Budget Implementation Act, 2006, No. 2 (S.C. 2007, c. 2)

Assented to 2007-02-21

  •  (1) Subparagraph 127.52(1)(h)(i) of the Act is replaced by the following:

    • (i) the amounts deducted under any of subsections 110(2), 110.6(2), (2.1), (2.2), (3) and (12) and 110.7(1),

  • (2) Subsection (1) applies to taxation years that end on or after May 2, 2006.

  •  (1) Paragraph 127.531(a) of the Act is replaced by the following:

    • (a) an amount deducted under subsection 118(1), (2) or (10), 118.01(2), 118.02(2), 118.03(2) or 118.3(1) or any of sections 118.5 to 118.7 in computing the individual’s tax payable for the year under this Part; or

  • (2) Subsection (1) applies to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, paragraph 127.531(a) of the Act, as enacted by subsection (1), is to be read without its reference to subsection 118.03(2).

  •  (1) Clause 128(2)(e)(iii)(A) of the Act is replaced by the following:

    • (A) under section 118, 118.01, 118.02, 118.03, 118.2, 118.3, 118.5, 118.6, 118.8 or 118.9,

  • (2) Subsection (1) applies to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, clause 128(2)(e)(iii)(A) of the Act, as enacted by subsection (1), is to be read without its reference to section 118.03.

  •  (1) The portion of subsection 137(3) of the Act before paragraph (a) is replaced by the following:

    • Marginal note:Additional deduction

      (3) There may be deducted from the tax otherwise payable under this Part for a taxation year by a corporation that was, throughout the year, a credit union, an amount equal to the amount determined by multiplying the rate that would, if subsection 125(1.1) applied to the corporation for the year, be its small business deduction rate for the year within the meaning assigned by that subsection, by the amount, if any, by which the lesser of

  • (2) Subsection (1) applies to the 2008 and subsequent taxation years.

  •  (1) Subsection 137.1(9) of the Act is replaced by the following:

    • Marginal note:Special tax rate

      (9) The tax payable under this Part by a corporation for a taxation year throughout which it was a deposit insurance corporation (other than a corporation incorporated under the Canada Deposit Insurance Corporation Act) is the amount determined by the formula:

      (38% - A) × B

      where

      A 
      is the rate that would, if subsection 125(1.1) applied to the corporation for the taxation year, be the corporation’s small business deduction rate for the taxation year within the meaning assigned by that subsection; and
      B 
      is the corporation’s taxable income for the taxation year.
  • (2) Subsection (1) applies to the 2008 and subsequent taxation years.

  •  (1) Section 147.2 of the Act is amended by adding the following after subsection (6):

    • Marginal note:Letter of credit

      (7) For the purposes of this section and any regulations made under subsection (2) or under subsection 147.1(18), an amount paid to a registered pension plan by the issuer of a letter of credit issued in connection with an employer’s funding obligations under a defined benefit provision of the plan is deemed to be an eligible contribution made to the plan in respect of the provision by the employer with respect to the employer’s employees or former employees, if

      • (a) the amount is paid under the letter of credit;

      • (b) the use of the letter of credit is permitted under the Pension Benefits Standards Act, 1985 or a similar law of a province; and

      • (c) the amount would have been an eligible contribution under subsection (2) if

        • (i) it had been paid to the plan by the employer, and

        • (ii) this section were read without reference to this subsection.

  • (2) Subsection (1) applies after 2005.

  •  (1) Subsections 190.1(1.1) and (1.2) of the Act are repealed.

  • (2) The portion of subsection 190.1(3) of the Act after paragraph (b) is repealed.

  • (3) Subsection 190.1(4) of the Act is amended by striking out the word “and” at the end of paragraph (a), by adding the word “and” at the end of paragraph (b) and by adding the following after paragraph (b):

    • (c) an amount may be claimed under paragraph (3)(b) in computing a corporation’s tax payable under this Part for a taxation year that ends before July 1, 2006 in respect of its unused Part I tax credit for a taxation year that ends after July 1, 2006 (referred to in this paragraph as the “credit taxation year”) only to the extent that the unused Part I tax credit exceeds the amount, if any, by which

      • (i) the amount that would, if this Part were read as it applied to the 2005 taxation year, be the corporation’s tax payable under this Part for the credit taxation year

      exceeds

      • (ii) the corporation’s tax payable under this Part for the credit taxation year.

  • (4) Subsections (1) to (3) apply in respect of taxation years that end on or after July 1, 2006.

  •  (1) Subsections 190.15(1) to (3) of the Act are replaced by the following:

    Marginal note:Capital deduction
    • 190.15 (1) For the purposes of this Part, the capital deduction of a corporation for a taxation year during which it was at any time a financial institution is $1 billion unless the corporation was related to another financial institution at the end of the year, in which case, subject to subsection (4), its capital deduction for the year is nil.

