Income Tax Regulations (C.R.C., c. 945)

Regulations are current to 2014-10-15 and last amended on 2014-06-19. Previous Versions

Prescribed Canadian Development Expense

  •  (1) For the purposes of subsection 66(14.2) of the Act, prescribed Canadian development expense of a corporation for a taxation year is the amount, if any, by which its total specified development expenses for the year exceed its total development assistance for the year.

  • (2) For the purposes of subsection (1), the total specified development expenses of a particular corporation for a particular taxation year is the aggregate of

    • (a) all expenses (other than expenses referred to in paragraph (b) or (c)) that are described in subparagraph 66.2(5)(a)(i) or (i.1) of the Act and that were incurred by the corporation in the particular year and after March 1985 and before October 1986,

    • (b) where the particular corporation is a shareholder corporation of a joint exploration corporation, all expenses that are described in subparagraph 66.2(5)(a)(i) or (i.1) of the Act, that were incurred by the joint exploration corporation after March 1985 and before October 1986 and in the taxation year of the joint exploration corporation ending in the particular year and that were deemed under paragraph 66(10.2)(c) of the Act to be Canadian development expenses incurred by the particular corporation in the particular year, and

    • (c) all expenses that would be described in subparagraph 66.2(5)(a)(iv) or (v) of the Act if the references in those subparagraphs to “any of subparagraphs (i) to (iii) incurred” were read as “subparagraph (i) or (i.1) incurred after March 1985 and before October 1986,” and that were incurred by the particular corporation in the particular year or by a partnership in a fiscal period of the partnership that ended in the particular year if, at the end of that fiscal period, the particular corporation was a member of the partnership,

    other than

    • (d) expenses renounced by the corporation at any time under subsection 66(10.2), (12.601) or (12.62) of the Act,

    • (e) Canadian exploration and development overhead expenses of the corporation or of a partnership of which the corporation was a member, or

    • (f) expenses incurred or deemed to have been incurred by the corporation in a period during which it was exempt from tax on its taxable income under Part I of the Act.

  • (3) For the purposes of subsection (1), the total development assistance of a corporation for a taxation year is the aggregate of all amounts each of which is an amount of assistance or benefit that the corporation has received or is entitled to receive in the year from a government, municipality or other public authority in respect of an expense that is included in its total specified development expenses for the year by virtue of paragraph (2)(a) or (c), whether such mount is by way of a grant, subsidy, rebate, forgivable loan, deduction from royalty or tax, rebate of royalty or tax, investment allowance or any other form of assistance or benefit.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/88-423, s. 2;
  • SOR/94-686, ss. 58(F), 78(F), 79(F), 81(F);
  • SOR/96-199, s. 3.

Canadian Renewable and Conservation Expense

  •  (1) Subject to subsections (2) to (4), for the purpose of subsection 66.1(6) of the Act, “Canadian renewable and conservation expense” means an expense incurred by a taxpayer, and payable to a person or partnership with whom the taxpayer is dealing at arm’s length, in respect of the development of a project for which it is reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in the project would be the capital cost of any property that is included in Class 43.1 or 43.2 in Schedule II, or that would be so included if this Part were read without reference to this section, and includes such an expense incurred by the taxpayer

    • (a) for the purpose of making a service connection to the project for the transmission of electricity to a purchaser of the electricity, to the extent that the expense so incurred was not incurred to acquire property of the taxpayer;

    • (b) for the construction of a temporary access road to the project site;

    • (c) for a right of access to the project site before the earliest time at which a property described in Class 43.1 or 43.2 in Schedule II is used in the project for the purpose of earning income;

    • (d) for clearing land to the extent necessary to complete the project;

    • (e) for process engineering for the project, including

      • (i) collection and analysis of site data,

      • (ii) calculation of energy, mass, water, or air balances,

      • (iii) simulation and analysis of the performance and cost of process design options, and

      • (iv) selection of the optimum process design;

    • (f) for the drilling or completion of a well for the project, other than a well that is, or can reasonably be expected to be, used for the installation of underground piping that is included in paragraph (d) of Class 43.1 or paragraph (b) of Class 43.2 in Schedule II; or

    • (g) for a test wind turbine that is part of a wind farm project of the taxpayer.

  • (2) A Canadian renewable and conservation expense does not include any expense that

    • (a) is described in paragraphs 20(1)(c), (d), (e) or (e.1) of the Act; or

    • (b) is incurred by a taxpayer directly or indirectly and is

      • (i) for the acquisition of, or the use of or the right to use, land, except as provided by paragraph (1)(b), (c) or (d),

      • (ii) for grading or levelling land or for landscaping, except as provided by paragraph (1)(b),

      • (iii) payable to a non-resident person or a partnership other than a Canadian partnership (other than an expense described in paragraph (1)(g)),

      • (iv) included in the capital cost of property that, but for this section, would be depreciable property, except as provided by paragraph (1)(b), (d), (e), (f) or (g),

      • (v) an expenditure that, but for this section, would be an eligible capital expenditure, except as provided by any of paragraphs (1)(a) to (e),

      • (vi) included in the cost of inventory of the taxpayer,

      • (vii) an expenditure on or in respect of scientific research and experimental development,

      • (viii) a Canadian development expense or a Canadian oil and gas property expense,

      • (ix) incurred, for a project, in respect of any time at or after the earliest time at which a property described in Class 43.1 or 43.2 in Schedule II was used in the project for the purpose of earning income,

      • (x) incurred in respect of the administration or management of a business of the taxpayer, or

      • (xi) a cost attributable to the period of the construction, renovation or alteration of depreciable property, other than property described in Class 43.1 or 43.2 in Schedule II, that relates to

        • (A) the construction, renovation or alteration of the property, except as provided by paragraph (1)(b), (f), or (g), or

        • (B) the ownership of land during the period, except as provided by paragraph (1)(b), (c) or (d).

  • (3) For the purpose of paragraph (1)(g), “test wind turbine” means a fixed location device that is a wind energy conversion system that would, if this Part were read without reference to this section, be property included in Class 43.1 in Schedule II because of subparagraph (d)(v) of that Class, or in Class 43.2 in Schedule II because of paragraph (b) of that Class, in respect of which the Minister, in consultation with the Minister of Natural Resources, determines that

    • (a) the device is installed as part of a wind farm project of the taxpayer at which the electrical energy produced from wind by the device, and by all other test wind turbines that are part of the project, does not exceed

      • (i) one third of the project’s planned nameplate capacity if

        • (A) the Minister of Natural Resources determines that the project’s planned nameplate capacity is limited from an engineering or scientific perspective, and

        • (B) the project’s planned nameplate capacity does not exceed six megawatts, or

      • (ii) 20% of the project’s planned nameplate capacity, in any other case;

    • (b) the project does not share with any other project a point of interconnection to an electrical energy transmission or distribution system;

    • (c) if the project does not have a point of interconnection to an electrical energy transmission or distribution system, the project has a point of interconnection to an electrical system

      • (i) of the taxpayer

        • (A) which system is more than 10 kilometres from any transmission system and from any distribution system, and

        • (B) from which system at least 90% of the electrical energy produced by the project is used in a business carried on by the taxpayer, or

      • (ii) of another person or partnership that deals at arm’s length with the taxpayer

        • (A) which system is more than 10 kilometres from any transmission system and from any distribution system, and

        • (B) from which system at least 90% of the electrical energy produced by the project is used in a business carried on by the other person or partnership;

    • (d) the primary purpose for installing the device is to test the level of electrical energy produced by the device from wind at the place of installation;

    • (e) no other test wind turbine is installed within 1500 metres of the device; and

    • (f) no other wind energy conversion system is installed within 1500 metres of the device until the level of electrical energy produced from wind by the device has been tested for at least 120 calendar days.

  • (4) For greater certainty, a Canadian Renewable and Conservation Expense includes an expense incurred by a taxpayer to acquire a fixed location device that is a wind energy conversion system only if the device is described in paragraph (1)(g).

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts and regulations. SOR/2000-327, s. 4;
  • SOR/2005-266, s. 1;
  • SOR/2006-117, s. 5;
  • SOR/2007-116, s. 3;
  • 2010, c. 25, s. 77.