17), and
(c) the corporation’s income for the particular year computed before deducting any amount under this subsection in respect of the partnership or under sections 61.3 and 61.4.
Marginal note:Inclusion of prior year reserve
(12) A corporation shall include in computing its income in respect of a partnership for a taxation year the amount, if any, deducted by it under subsection (11) in respect of the partnership for its immediately preceding taxation year.
Marginal note:No reserve
(13) No deduction shall be made under subsection (11) in computing a corporation’s income for a taxation year in respect of a partnership
(a) unless,
(i) in the case of a corporation that is a member of a partnership in respect of which there is a multi-tier alignment, the corporation has been a member of the partnership continuously since before March 22, 2011 to the end of the year,
(ii) in the case of a corporation that is a member of a partnership in respect of which there is no multi-tier alignment, the corporation is a member of the partnership
(A) at the end of the partnership’s fiscal period that begins before March 22, 2011 and ends in the year of the corporation that includes March 22, 2011,
(B) at the end of the partnership’s fiscal period commencing immediately after the fiscal period referred to in clause (A) and continues to be a member until after the end of the year of the corporation that includes March 22, 2011, and
(C) continuously since before March 22, 2011 until the end of the year;
(b) if at the end of the year or at any time in the following taxation year,
(i) the corporation’s income is exempt from tax under this Part, or
(ii) the corporation is non-resident and the partnership does not carry on business through a permanent establishment (as defined for the purpose of subsection 16.1(1)) in Canada; or
(c) if the year ends immediately before another taxation year
(i) at the beginning of which the partnership no longer principally carries on the activities to which the reserve relates,
(ii) in which the corporation becomes a bankrupt, or
(iii) in which the corporation is dissolved or wound up (other than in circumstances to which subsection 88(1) applies).
Marginal note:Deemed partner
(14) A corporation that cannot deduct an amount under subsection (11) for a taxation year in respect of a partnership solely because it has disposed of its interest in the partnership is deemed for the purposes of paragraph (13)(a) to be a member of the partnership continuously until the end of the taxation year if
(a) the corporation disposed of its interest to another corporation related to, or affiliated with, the corporation at the time of the disposition; and
(b) a corporation related to, or affiliated with, the corporation has the partnership interest referred to in paragraph (a) at the end of the taxation year.
Marginal note:Computing qualifying transitional income — special rules
(15) For the purposes of determining a corporation’s qualifying transitional income, the income or loss, as the case may be, of a partnership for a fiscal period shall be computed as if
(a) the partnership had deducted for the period the maximum amount deductible in respect of any expense, reserve, allowance or other amount;
(b) this Act were read without reference to paragraph 28(1)(b); and
(c) the partnership had made an election under paragraph 34(a).
Marginal note:Qualifying transition income adjustment — conditions for application
(16) Subsection (17) applies for a particular taxation year of a corporation and for each subsequent taxation year for which the corporation may deduct an amount under subsection (11) in respect of a partnership if the particular year is the first taxation year
(a) that is after the taxation year in which the corporation has, or would have if the partnership had income, an adjusted stub period accrual that is included in the corporation’s qualifying transitional income in respect of the partnership by reason of paragraph (b) of the definition “qualifying transitional income” in subsection (1); and
(b) in which ends the fiscal period of the partnership that began in the taxation year referred to in paragraph (a).
Marginal note:Adjustment of qualifying transitional income
(17) If this subsection applies in respect of a partnership for a taxation year of a corporation, the adjusted stub period accrual included in the corporation’s qualifying transitional income in respect of the partnership for the year is computed as if
(a) the descriptions in paragraph (a) and subparagraph (b)(i) of the definition “adjusted stub period accrual” in subsection (1) read as follows:
- A
- is the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the particular period (other than any amount for which a deduction is available under section 112 or 113),
- B
- is the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for the particular period,
- C
- is the number of days that are in both the year and the particular period,
- D
- is the number of days in the particular period,
- E
- is the amount of the qualified resource expense in respect of the particular period of the partnership that is designated by the corporation for the year under subsection (6) in its return of income for the year filed with the Minister on or before its filing-due date for the year, and
- F
- is nil; and
(b) the descriptions in subparagraph (b)(ii) of the definition “adjusted stub period accrual” in subsection (1) read as follows:
- A
- is the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the particular period (other than any amount for which a deduction is available under section 112 or 113),
- B
- the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for the particular period,
- C
- is the corporation’s eligible alignment income for the eligible fiscal period,
- D
- is the number of days that are in both the year and the particular period,
- E
- is the number of days in the particular period,
- F
- is the amount of the qualified resource expense in respect of the particular period of the partnership that is designated by the corporation for the year under subsection (6) in its return of income for the year filed with the Minister on or before its filing-due date for the year, and
- G
- is nil.