    • Marginal note:Related financial institution

      (2) A corporation that is a financial institution at any time during a taxation year and that was related to another financial institution at the end of the year may file with the Minister an agreement in prescribed form on behalf of the related group of which the corporation is a member under which an amount that does not exceed $1 billion is allocated among the members of the related group for the taxation year.

    • Marginal note:Allocation by Minister

      (3) The Minister may request a corporation that is a financial institution at any time during a taxation year and that was related to any other financial institution at the end of the year to file with the Minister an agreement referred to in subsection (2) and, if the corporation does not file such an agreement within 30 days after receiving the request, the Minister may allocate an amount among the members of the related group of which the corporation is a member for the year not exceeding $1 billion.

  • (2) Subsection (1) applies to taxation years that end on or after July 1, 2006.

  •  (1) Sections 190.16 and 190.17 of the Act are replaced by the following:

    Transitional Provisions
    Marginal note:Application to taxation year including July 1, 2006
    • 190.16 (1) If a taxation year of a corporation begins before and ends on or after July 1, 2006, notwithstanding any other provision of this Part, the tax payable under this Part by the corporation for the taxation year is equal to the total of

      • (a) that proportion of the amount that would be the tax payable by the corporation under this Part for the taxation year, if this Part were read as it applied to the 2005 taxation year, that the number of days in the taxation year that are before that day is of the number of days in the taxation year, and

      • (b) that proportion of the amount that would, if this Part were read without reference to this section, be the tax payable by the corporation under this Part for the taxation year that the number of days in the taxation year that are on or after that day is of the number of days in the taxation year.

    • Marginal note:Proportionate allocation

      (2) Any allocation made for the purpose of paragraph (1)(a) under subsection 190.15(2) or (3) shall be in the same proportion as the allocation, if any, made for the purpose of paragraph (1)(b) under subsection 190.15(2) or (3).

    • Marginal note:Capital deduction deemed

      (3) For the purpose of applying subsection 190.15(5) to a corporation for a taxation year that is described in that subsection in circumstances where the “first such taxation year” referred to in that subsection is a taxation year to which subsection (1) applies, the capital deduction of the corporation for that “first such taxation year” is deemed to be the total of

      • (a) that proportion of the capital deduction amount allocated to the corporation for the purposes of paragraph (1)(a) that the number of days in the taxation year that are before July 1, 2006 is of the number of days in the taxation year, and

      • (b) that proportion of the capital deduction amount allocated to the corporation for the purposes of paragraph (1)(b) that the number of days in the taxation year that are after June 30, 2006 is of the number of days in the taxation year.

  • (2) Subsection (1) applies to taxation years that end on or after July 1, 2006.

PART 2R.S., c. 1 (5th Supp.)AMENDMENTS TO THE INCOME TAX ACT (DIVIDEND TAXATION)

  •  (1) Subsection 15(1.1) of the Income Tax Act is replaced by the following:

    • Marginal note:Conferring of benefit

      (1.1) Notwithstanding subsection (1), if in a taxation year a corporation has paid a stock dividend to a person and it may reasonably be considered that one of the purposes of that payment was to significantly alter the value of the interest of any specified shareholder of the corporation, the fair market value of the stock dividend shall, except to the extent that it is otherwise included in computing that person’s income under any of paragraphs 82(1)(a), (a.1) and (c) to (e), be included in computing the income of that person for the year.

  • (2) Subsection (1) applies to dividends paid after 2005.

  •  (1) Subparagraph 74.4(2)(b)(ii) of the French version of the Act is replaced by the following:

    • (ii) les sommes incluses dans le revenu du particulier pour l’année en application des paragraphes 82(1) ou 90(1) au titre de dividendes imposables qu’il a reçus au cours de l’année, sauf les dividendes réputés reçus en vertu de l’article 84, soit sur les actions reçues de la société en contrepartie du transfert ou en remboursement du prêt qui sont, au moment de la réception des dividendes, une contrepartie exclue, soit sur des actions y substituées qui sont, à ce moment, une contrepartie exclue;

  • (2) Paragraph 74.4(2)(f) of the English version of the Act is replaced by the following:

    • (f) all amounts included in the individual’s income for the taxation year pursuant to subsection 82(1) or 90(1) in respect of taxable dividends received (other than dividends deemed by section 84 to have been received) by the individual in the year on shares that were received from the corporation as consideration for the transfer or as repayment for the loan that were excluded consideration at the time the dividends were received or on shares substituted therefor that were excluded consideration at that time, and

  • (3) Subsections (1) and (2) apply to amounts received after 2005.

 
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