Marginal note:Anti-avoidance
(18) If it is reasonable to conclude that one of the main reasons a corporation is a member of a partnership in a taxation year is to avoid the application of subsection (13), the corporation is deemed not to be a member of the partnership for the purposes of that subsection.
Marginal note:Definitions
34.3 (1) The definitions in this subsection and in subsection 34.2(1) apply in this section.
“actual stub period accrual”
« montant comptabilisé réel pour la période tampon »
“actual stub period accrual”, of a corporation in respect of a qualifying partnership for a taxation year, means the positive or negative amount determined by the formula
(A – B) × C/D – E
where
- A
- is the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the qualifying partnership for the last fiscal period of the partnership that began in the base year (other than any amount for which a deduction was available under section 112 or 113);
- B
- is the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss of the qualifying partnership for the last fiscal period of the partnership that began in the base year (to the extent that the total of all allowable capital losses included under this description in respect of all qualifying partnerships for the taxation year does not exceed the corporation’s share of all taxable capital gains of all qualifying partnerships for the taxation year);
- C
- is the number of days that are in both the base year and the fiscal period;
- D
- is the number of days in the fiscal period; and
- E
- is the amount of the qualified resource expense in respect of the qualifying partnership that was designated by the corporation for the base year under subsection 34.2(6) in its return of income for the base year filed with the Minister on or before its filing-due date for the base year.
“base year”
« année de base »
“base year”, of a corporation in respect of a qualifying partnership for a taxation year, means the preceding taxation year of the corporation in which began a fiscal period of the partnership that ends in the corporation’s taxation year.
“income shortfall adjustment”
« rajustement pour revenu insuffisant »
“income shortfall adjustment”, of a corporation in respect of a qualifying partnership for a taxation year, means the positive or negative amount determined by the formula
(A – B) × C × D
where
- A
- is the amount that is the lesser of
(a) the actual stub period accrual in respect of the qualifying partnership, and
(b) the amount that would be the corporation’s adjusted stub period accrual for the base year in respect of the qualifying partnership if the value of F in paragraph (a) of the definition “adjusted stub period accrual” in subsection 34.2(1) were nil;
- B
- is the amount included under subsection 34.2(2) in computing the corporation’s income for the base year in respect of the qualifying partnership;
- C
- is the number of days in the period that
(a) begins on the day after the day on which the base year ends, and
(b) ends on the day on which the taxation year ends; and
- D
- is the average daily rate of interest determined by reference to the rate of interest prescribed under paragraph 4301(a) of the Income Tax Regulations for the period referred to in the description of C.
“qualifying partnership”
« société de personnes admissible »
“qualifying partnership”, in respect of a corporation for a particular taxation year, means a partnership
(a) a fiscal period of which began in a preceding taxation year and ends in the particular taxation year; and
(b) in respect of which the corporation was required to calculate an adjusted stub period accrual for the preceding taxation year.
Marginal note:Application of subsection (3)
(2) Subsection (3) applies to a corporation for a taxation year if
(a) the corporation has designated an amount for the purpose of the description of F in paragraph (a) of the definition “adjusted stub period accrual” in subsection 34.2(1) in calculating its adjusted stub period accrual for the base year in respect of a qualifying partnership for the taxation year; and
(b) where the corporation has qualifying transitional income, the taxation year is after the first taxation year of the corporation to which subsection 34.2(17) applies.
Marginal note:Income shortfall adjustment — inclusion
(3) If this subsection applies to a corporation for a taxation year, the corporation shall include in computing its income for the taxation year the amount determined by the formula
A + 0.50 × (A – B)
where
- A
- is the amount that is the total of all amounts each of which is the corporation’s income shortfall adjustment in respect of a qualifying partnership for the year; and
- B
- is the amount that is the lesser of A and the total of all amounts each of which is 25% of the positive amount, if any, that would be the income shortfall adjustment in respect of a qualifying partnership for the year if the value of the description of B in the definition “income shortfall adjustment” in subsection (1) were nil.
(2) Subsection (1) applies to taxation years ending after March 22, 2011.
- Date modified: