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Taxation Act, 2007
Loi de 2007 sur les impôts

ONTARIO REGULATION 37/09

general

Consolidation Period:  From July 20, 2012 to the e-Laws currency date.

Last amendment:  O. Reg. 204/12.

This Regulation is made in English only.

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CONTENTS

PART 0.I
GENERAL

0.1

Application

PART I
INCOME TAX — INDIVIDUALS

1.

Carryforward amount re tax credit for minimum tax

2.

Property and sales tax credits

3.

Senior homeowners’ property tax grant

4.

Amounts to be deducted or withheld by employers

PART II
INCOME TAX — CORPORATIONS

5.

Definition

6.

Tax credit for manufacturing and processing

7.

Notional resource allowance, s. 36 (3) of the Act

PART III
CORPORATE MINIMUM TAX

8.

Definitions and interpretation

9.

Adjusted net income

PART IV
CAPITAL TAX — FINANCIAL INSTITUTIONS

Division A — Prescribed Financial Institutions

10.

Prescribed financial institutions for capital tax purposes

Division B — Small Business Investment Tax Credit

11.

Interpretation

12.

Amount of consideration for eligible investment

13.

Below-prime loan

14.

Patient capital investment

15.

Investment used for prescribed purpose

16.

Associated small business corporation

17.

Specified corporation

18.

Disposition of patient capital investment

19.

Small business investment fund

20.

Eligible investment through a small business investment fund

21.

Certification rules

22.

Disposition of investment in fund

PART V
REFUNDABLE TAX CREDITS

Division A — Ontario Refundable Tax Credits Relating to the Film and Television Industries

23.

Definitions

Ontario Computer Animation and Special Effects Tax Credit

24.

Definitions

25.

Ontario labour expenditure

Ontario Film and Television Tax Credit

26.

Qualifying production company

27.

Eligible Ontario production

28.

First-time production

29.

Qualifying labour expenditure

30.

Ontario labour expenditure

Ontario Production Services Tax Credit

31.

Eligible production

32.

Qualifying corporation

33.

Qualifying Ontario labour expenditure

Division B — Other Refundable Tax Credits for Corporations

Ontario Interactive Digital Media Tax Credit

34.

Eligible product

35.

Ontario labour expenditure

35.1

Interactive digital media product of a qualifying digital game corporation

35.2

Interactive digital media product of a specialized digital game corporation

Ontario Sound Recording Tax Credit

36.

Ontario sound recording tax credit

Ontario Book Publishing Tax Credit

37.

Ineligible publication

Ontario Business-Research Institute Tax Credit

38.

Ontario business-research institute tax credit

Part 0.i
General

Application

0.1 This Regulation applies in respect of taxation years ending after December 31, 2008, except as otherwise provided in this or any other regulation.  O. Reg. 70/10, s. 1.

Part I
Income Tax — Individuals

Carryforward amount re tax credit for minimum tax

1. (1) For the purposes of clause 15 (1) (b) of the Taxation Act, 2007, an individual’s carryforward amount for a taxation year in respect of minimum tax is the amount calculated using the formula,

A × B × C

in which,

  “A” is the amount deducted under section 120.2 of the Federal Act for the year,

  “B” is the amount determined by dividing “D” by “E” where,

“D” is the lowest tax rate for the year, and

“E” is the appropriate percentage for the year under the Federal Act, and

  “C” is the Ontario allocation factor in respect of the individual for the year.

O. Reg. 70/10, s. 2.

(2) For the purposes of subsection (1), the result obtained by dividing “D” by “E” shall be rounded to the nearest one-thousandth or, if the result obtained by that division is equidistant from two consecutive thousandths, to the higher thousandth.  O. Reg. 70/10, s. 2.

Property and sales tax credits

2. (1) For the purposes of the definition of “designated principal residence” in subsection 98 (1) of the Act an individual shall designate his or her principal residence for a taxation year by,

(a) completing a declaration setting out the address of his or her principal residence for the year; and

(b) filing the completed declaration as part of the return filed by the individual for the year.  O. Reg. 37/09, s. 2 (1).

(2) If an individual’s principal residence changes during the year, the individual shall set out the address of each principal residence in the declaration.  O. Reg. 37/09, s. 2 (2).

(3) The following are prescribed for the purposes of clause (d) of the definition of “municipal tax” in subsection 98 (1) of the Act:

1. Amounts paid under the Statute Labour Act, or under a by-law passed under the authority of that Act for the commutation of statute labour.

2. Amounts paid for fees charged by a school board or licence fees levied by a municipality in respect of a mobile home.  O. Reg. 37/09, s. 2 (3).

(4) For the purposes of paragraph 5 of subsection 98 (2) of the Act and paragraph 5 of subsection 98 (3) of the Act, the prescribed amount for a taxation year with respect to a designated principal residence of an individual for the year that is in a student’s residence designated by the Ontario Minister is $25.  O. Reg. 37/09, s. 2 (4).

(5) The following institutions are prescribed for the purposes of subparagraph 4 i of subsection 98 (5) of the Act:

1. An “institution” as defined in subsection 21 (1) of the Health Protection and Promotion Act.

2. A hospital listed in Group F or G in the list of public hospitals maintained under subsection 32.1 (2) of the Public Hospitals Act.  O. Reg. 37/09, s. 2 (5).

Senior homeowners’ property tax grant

3. (1) For the purposes of the definition of “designated principal residence” in subsection 104.1 (1) of the Act an individual shall designate his or her principal residence for a taxation year by,

(a) completing a declaration setting out the address of his or her principal residence for the year; and

(b) filing the completed declaration as part of the return filed by the individual for the year.  O. Reg. 37/09, s. 3 (1).

(2) If an individual’s principal residence changes during the year, the individual shall set out the address of each principal residence in the declaration.  O. Reg. 37/09, s. 3 (2).

Amounts to be deducted or withheld by employers

4. (1) In this section, “employee”, “employer”, “pay period” and “remuneration” each has the meaning given in section 100 of the Federal regulations.  O. Reg. 37/09, s. 4 (1).

(2) For the purposes of subsection 153 (1) of the Federal Act, as made applicable by subsection 137 (1) of the Act, the amount required to be deducted or withheld by an employer from a payment of remuneration to an employee and remitted to the Receiver General for Canada is the amount, if any, determined under subsection (3).  O. Reg. 37/09, s. 4 (2).

(3) The amount determined under this subsection in respect of a payment of remuneration made by an employer to an employee in the employee’s taxation year or for any pay period in which a payment of remuneration is made by the employer, if the employee reports for work at an establishment of the employer in Ontario, is the amount determined in accordance with the Payroll Deductions Tables for Ontario published or issued by the Canada Revenue Agency for the taxation year or in respect of the pay period.  O. Reg. 37/09, s. 4 (3).

(4) Subsections 100 (4) and 102 (5) of the Federal regulations and sections 106, 107, 108 and 109 of those regulations apply for the purposes of subsections (2) and (3), with the necessary modifications.  O. Reg. 37/09, s. 4 (4).

Part II
Income Tax — corporations

Definition

5. In this Part,

“Canadian fossil fuel source” means,

(a) a natural accumulation of petroleum or natural gas in Canada other than a mineral resource,

(b) an oil or gas well in Canada,

(c) a bituminous sands deposit in Canada that is a mineral resource for the purposes of the Act, or

(d) an oil shale deposit in Canada.  O. Reg. 37/09, s. 5.

Tax credit for manufacturing and processing

6. (1) For the purposes section 33 of the Act,

“industrial mining operations” means,

(a) the extraction or production of industrial mineral ore from or in an industrial mine,

(b) the transportation of industrial mineral ore to the point of egress from the industrial mine, and

(c) the processing of industrial mineral ore,

(i) before or in the course of its transportation to the point of egress from the industrial mine, and

(ii) before its removal from the industrial mine.  O. Reg. 37/09, s. 6 (1).

(2) In this section,

“industrial mine” means any work or undertaking from which material is extracted or produced from a resource in Canada that is not a mineral resource;

“industrial mineral” means a mineral that is not obtained from a mineral resource;

“industrial mineral ore” includes an unprocessed industrial mineral or a substance bearing an industrial mineral.  O. Reg. 37/09, s. 6 (2).

Notional resource allowance, s. 36 (3) of the Act

7. (1) In this section,

“Canadian exploration and development overhead expense” means an amount that is a Canadian exploration and development overhead expense for the purposes of Part XII of the Federal regulations;

“Crown entity” means,

(a) Her Majesty in right of Canada or of a province,

(b) an agent of Her Majesty in right of Canada or of a province, or

(c) a corporation, commission or association that is controlled by Her Majesty in right of Canada or of a province or by an agent of Her Majesty in right of Canada or of a province;

“exempt rental or royalty” means,

(a) an amount paid or payable to or received or receivable by the Crown in right of Canada for the use and benefit of a band or bands as defined in the Indian Act (Canada),

(b) an amount paid or payable to or received or receivable by a Crown entity if the amount,

(i) may reasonably be regarded to be in respect of a rental for property,

(A) that is described in subparagraph (b) (ii) of the definition of “Canadian resource property” in subsection 66 (15) of the Federal Act, or

(B) that is in Canada and is not depreciable property if the principal value of the property depends on its mineral resource content, and

(ii) is paid or payable or received or receivable before the commencement of production of minerals in reasonable commercial quantities from the mineral resource referred to in subclause (i),

(c) an amount paid or payable to or received or receivable by a Crown entity if the amount may reasonably be regarded to be in respect of a right, licence or privilege to store fossil fuel underground in Canada,

(d) an amount equal to the lesser of,

(i) an amount,

(A) that was paid or payable to or received or receivable by a Crown entity as a rental for property or a portion of a property that is a right, licence or privilege to explore for, drill for or take fossil fuel in Canada,

(B) that was payable or receivable in a taxation year in which there was no taking of fossil fuel from the property or portion of the property to which the rental relates, and

(ii) an amount equal to $2.50 multiplied by the number of hectares of the property or portion of the property to which the amount referred to in subclause (i) relates;

“fossil fuel” means petroleum, natural gas or a related hydrocarbon;

“production royalty” means an amount in respect of a particular Canadian resource property that is included in computing a corporation’s income as a rental or royalty determined by reference to the amount or value of fossil fuel produced from a Canadian fossil fuel source but only if,

(a) the corporation has a Crown royalty in respect of,

(i) the production of the fossil fuel from the Canadian fossil fuel source, or

(ii) the ownership of property to which the production relates and the Crown royalty is computed by reference to an amount of production from the Canadian fossil fuel source,

and it is reasonable to consider that the corporation would have had the Crown royalty if the corporation’s only source of income had been the rental or royalty in respect of the particular property, or

(b) the corporation would have a Crown royalty described in clause (a) but for an exemption or allowance, other than a rate of nil, that is provided under a statute by a Crown entity;

“specified royalty” means a royalty,

(a) the cost of which is a Canadian development expense,

(b) that was created after December 5, 1996 as part of a transaction or event or series of transactions or events as a consequence of which depreciable property was acquired at a capital cost that was less than the amount that would have been the fair market value of the depreciable property determined without regard to the royalty, and

(c) that was not created pursuant to an agreement in writing made on or before December 5, 1996.  O. Reg. 37/09, s. 7 (1).

(2) For the purposes of the definition of “production royalty” in subsection (1), each of the following amounts is a Crown royalty of a corporation for a taxation year in respect of the production of fossil fuel from a Canadian fossil fuel source or in respect of the ownership of property to which such production relates:

1. An amount that, if the Corporations Tax Act were to apply for the year, would be added in computing the corporation’s income for the year in respect of the production or ownership for the purposes of that Act by reason of subsection 11.0.1 (3) of that Act less all reimbursements, contributions and allowances referred to in subsection 26 (6) of that Act that are received or receivable by the corporation in respect of that amount.

2. An amount in respect of the production or ownership that is an exempt rental or royalty for the year less all reimbursements, contributions and allowances referred to in subsection 26 (6) of the Corporations Tax Act that are received or receivable by the corporation in respect of that amount.

3. An amount that, if the Corporations Tax Act were to apply for the year, would not be deductible in computing the corporation’s income for the year in respect of the production or ownership for the purposes of that Act by reason of subsection 11.0.1 (5) of that Act less all reimbursements, contributions and allowances referred to in subsection 26 (6) of that Act that are received or receivable by the corporation in respect of that amount.

4. An amount by which the corporation’s proceeds of disposition of fossil fuel would be increased under subsection 108.4 (1) of Regulation 183 of the Revised Regulations of Ontario, 1990 (General), made under the Corporations Tax Act, if that regulation and subsection 26 (4.1) of that Act were to apply for the year.

5. An amount by which the corporation’s cost of acquisition of the fossil fuel would be reduced under subsection 108.4 (4) of Regulation 183 of the Revised Regulations of Ontario, 1990 (General), made under the Corporations Tax Act, if that regulation and subsection 26 (4.1) of that Act were to apply for the year.  O. Reg. 37/09, s. 7 (2).

(3) For the purposes of subsection 36 (3) of the Act, a corporation’s notional resource allowance for a taxation year is the amount, if any, calculated using the formula,

[0.25 × (A – B)] – C

in which,

  “A” is the amount of the corporation’s adjusted resource profits for the year, as determined under subsection (4), 

  “B” is the sum of all amounts each of which is a Canadian exploration and development overhead expense made or incurred by the corporation in the year, other than an amount that is a Canadian exploration and development overhead expense because it is deemed to be a Canadian exploration expense or a Canadian development expense under subsection 21 (2) or (4) of the Federal Act, and

  “C” is the amount, if any, by which “D” exceeds “E” where,

“D” is the sum of all amounts determined under paragraphs 1205 (1) (e) to (k) of the Federal regulations in computing the corporation’s earned depletion base at the end of the year, as determined under section 1205 of the Federal regulations, other than any portion of that sum determined under paragraph 1205 (1) (i) of the Federal regulations as a consequence of a disposition in the year of property in circumstances in which subsection 1202 (2) of the Federal regulations applies, and

“E” is the amount equal to 33 1/3 per cent of the sum of all amounts determined under paragraphs 1205 (1) (a) to (d.2) of the Federal regulations in computing the corporation’s earned depletion base at the end of the year, as determined under section 1205 of the Federal regulations.

O. Reg. 37/09, s. 7 (3).

(4) A corporation’s adjusted resource profits for a taxation year for the purposes of subsection (3) is the amount, which may be a positive or negative amount, calculated using the formula,

F + G – H

in which,

“F” is the amount of the corporation’s resource profits for the year, as determined under subsection (5),

  “G” is the sum of all amounts each of which is the corporation’s share for the year of the adjusted resource profits of a partnership, as determined under subsections (6) and (7), for a fiscal period of the partnership ending in the year, and

  “H” is the amount, if any, by which the sum of “I” and “J” exceeds the amount of “K” where,

“I” is the sum of all amounts each of which is an amount, other than a production royalty or specified royalty included in the corporation’s gross resource profits for the year under subsection 1204 (1) of the Federal regulations as a rental or royalty computed by reference to the amount or value of fossil fuel produced from a Canadian fossil fuel source,

“J” is 50 per cent of all amounts in respect of specified royalties that are included in the corporation’s gross resource profits for the year under subsection 1204 (1) of the Federal regulations, and

“K” is the sum of all outlays and expenses that were made or incurred in respect of the amounts included in the calculation of “I”, to the extent the outlays and expenses were deducted in computing the corporation’s gross resource profits for the year under subsection 1204 (1) of the Federal regulations.

O. Reg. 37/09, s. 7 (4).

(5) The amount of a corporation’s resource profits for a taxation year for the purposes of this section is the amount that would be determined in respect of the corporation for the year under subsection 1204 (1.1) of the Federal regulations,

(a) if, in determining the corporation’s gross resource profits for the year under subsection 1204 (1) of the Federal regulations,

(i) no amount were included under paragraph 1204 (1) (a) of the Federal regulations, and

(ii) no amount were included in the corporation’s income for the year from the processing in Canada of ore described in clause 1204 (1) (b) (iv) (A), (B) or (C) of the Federal regulations;

(b) if references to a resource activity in subparagraph 1204 (1.1) (a) (iv), subclause 1204 (1.1) (a) (v) (A) (I) and clause 1204 (1.1) (a) (v) (B) of the Federal regulations were read as references to a resource activity other than an activity described in paragraph (d) of the definition of “resource activity” in subsection 1206 (1) of the Federal regulations;

(c) if the corporation’s gross resource profits for the year under subsection 1204 (1) of the Federal regulations and its resource profits for the year under subsection 1204 (1.1) of the Federal regulations were determined on the basis that,

(i) no amount would be deductible in computing the corporation’s income for the year in respect of a rental or royalty paid or payable by the corporation and computed by reference to the amount or value of fossil fuel produced from a Canadian fossil fuel source, other than,

(A) an amount in respect of an exempt rental or royalty,

(B) an amount that is a production royalty, or

(C) an amount paid or payable in respect of a specified royalty,

(ii) no amount would be deductible in computing the corporation’s income for the year under paragraph 20 (1) (e), (e.1), (e.2) or (f) of the Federal Act or as, on account of or in lieu of, interest in respect of a debt owed by the corporation,

(iii) no amount would be deductible in computing the corporation’s income under any of sections 65 to 66.7 of the Federal Act, subsection 17 (2) or (6) of the Income Tax Application Rules or section 29 of those Rules, and

(iv) section 11.0.1, other than subsection 11.0.1 (4), and subsections 26 (4.1), (6) and (7) and 31 (1.2) of the Corporations Tax Act would apply in computing the corporation’s income for the year even though those provisions would not otherwise apply for the year;

(d) if the corporation’s share of the income or loss of a partnership from any source were deemed to be nil; and

(e) if each of subsections 1204 (1) and (1.1) of the Federal regulations were deemed to allow the computation of a negative amount if the sum of the amounts deducted under the subsection exceeded the sum of the amounts added under that subsection.  O. Reg. 37/09, s. 7 (5).

(6) For the purposes of the definition of “G” in subsection (4), a corporation’s share for a taxation year of a particular partnership’s adjusted resource profits for a fiscal period ending in the year is determined as follows:

1. If the corporation does not hold a direct interest in the particular partnership at the end of the fiscal period, the corporation’s share of the partnership’s adjusted resource profits is deemed to be nil.

2. If the corporation holds a direct interest in the particular partnership at the end of the fiscal period, the corporation’s share of the partnership’s adjusted resource profits is the amount that may reasonably be considered to represent the corporation’s share of the partnership’s adjusted resource profits for the fiscal period, determined under subsection (4) as if,

i. the particular partnership and every other partnership in which the corporation has an indirect interest through the particular partnership were corporations, each having a taxation year that is the same as its fiscal period,

ii. subclause (5) (c) (iv) applied to the particular partnership, but only if the corporation is a majority interest partner in that partnership at the end of the fiscal period,

iii. subclause (5) (c) (iv) applied to another partnership in which the corporation held an indirect interest through the particular partnership, but only if the corporation is a majority interest partner in the particular partnership at the end of the fiscal period and is a majority interest partner in the other partnership at any time in the fiscal period, and

iv. this section were read without reference to subsection (7).  O. Reg. 37/09, s. 7 (6).

(7) Despite subsection (6), a corporation’s share for a taxation year of the adjusted resource profits of a partnership for a fiscal period of the partnership ending in the year is deemed to be nil unless the corporation holds a direct interest in and is a majority interest partner of the partnership at the end of the fiscal period and does not have, through that partnership, an indirect interest in another partnership other than,

(a) a partnership of which the corporation is a majority interest partner at any time in the fiscal period; or

(b) a partnership that carries on no resource activity as defined in subsection 1204 (6) of the Federal regulations.  O. Reg. 37/09, s. 7 (7).

(8) For greater certainty, nothing in subparagraph 2 i of subsection (6) affects the nature or extent of any partner’s interest in any partnership for the purposes of the definition of “G” in subsection (4) or for the purposes of clause (5) (d).  O. Reg. 37/09, s. 7 (8).

Part III
corporate Minimum Tax

Definitions and interpretation

8. (1) In this Part,

“excluded mark-to-market property” means, in respect of a corporation, property held by the corporation,

(a) in respect of which mark-to-market changes from the beginning to the end of a taxation year of the corporation would be reflected in the calculation of the corporation’s income for the year under subdivision a of Division B of Part III of the Ontario Act if the property were held by the corporation throughout the taxation year, or

(b) that is denominated in a foreign currency and in respect of which any change in the value of that currency relative to Canadian currency from the beginning to the end of a taxation year of the corporation would be reflected in the calculation of the corporation’s income for the year under subdivision a of Division B of Part III of the Ontario Act if the property were held by the corporation throughout the taxation year;

“exempt event” means, in respect of a corporation,

(a) a disposition of property by the corporation where,

(i) the property is an eligible property for the purposes of subsection 85 (1) of the Federal Act and a joint election in respect of the disposition is made,

(A) under subsection 85 (1) of the Federal Act, and

(B) under subsection 60 (1) of the Ontario Act,

(ii) the property is an eligible property for the purposes of subsection 85 (1) of the Federal Act that is described in paragraph 85 (2) (a) of that Act and a joint election in respect of the disposition is made,

(A) under subsection 85 (2) of the Federal Act, and

(B) under subsection 60 (2) of the Ontario Act,

(iii) the property is a share of the capital stock of a taxable Canadian corporation and,

(A) section 85.1 of the Federal Act applies in respect of the disposition, and

(B) a joint election in respect of the disposition is made under subsection 60 (1) of the Ontario Act, or

(iv) the property is property referred to in subsection 97 (2) of the Federal Act and a joint election in respect of the disposition is made under that subsection of the Federal Act and under subsection 60 (2) of the Ontario Act,

(b) a disposition of property by the corporation where the proceeds of disposition of the property are determined under subsection 13 (4) or 14 (6) of the Federal Act or under section 44 of that Act and an election in respect of the disposition is made under subsection 61 (1) of the Ontario Act,

(c) the receipt by the corporation of a property referred to in paragraph 88 (1) (a) of the Federal Act in connection with a winding-up to which section 88 of the Federal Act applies, or

(d) the receipt by the corporation of property as a consequence of an amalgamation of two or more corporations to which section 87 of the Federal Act applies;

“fair value” means, in respect of property of a corporation, the amount determined in accordance with generally accepted accounting principles that is the fair value of the property to the corporation, expressed in Canadian currency;

“mark-to-market changes” means, with respect to a specified mark-to-market property or excluded mark-to-market property held by a corporation, changes in the fair value of the property that occur after the corporation acquires the property and before the corporation disposes of the property;

“specified mark-to-market property” means, in respect of a corporation, property, other than excluded mark-to-market property, held by the corporation,

(a) in respect of which, under generally accepted accounting principles, any mark-to-market changes from the beginning to the end of a taxation year of the corporation would be reflected in the calculation of the corporation’s net income for the taxation year for the purposes of Division C of Part III of the Ontario Act if the property were held by the corporation throughout the taxation year, or

(b) that is denominated in a foreign currency and in respect of which, under generally accepted accounting principles, any change in the value of that currency relative to Canadian currency from the beginning to the end of a taxation year of the corporation would be reflected in the calculation of the corporation’s net income for the taxation year for the purposes of Division C of Part III of the Ontario Act if the property were held by the corporation throughout the taxation year.  O. Reg. 37/09, s. 8 (1).

(2) In subsection (1),

“Ontario Act” means the Taxation Act, 2007.  O. Reg. 37/09, s. 8 (2).

(3) A disposition that is deemed to be made for the purposes of the Federal Act is a disposition for the purposes of this Part.  O. Reg. 37/09, s. 8 (3).

(4) For the purposes of this Part and subject to any necessary modifications, unless the context requires otherwise,

(a) references to corporations include partnerships having members that are corporations; and

(b) references to taxation years of corporations include fiscal periods of partnerships that have members that are corporations.  O. Reg. 37/09, s. 8 (4).

Adjusted net income

9. (1) The following amounts are prescribed for the purposes of subsection 57 (1) of the Act as amounts required to be included in calculating a corporation’s adjusted net income for the purposes of Division C of Part III of the Act for a taxation year:

1. The corporation’s accounting loss difference for the year.

2. The corporation’s net capital gain difference for the year.

3. The corporation’s net specified income for the year.  O. Reg. 37/09, s. 9 (1).

(2) The following amounts are prescribed for the purposes of subsection 57 (1) of the Act as amounts required to be included in calculating the total amount to be deducted in determining a corporation’s adjusted net income for the purposes of Division C of Part III of the Act for a taxation year:

1. The corporation’s accounting gain difference for the year.

2. The corporation’s net capital loss difference for the year.

3. The corporation’s net specified loss for the year.

4. The corporation’s reorganization gain for the year, but only if the corporation,

i. has a permanent establishment in Ontario during the year,

ii. satisfies clause 55 (1) (a), (b) or (c) of the Act for the year, and

iii. is not exempt from tax under Division C of Part III of the Act for the year by reason of subsection 55 (3) of the Act.  O. Reg. 37/09, s. 9 (2).

(3) A corporation’s accounting gain difference for a taxation year, if any, is the amount by which “A” exceeds “B” and its accounting loss difference for the year, if any, is the amount by which “B” exceeds “A” where,

  “A” is the sum of,

(a) the corporation’s net income, if any, for the year for the purposes of Division C of Part III of the Act, and

(b) the amount, if any, that would be the corporation’s net loss for the year for the purposes of Division C of Part III of the Act if the mark-to-market changes in each specified mark-to-market property held by the corporation in the year were not taken into account, and

  “B” is the sum of,

(a) the amount, if any, that would be the corporation’s net income for the year for the purposes of Division C of Part III of the Act if the mark-to-market changes in each specified mark-to-market property held by the corporation in the year were not taken into account, and

(b) the corporation’s net loss, if any, for the year for the purposes of Division C of Part III of the Act.  O. Reg. 37/09, s. 9 (3).

(4) A corporation’s net capital gain difference for a taxation year, if any, is the amount by which “C” exceeds “D” and its net capital loss difference for the year, if any, is the amount by which “D” exceeds “C” where,

  “C” is the sum of all amounts each of which is the corporation’s capital gain, if any, for the year as determined for the purposes of Subdivision c of Division B of Part I of the Federal Act from the disposition by the corporation of a specified mark-to-market property in the year or in a previous taxation year that,

(a) ended after March 22, 2007, or

(b) began after June 30, 2004 and ended before March 23, 2007 and an election was made under subsection 1 (3) of Ontario Regulation 509/07 (Corporate Minimum Tax), made under the Corporations Tax Act, to have section 1 of that regulation apply to that taxation year, and

  “D” is the sum of all amounts each of which is the corporation’s capital loss or business investment loss, if any, for the year from the disposition of a specified mark-to-market property, as determined for the purposes of Subdivision c of Division B of Part I of the Federal Act.  O. Reg. 37/09, s. 9 (4).

(5) A corporation’s net specified income for a taxation year, if any, is the amount by which “E” exceeds “F” and its net specified loss for the year, if any, is the amount by which “F” exceeds “E” where,

“E” is the sum of,

(a) the corporation’s income for the year, if any, as determined for the purposes of subdivision a of Division B of Part III of the Act, and

(b) the amount, if any, that would be the corporation’s total loss for the year from business and property for the purposes of subdivision a of Division B of Part III of the Act if any increase or decrease in the amount of the loss attributable to the disposition of a specified mark-to-market property that was not a capital property were not included, and

“F” is the sum of,

(a) the amount, if any, that would be the corporation’s income for the year for the purposes of subdivision a of Division B of Part III of the Act if any increase or decrease in the amount of the income attributable to the disposition of a specified mark-to-market property that was a not a capital property were not included, and

(b) the amount, if any, of the corporation’s total loss for the year from business and property for the purposes of subdivision a of Division B of Part III of the Act.  O. Reg. 37/09, s. 9 (5).

(6) A corporation’s reorganization gain, if any, for a taxation year in respect of an exempt event is the amount, if any, by which “G” exceeds “H” where,

  “G” is the sum of,

(a) the corporation’s net income, if any, for the year for the purposes of Division C of Part III of the Act, and

(b) the amount, if any, that would be the corporation’s net loss for the year for the purposes of Division C of Part III of the Act if any decrease in the amount of the net loss for the year from the exempt event were not taken into account, and

  “H” is the sum of,

(a) the amount, if any, that would be the corporation’s net income for the year for the purposes of Division C of Part III of the Act if any increase in the amount of the net income for the year from the exempt event were not taken into account, and

(b) the corporation’s net loss, if any, for the year for the purposes of Division C of Part III of the Act.  O. Reg. 37/09, s. 9 (6).

(7) For the purposes of determining the adjusted net income or adjusted net loss of a corporation for a taxation year in which the corporation is a partner in a partnership,

(a) the partnership shall not, in determining the partnership’s adjusted net income or adjusted net loss for a fiscal period ending in the taxation year of the corporation, deduct an amount in respect of a reorganization gain of the partnership for a fiscal period in respect of an exempt event unless the corporation satisfies subparagraphs 4 i, ii and iii of subsection (2) for the taxation year; and

(b) the partnership is not required to satisfy the conditions described in subparagraphs 4 i, ii and iii of subsection (2).  O. Reg. 37/09, s. 9 (7).

Part IV
Capital Tax — Financial Institutions

Division A — Prescribed Financial Institutions

Prescribed financial institutions for capital tax purposes

10. (1) The following corporations are prescribed as financial institutions for a taxation year for the purposes of subsection 66 (2) of the Act:

1. A corporation all or substantially all of whose assets consist of shares or indebtedness of one or more financial institutions that are related to the corporation in the particular year.

2. A corporation all or substantially all of whose assets consist of shares or indebtedness of one or more insurance corporations that are related to the corporation if,

i. each of the insurance corporations carries on business in Canada at any time in the particular year, and

ii. the corporation elects in its return of income for the particular year to be a financial institution for the purposes of subsection 66 (2) of the Act.

3. A corporation, other than a corporation referred to in paragraph 1 or 2, all or substantially all of whose assets consist of shares or indebtedness of one or more financial institutions that are related to the corporation in the particular year and shares or indebtedness of one or more insurance corporations that are related to the corporation in the particular year if,

i. each of the insurance corporations carries on business in Canada at any time in the particular year, and

ii. the corporation elects in its return of income for the particular year to be a financial institution for the purposes of subsection 66 (2) of the Act.

4. Accredited Home Lenders Canada Inc.

5. AmeriCredit Financial Services of Canada Limited.

6. Associates Capital Corporation of Canada.

7. Avco Financial Services Canada Limited.

8. Avco Financial Services Quebec Limited.

9. Avco Financial Services Realty Limited.

10. Citibank Canada Investment Funds Limited.

11. CitiCapital Commercial Corporation.

12. CitiFinancial Canada, Inc.

13. CitiFinancial Mortgage Corporation.

14. CitiFinancial Services of Canada Ltd.

15. GE Card Services Canada Inc.

16. General Motors Acceptance Corporation of Canada, Limited.

17. Ford Credit Canada Limited.

18. Household Commercial Canada Inc.

19. Household Finance Corporation of Canada.

20. Household Financial Corporation Limited.

21. Household Realty Corporation Limited.

22. John Deere Credit Inc.

23. Merchant Retail Services Limited.

24. PACCAR Financial Limited.

25. State Farm Finance Corporation of Canada.

26. VFC Inc.

27. Wells Fargo Financial Canada Corporation.

28. Wells Fargo Financial Corporation Canada.

29. Wells Fargo Financial Retail Services Company.  O. Reg. 37/09, s. 10 (1).

(2) For the purposes of subparagraphs 2 ii and 3 ii of subsection (1), a corporation is deemed to elect in its return of income for a taxation year to be a financial institution under subsection 66 (2) of the Act if the corporation calculates its tax under Division E of Part III of the Act for the year on the basis that it is a financial institution.  O. Reg. 37/09, s. 10 (2).

Division B — Small Business Investment Tax Credit

Interpretation

11. (1) Subject to subsection (2), a debt obligation is a qualifying obligation for the purposes of this Division if it is issued after May 7, 1996 by a corporation that is a qualifying small business corporation at the time the obligation is issued.  O. Reg. 37/09, s. 11 (1).

(2) A debt obligation issued by a corporation after May 7, 1996 is not a qualifying obligation if, under the terms of the debt obligation or any agreement relating to it, 

(a) the corporation is or may be required to repay more than 5 per cent of the principal amount of the debt obligation in any of the first five years following the date the debt obligation is issued, except in the event that the corporation becomes bankrupt or commits a default under the agreement or instrument under which the debt obligation was issued;

(b) the holder may exchange or convert the debt obligation within five years after the date of its issue into a share or debt obligation that is not a qualifying share or qualifying obligation of the corporation;

(c) the debt obligation, whether as a result of its terms or as a result of security provided by the corporation, is not subordinate in right of repayment to all other debt obligations of the corporation, other than the payment of debt obligations owing to a shareholder of the corporation or debt obligations each of which is a qualifying obligation,

(i) that was issued to a bank or a specified corporation in which a bank had an ownership interest at the time the debt obligation was issued, if the debt obligation was issued before May 7, 1997, or

(ii) that was issued to a deposit-taking institution, an insurance corporation that was related to a deposit-taking institution when the debt obligation was issued, or to a specified corporation that was related to a deposit-taking institution when the debt obligation was issued, if the debt obligation was issued after May 6, 1997;

(d) the corporation is restricted from incurring other debts; or

(e) a government, municipality or other public authority in Canada is or may be required to provide a guarantee or similar indemnity with respect to the debt obligation.  O. Reg. 37/09, s. 11 (2).

(3) Subject to subsection (4), a share of the capital stock of a qualifying small business corporation is a qualifying share for the purposes of this Division if,

(a) it is issued after May 7, 1996; and

(b) the corporation was a qualifying small business corporation at the time the share was issued.  O. Reg. 37/09, s. 11 (3).

(4) A share of the capital stock of a qualifying small business corporation is not a qualifying share if, under the terms and conditions of the share, any agreement relating to the share or any agreement entered into by the corporation or a person related to the corporation,

(a) the corporation or a person related to the corporation may be required to redeem, acquire or cancel the share, or reduce the paid-up capital of the class to which the share belongs, within five years after the date of issue of the share, unless the redemption, acquisition or cancellation arises as a result of an exchange or conversion of the share into a qualifying share or qualifying obligation of the corporation;

(b) the holder of the share may exchange or convert the share within five years after the date of its issue into a share or obligation that is not a qualifying share or qualifying obligation of the corporation; or

(c) a government, municipality or other public authority in Canada is or may be required to provide a guarantee or similar indemnity with respect to the share or compensate any person for any loss that may be realized in respect of the share.  O. Reg. 37/09, s. 11 (4).

(5) An individual is a qualifying sole proprietor for the purposes of this Division if he or she is a sole proprietor and resident in Ontario.  O. Reg. 37/09, s. 11 (5).

(6) A partnership is a qualifying partnership for the purposes of this Division if,

(a) the partnership carries on an active business primarily in Ontario through one or more permanent establishments in Ontario;

(b) all or substantially all of the fair market value of the partnership’s assets is attributable to assets used principally in the active business; and

(c) all of the members of the partnership who are partnerships are qualifying partnerships.  O. Reg. 37/09, s. 11 (6).

(7) A business carried on by a qualifying sole proprietor or by the partners of a qualifying partnership is a qualifying small business for the purposes of this Division if,

(a) the business is carried on by the proprietor or the partners of the partnership through one or more permanent establishments in Ontario; and

(b) all or substantially all of the fair market value of the assets of the qualifying sole proprietorship used in carrying on the business, or of the qualifying partnership carrying on the business, is attributable to assets used principally in one or more active businesses carried on primarily in Ontario.  O. Reg. 37/09, s. 11 (7).

(8) A reference in this subdivision to,

(a) the making of an investment in a qualifying small business includes the making of a loan to the person or persons carrying on the business to be used in carrying on that business;

(b) the holder of an investment means the lender or assignee of the lender in the case of a loan to a person other than a corporation; and

(c) an investment that has been issued includes a loan that has been made to a person other than a corporation.  O. Reg. 37/09, s. 11 (8).

(9) For the purposes of subdivision b of Division E of Part III of the Act and this Division, an associated group in respect of a corporation or qualifying small business includes the corporation or qualifying small business and all corporations and qualifying small businesses that are associated with it or would be associated with it if the following rules applied:

1. A qualifying sole proprietor is deemed to be a corporation, all the issued shares of the capital stock of which are owned by the sole proprietor.

2. A qualifying partnership is deemed to be a corporation having only one class of issued shares which have full voting rights under all circumstances, and each member of the partnership is deemed to own the proportion of the number of issued shares of the capital stock of the corporation as that member’s proportionate share of the income or loss of the partnership.

3. Two partnerships are deemed to be associated if each member of one partnership is related to each member of the other partnership.

4. A corporation or qualifying small business that is deemed to be associated with another corporation or qualifying small business is deemed to be associated with every corporation and qualifying small business deemed to be associated with the other corporation or qualifying small business.  O. Reg. 37/09, s. 11 (9).

(10) If a qualifying small business corporation or qualifying small business employs one or more employees in connection with a business carried on by it, the corporation or small business is deemed to carry on that business primarily in Ontario at a particular time if not less than 50 per cent of the salaries and wages paid by the corporation or small business in connection with the business during the six months before that time, or during the period when the corporation or small business carried on that business if less than six months before that time, would be required for the purposes of Part IV of the Federal regulations to be included in the amount of salary or wages paid to employees of a permanent establishment of the corporation in Ontario.  O. Reg. 37/09, s. 11 (10).

(11) For the purposes of subdivision b of Division E of Part III of the Act,

(a) the amount of the total assets of an associated group measured immediately before an investment is made is the aggregate of the total assets of each member of the group determined as of the end of the last fiscal period of the member ending before the investment is made; and

(b) the amount of the gross revenue of an associated group measured immediately before an investment is made is the aggregate amount of gross revenue of each member of the group determined for the last fiscal period of the member ending before the investment is made.  O. Reg. 37/09, s. 11 (11).

(12) If the fiscal period referred to in clause (11) (b) of a member of the associated group is less than 365 days, the amount of the gross revenue of that member for that fiscal period is deemed to be the amount otherwise determined multiplied by the ratio of 365 to the number of days in the fiscal period.  O. Reg. 37/09, s. 11 (12).

Amount of consideration for eligible investment

12. (1) For the purposes of section 76 of the Act, the amount of consideration for which an eligible investment is issued is the total consideration expressed in Canadian currency for which the eligible investment is issued or made.  O. Reg. 37/09, s. 12 (1).

(2) Despite subsection (1), if a deposit-taking institution, an insurance corporation related to a deposit-taking institution or a specified corporation makes an eligible investment in a qualifying small business corporation or qualifying small business in substitution for another investment in the corporation or business, other than a short-term loan, the following rules apply:

1. The consideration for which the eligible investment is issued is deemed to be the amount, if any, by which the amount of the consideration otherwise determined under this section exceeds the fair market value of the other investment immediately before the substitution.

2. The consideration for which the eligible investment is issued, as determined under paragraph 1, shall not be greater than the amount, if any, by which the fair market value of the eligible investment issued in substitution for the other investment exceeds the fair market value of the other investment.  O. Reg. 37/09, s. 12 (2).

(3) Despite subsections (1) and (2),  a series of two or more eligible investments made by one or more corporations, each of which is a deposit-taking institution or a corporation related to a deposit-taking institution, in the same qualifying small business corporation or qualifying small business or in two or more corporations or businesses in the same associated group is deemed to be a single investment if it is reasonable to consider that the series of investments was made instead of one or more larger investments in order that one or more financial institutions may increase the amount otherwise calculated as “E” in subsection 72 (1) of the Act.  O. Reg. 37/09, s. 12 (3).

(4) In this section,

“short-term loan” means a loan that,

(a) has a term or remaining term of less than 12 months, or

(b) is payable on the demand of the lender or subsequent holder, if the demand may be made within 12 months after the loan is made.  O. Reg. 37/09, s. 12 (4).

Below-prime loan

13. (1) In section 75 of the Act,

“average bank prime rate” means, as of a particular date, the mean rounded to the nearest whole percentage point of the annual rates of interest announced by each of the Royal Bank of Canada, The Bank of Nova Scotia, the Canadian Imperial Bank of Commerce, the Bank of Montreal and The Toronto-Dominion Bank to be its prime or reference rate of interest in effect on that date for determining interest rates on Canadian dollar commercial loans by that bank in Canada.  O. Reg. 37/09, s. 13 (1).

(2) The following are prescribed classes of businesses for the purposes of paragraph 3 of subsection 75 (1) of the Act:

1. The professional practice of accounting, law, dentistry or medicine.

2. The provision of managerial, administrative, financial, maintenance or other similar services to one or more businesses listed in paragraph 1.  O. Reg. 37/09, s. 13 (2).

(3) For the purposes of subsection 75 (5) of the Act, the average outstanding balance during a taxation year of a below-prime loan owed to a corporation that is a financial institution, an insurance corporation or a specified corporation is determined using the average outstanding balances of the loan determined daily for each day in the corporation’s taxation year, weekly for each week in the corporation’s taxation year or monthly for each month in the corporation’s taxation year and, if the taxation year is less than 365 days, the amount otherwise determined shall be multiplied by the ratio of the number of days in the taxation year to 365.  O. Reg. 37/09, s. 13 (3).

Patient capital investment

14. (1) For the purposes of clause 76 (1) (a) of the Act, an investment made in a qualifying small business corporation must be made in consideration for the issue by the qualifying small business corporation of one or more qualifying shares or qualifying obligations in order to be a patient capital investment.  O. Reg. 37/09, s. 14 (1).

(2) Subject to clause 76 (1) (b) of the Act and subsection (3) of this section, a loan made after May 6, 1997 to a qualifying small business by a deposit-taking institution or by a corporation that was a specified corporation or insurance corporation related to the deposit-taking institution when the investment was made is a patient capital investment, unless,

(a) by reason of clause 11 (2) (a), (b), (d) or (e), the loan would not be a qualifying obligation if it had been issued by a qualifying small business corporation; or

(b) as a result of the terms of the loan or of any security provided for it, the loan is not subordinate in right of repayment to all other debt obligations of the qualifying small business, other than the payment of,

(i) qualifying obligations owing to the lender or to a person related to the lender, and

(ii) obligations owing to,

(A) a partner of the qualifying partnership or a person related to a partner of the qualifying partnership, if the business is carried on by a qualifying partnership, or

(B) a person related to the qualifying sole proprietor, if the business is carried on by a qualifying sole proprietor.  O. Reg. 37/09, s. 14 (2).

(3) A loan to a qualifying sole proprietor is not a patient capital investment unless the qualifying sole proprietor gives to the lender,

(a) financial statements covering the operations of the business carried on by the qualifying sole proprietor for the 12-month period ending at the end of its last fiscal period, or for the period during which the proprietor carried on the business if less than 12 months before the end of its last fiscal period; and

(b) a written undertaking supported by reasonable evidence that,

(i) the amount of the investment will be used by the qualifying sole proprietor for the purposes only of gaining or producing income from the business, and

(ii) the qualifying sole proprietor will keep the amount of the loan, all property acquired with the proceeds of the loan and all other assets used primarily in the business separate from his or her assets that are not used in the business.  O. Reg. 37/09, s. 14 (3).

(4) The financial statements required by clause (3) (a) shall include,

(a) a balance sheet prepared as of a date not earlier than the end of the sole proprietor’s last fiscal period; and

(b) an income statement for the period of time described in clause (3) (a).  O. Reg. 37/09, s. 14 (4).

Investment used for prescribed purpose

15. (1) For the purposes of paragraph 5 of subsection 75 (1) and clause 76 (1) (b) of the Act, an investment made in a qualifying small business corporation or in a qualifying small business is used by the corporation or business for a prescribed purpose or in a prescribed manner if any part of the investment is used,

(a) for a purpose other than gaining or producing income from an active business carried on primarily in Ontario by,

(i) the qualifying small business corporation or by a qualifying small business corporation controlled by the qualifying small business corporation, if the investment is in a qualifying small business corporation, or

(ii) the qualifying small business, if the investment is in a qualifying small business; or

(b) directly or indirectly for the purpose of,

(i) making a loan to another person,

(ii) acquiring an interest in land, other than land in Ontario that is used directly and principally in an active business carried on primarily in Ontario by the qualifying small business corporation or qualifying small business in which the investment was made,

(iii) purchasing or acquiring securities from any person,

(iv) funding the payment of dividends or a return of capital to shareholders of the qualifying small business corporation, if the investment is in a qualifying small business corporation,

(v) funding the distribution of income or a return of capital to the partners of the qualifying partnership, if the investment is in a qualifying partnership,

(vi) funding the purchase or sale of goods or services provided by,

(A) a shareholder of the qualifying small business corporation or by a person related to a shareholder of the corporation, if the investment is in a qualifying small business corporation,

(B) a partner of a qualifying partnership or a person related to a partner of a qualifying partnership, if the investment is in a qualifying partnership, or

(C) a person related to the sole proprietor, if the investment is in a qualifying sole proprietor,

(vii) repaying a loan or other amount,

(A) advanced to the qualifying small business corporation by a shareholder, a person who was a shareholder at the time that the amount was advanced to the corporation or to a person related to a shareholder or to a person who was a shareholder at the time that the amount was advanced to the corporation, if the investment is in a qualifying small business corporation,

(B) advanced to the qualifying small business by a partner of the qualifying partnership, by a person who was a partner at the time the amount was advanced to the partnership or by a person who is related to a partner of the qualifying partnership or to a person who was a partner at the time the amount was advanced to the partnership, if the investment is in a qualifying partnership, or

(C) advanced to the qualifying small business by a person related to the sole proprietor, if the investment is in a qualifying sole proprietor, or

(viii) reinvestment outside Canada, other than the establishment and maintenance of an office outside Canada to promote sales by the business outside Canada.  O. Reg. 37/09, s. 15 (1).

(2) Despite subclauses (1) (b) (i) and (iii), an investment made in a qualifying small business corporation that is otherwise an eligible investment will not cease to be an eligible investment if the investment is used by the qualifying small business corporation to make an eligible investment in another qualifying small business corporation controlled by the qualifying small business corporation.  O. Reg. 37/09, s. 15 (2).

(3) Subclause (1) (b) (vi) does not apply in respect of,

(a) fees and other amounts normally charged by a financial institution to its customers for providing services in the ordinary course of its business; or

(b) reasonable salaries and wages paid to employees.  O. Reg. 37/09, s. 15 (3).

Associated small business corporation

16. A corporation referred to in subsection 66 (5) of the Act is a qualifying small business corporation at a particular time for the purposes of subdivision b of Division E of Part III of the Act if, at that time,

(a) it is a Canadian-controlled private corporation; and

(b) it controls the qualifying small business corporation referred to in subsection 66 (4) of the Act with which it is associated.  O. Reg. 37/09, s. 16.

Specified corporation

17. The classes of corporations prescribed for the purposes of clause 74 (6) (a) of the Act, are the classes of corporations that would be referred to in any paragraph of subsection 468 (1) of the Bank Act (Canada) if the references to “bank” in that subsection and in the definitions in subsection 464 (1) of that Act were read as “financial institution”.  O. Reg. 37/09, s. 17.

Disposition of patient capital investment

18. (1) For the purposes of clause (a) of the definition of “C” in subsection 74 (1) the Act, each of the following events constitutes a disposition of a patient capital investment:

1. A change in the terms or conditions of the investment that causes it to cease to be a patient capital investment.

2. The repayment of more than 5 per cent of the principal amount of the patient capital investment in any of the first five years after the investment was issued.

3. The redemption, acquisition or cancellation of the patient capital investment by the qualifying small business corporation or by a person related to the qualifying small business corporation.

4. The substitution of a property that is not a patient capital investment for the patient capital investment.

5. The sale or transfer of the patient capital investment,

i. within one year after the date of its issue if the sale or transfer is to a person who is not associated with the corporation that made the patient capital investment, or

ii. within five years after the date of its issue if the investment does not continue to be a patient capital investment immediately after the sale or transfer.  O. Reg. 37/09, s. 18 (1).

(2) Despite subsection (1), the following events do not constitute a disposition of a patient capital investment:

1. The acquisition by the holder of the patient capital investment of a property that is a patient capital investment in the same qualifying small business corporation or qualifying small business, as the case may be, in substitution for the patient capital investment in the corporation or business, if the new patient capital investment is the only consideration received or receivable in respect of the substitution.

2. A repayment, redemption, acquisition or cancellation of the patient capital investment after and as a reasonably expected consequence of the qualifying small business corporation or qualifying small business, as the case may be,

i. becoming bankrupt, or

ii. committing a default under the agreement or instrument under which the patient capital investment was issued, if the default occurred at least four months before the repayment, redemption, acquisition or cancellation, was a consequence of the inability of the corporation or small business to pay its liabilities as they came due and has not been remedied.

3. A repayment, redemption, cancellation, acquisition, substitution, sale or transfer of the patient capital investment that is carried out at the request of the qualifying small business corporation or qualifying small business in which the investment was made, if the holder of the patient capital investment has not directly or indirectly required the corporation or business to make the request.

4. An event described in subsection (1) that occurs more than five years after the date of issue of the patient capital investment or that occurs at a time when the holder of the investment is a person other than,

i. the financial institution that was entitled to include an amount in respect of the investment in the calculation of “E” in subsection 72 (1) of the Act or deduct an amount under subsection 66.1 (2) of the Corporations Tax Act in respect of the investment, or

ii. a corporation related to that financial institution.  O. Reg. 37/09, s. 18 (2).

(3) If a financial institution that was entitled to include an amount in the calculation of “E” in subsection 72 (1) of the Act or deduct an amount under subsection 66.1 (2) of the Corporations Tax Act in respect of a patient capital investment made by another corporation ceases to be related to that other corporation, the patient capital investment held by the other corporation when the financial institution and the corporation cease to be related is deemed to have been disposed of immediately before the financial institution and the corporation ceased to be related unless,

(a) the financial institution and corporation cease to be related more than one year after the date of issue of the patient capital investment and the investment continues to be a patient capital investment immediately after they ceased to be related; or

(b) there has been a previous disposition of the patient capital investment for the purposes of subsection 66 (1) of the Act or section 66.1 of the Corporations Tax Act in respect of which an amount has been included in the calculation of the amount under clause (a) of the definition of “C” in subsection 74 (1) of the Act or under clause 66.1 (4) (c) of the Corporations Tax Act in the calculation of the small business investment tax credit account of the financial institution that included an amount in respect of the investment in the calculation of “E” in subsection 72 (1) of the Act or deducted an amount under subsection 66.1 (2) of the Corporations Tax Act in respect of the investment.  O. Reg. 37/09, s. 18 (3).

(4) The amount determined under subsection (5) shall be included in the amount determined under clause (a) of the definition of “C” in subsection 74 (1) of the Act in determining the amount of a financial institution’s small business investment tax credit account in respect of the disposition of a patient capital investment if,

(a) the financial institution was entitled to include an amount in respect of the investment in the calculation of “E” in subsection 72 (1) of the Act or deduct an amount under subsection 66.1 (2) of the Corporations Tax Act in respect of the investment; and

(b) there has not been a previous disposition of the patient capital investment for the purposes of subsection 66 (1) of the Act or section 66.1 of the Corporations Tax Act in respect of which an amount has been included in the calculation of the amount under clause (a) of the definition of “C” in subsection 74 (1) of the Act or under clause 66.1 (4) (c) of the Corporations Tax Act in the calculation of the small business investment tax credit account of the financial institution that included an amount in respect of the investment in the calculation of “E” in subsection 72 (1) of the Act or deducted an amount under subsection 66.1 (2) of the Corporations Tax Act in respect of the investment.  O. Reg. 37/09, s. 18 (4).

(5) The amount referred to in subsection (4) in respect of the disposition of a patient capital investment is the amount calculated using the formula,

A × B/C

in which,

  “A” is the lesser of the fair market value of the investment at the time of its disposition and the amount of consideration for which the investment was originally issued,

  “B” is the tax credit amount in respect of the investment at the time the investment was made, and

  “C” is the amount of consideration for which the investment was originally issued.

O. Reg. 37/09, s. 18 (5).

Small business investment fund

19. (1) For the purposes of this subdivision, a small business investment fund is a corporation, fund, association or similar organization that satisfies the following conditions:

1. The primary objective and activity of the corporation, fund, association or organization is the investment of capital in small businesses carried on in Ontario.

2. The corporation, fund, association or organization carries out its activities or business through a permanent establishment in Ontario.

3. All or substantially all of the investments made by the corporation, fund, association or organization are eligible investments in qualifying small business corporations or qualifying small businesses that satisfy the following conditions:

i. Neither the total assets nor the gross revenue of the qualifying small business corporation or qualifying small business exceeds $5,000,000.

ii. If the qualifying small business corporation or qualifying small business is a member of a corporate group or associated group, neither the total assets nor the gross revenue of the group exceeds $5,000,000.  O. Reg. 37/09, s. 19 (1).

(2) Despite subsection (1), a corporation, fund, association or organization is not a small business investment fund if it is a registered charity.  O. Reg. 37/09, s. 19 (2).

Eligible investment through a small business investment fund

20. (1) An investment made after May 6, 1997 by a deposit-taking institution or by a corporation that, when the investment is made, is related to a deposit-taking institution and is an insurance corporation or specified corporation is an eligible investment for the purposes of subdivision b of Division E of Part III of the Act if it satisfies the following conditions:

1. The investment is a patient capital investment made in a small business investment fund that deals at arm’s length with the deposit-taking institution, insurance corporation or specified corporation.

2. The investment would be a patient capital investment if it had been issued by a qualifying small business corporation.

3. The small business investment fund reinvests all or part of the amount of the investment in investments in qualifying small business corporations or qualifying small businesses, and the investments are patient capital investments or below-prime loans that would be eligible investments if issued directly to the deposit-taking institution, insurance corporation or specified corporation.

4. The small business investment fund certifies the amount of the investment by the deposit-taking institution, insurance corporation or specified corporation that has been reinvested by the fund as required in paragraph 3 and certifies the date of the reinvestments.  O. Reg. 37/09, s. 20 (1).

(2) For the purposes of subdivision b of Division E of Part III of the Act, other than clause (a) of the definition of “C” in subsection 74 (1) of the Act, if the conditions described in subsection (1) are satisfied, the deposit-taking institution, insurance corporation or specified corporation is considered,

(a) to have made the eligible investment in the qualifying small business corporation or qualifying small business that was made by the small business investment fund; and

(b) to have made the eligible investment referred to in clause (a) on the date the small business investment fund made the reinvestment.  O. Reg. 37/09, s. 20 (2).

(3) The tax credit amount of an eligible investment referred to in subsection (2) is the amount that would be determined by reason of the definition of “E” in subsection 72 (1) of the Act if the deposit-taking institution, insurance corporation or specified corporation had made the investment in the qualifying small business corporation or qualifying small business.  O. Reg. 37/09, s. 20 (3).

Certification rules

21. (1) If a small business investment fund certifies the wrong amount or certifies an investment to be an eligible investment when it was not, the Ontario Minister may direct the fund to cease certifying investments and may order that all or certain of the investments made by the fund after the date of the direction and order be deemed not to be eligible investments for the purposes of subdivision b of Division E of Part III of the Act until the Ontario Minister revokes the direction and order.  O. Reg. 37/09, s. 21 (1).

(2) A direction or order given under subsection 13 (2) of Ontario Regulation 318/97 (Small Business Investment Tax Credit for Banks), made under the Corporations Tax Act applies for the purposes of this subdivision unless it is revoked under subsection (3).  O. Reg. 37/09, s. 21 (2).

(3) If the Ontario Minister is satisfied that a small business investment fund will comply with the Ontario Minister’s directions with respect to the accuracy, form and content of certificates to be given under section 21, the Ontario Minister may, subject to any conditions the Ontario Minister considers reasonable, revoke any direction and order given under subsection (1) of this section or subsection 13 (2) of Ontario Regulation 318/97 (Small Business Investment Tax Credit for Banks), made under the Corporations Tax Act and all investments that would otherwise have been eligible investments while the Ontario Minister’s direction and order were in effect shall, to the extent approved by the Ontario Minister, be considered to be eligible investments for the purposes of subdivision b of Division E of Part III of the Act and may be so certified by the fund.  O. Reg. 37/09, s. 21 (3).

Disposition of investment in fund

22. (1) Section 18 applies with necessary modifications in respect of a disposition of an investment in a small business investment fund that was made by a deposit-taking institution or by a corporation that, when the investment was made, was related to a deposit-taking institution and was an insurance corporation or specified corporation.  O. Reg. 37/09, s. 22 (1).

(2) For the purposes of the application of section 18 under subsection (1), the formula set out in subsection 18 (5) shall be read as if,

  “A” is the amount equal to the lesser of the fair market value of the investment at the time of its disposition and the amount of consideration for which the investment was originally issued,

  “B” is the total of all tax credit amounts in respect of eligible investments made by the small business investment fund that have been included or are required to be included in calculating the amount determined in respect of a financial institution under the definition of “A” in subsection 74 (1) of the Act for that period, and

  “C” is the total amount of consideration for which eligible investments made by the small business investment fund were issued to the extent that,

(a) the fund has reinvested investments made in the fund by the deposit-taking institution, insurance corporation or specified corporation in eligible investments in qualifying small business corporations or qualifying small businesses, and

(b) amounts in respect of the reinvestments have been included or are required to be included in the amounts determined in respect of the financial institution under the definition of “A” in subsection 74 (1) of the Act.  O. Reg. 37/09, s. 22 (2).

Part V
Refundable Tax Credits

Division A — Ontario Refundable Tax Credits Relating to the Film and Television Industries

Definitions

23. In this Division,

“Canadian”, when used in reference to a person or corporation other than a Canadian broadcaster, has the meaning assigned by subsection 1106 (1) of the Federal regulations;

“Ontario-based individual” means, in relation to a film or television production, an individual who was resident in Ontario at the end of the calendar year immediately before the calendar year in which principal photography for the production commences;

“parent” means a corporation that wholly owns another corporation;

“principal photography” includes key animation if the film or television production is an animated production or contains animated segments;

“producer” has the meaning assigned by the definition of that term in subsection 1106 (1) of the Federal regulations except that the reference to “film or video production” in that definition shall be read as “film or television production”;

“salary” and “wages” do not include an amount described in section 7 of the Federal Act or any amount determined by reference to profits or revenues;

“television series production” means, with respect to a cycle of a television series, the episode or group of episodes of the television series that is specified to be a production in an application for certification for the purposes of section 91 or 92 of the Act.  O. Reg. 37/09, s. 23.

Ontario Computer Animation and Special Effects Tax Credit

Definitions

24. (1) In section 90 of the Act,

“eligible computer animation and special effects activities” means activities undertaken to produce eligible animation or visual effects and includes designing, modelling, rendering, lighting, painting, animating and compositing, but does not include activities that are scientific research and experimental development for the purposes of paragraph 37 (1) (a) of the Federal Act or subparagraph 37 (1) (b) (i) of that Act;

“prescribed cost” means, in respect of costs incurred by a qualifying corporation in a taxation year in respect of an eligible production, the sum of all costs incurred by the corporation in the year in respect of the production each of which satisfies the following conditions:

1. The cost is incurred by the corporation in carrying on eligible computer animation and special effects activities for the eligible production.

2. The amount of the cost is reasonable in the circumstances.

3. The cost is,

i. included in the amount of the corporation’s cost or, in the case of a depreciable property, its capital cost of the eligible production that incorporates the results of the eligible computer animation and special effects activities, or

ii. incurred by the corporation in performing eligible computer animation and special effects activities under a contract entered into,

A. with the producer of the eligible production, or

B. with another qualifying corporation that is carrying on eligible computer animation and special effects activities for the eligible production.  O. Reg. 37/09, s. 24 (1).

(2) For the purposes of the definition of “eligible computer animation and special effects activities” in subsection (1),

“eligible animation or visual effects” means,

(a) if the animation or visual effects are completed before March 27, 2009, animation or visual effects created primarily with digital technologies, but does not include,

(i) audio effects,

(ii) in camera effects,

(iii) credit rolls,

(iv) subtitles,

(v) animation or visual effects all or substantially all of which are created by editing activities, or

(vi) animation or visual effects for use in promotional material for a film or television production, and

(b) if the animation or visual effects are completed after March 26, 2009, animation or visual effects created using digital technologies, but does not include,

(i) audio effects,

(ii) in camera effects,

(iii) credit rolls,

(iv) subtitles,

(v) animation or visual effects all or substantially all of which are created by editing activities, or

(vi) animation or visual effects for use in promotional material for a film or television production.  O. Reg. 70/10, s. 3.

Ontario labour expenditure

25. (1) For the purposes of section 90 of the Act, the amount of a qualifying corporation’s Ontario labour expenditure for a taxation year with respect to an eligible production is the sum of,

(a) the qualifying wage amount, as described in subsection (2), of the qualifying corporation for the year with respect to the eligible production;

(b) for expenditures incurred before March 27, 2009, 50 per cent of the qualifying remuneration amount of the corporation, as described in subsection (3), of the qualifying corporation for the year with respect to the eligible production; and

(c) for expenditures incurred after March 26, 2009, the qualifying remuneration amount of the corporation, as described in subsection (3), of the qualifying corporation for the year with respect to the eligible production.  O. Reg. 37/09, s. 25 (1); O. Reg. 70/10, s. 4 (1).

(2) Subject to subsections (2.1) and (6), the qualifying wage amount of a qualifying corporation for a taxation year with respect to an eligible production is the sum of,

(a) the amount incurred by it during the taxation year on account of salaries and wages that are directly attributable to eligible computer animation and special effects activities carried out by the qualifying corporation in Ontario for the eligible production; and

(b) if principal photography for the eligible production commenced after March 22, 2007, the amount, if any, of the eligible reimbursement of salaries and wages as determined under subsection (5) made by the qualifying corporation with respect to the eligible production for the taxation year.  O. Reg. 37/09, s. 25 (2); O. Reg. 70/10, s. 4 (2).

(2.1) If the qualifying corporation is a taxable Canadian corporation described in paragraph 4 of subsection (4), the qualifying wage amount of the qualifying corporation does not include an amount that,

(a) is incurred by the corporation after March 26, 2009; and

(b) is paid to an employee of the corporation in connection with eligible computer animation and special effects activities undertaken by the corporation on behalf of another qualifying corporation.  O. Reg. 70/10, s. 4 (3).

(3) Subject to subsection (6), the qualifying remuneration amount of a qualifying corporation for a taxation year with respect to an eligible production is the sum of,

(a) the amount determined under subsection (4); and

(b) if principal photography for the eligible production commenced after March 22, 2007, the amount, if any, of the eligible reimbursement of remuneration as determined under subsection (5) made by the qualifying corporation with respect to the eligible production for the taxation year.  O. Reg. 37/09, s. 25 (3).

(4) The amount determined under this subsection is an expenditure incurred during the taxation year that is directly attributable to eligible computer animation and special effects activities undertaken for the eligible production on behalf of the qualifying corporation and that is paid to any of the following in the following circumstances:

1. An individual who is not an employee of the corporation and who deals at arm’s length with the qualifying corporation, to the extent that the expenditure is attributable to activities personally undertaken by the individual.

2. An individual described in paragraph 1 for activities undertaken by the individual’s employees, to the extent that the expenditure does not exceed the salaries and wages of those employees for personally undertaking those activities.

3. An eligible partnership described in subsection (8),

i. for activities personally undertaken by a member of the eligible partnership, or

ii. for activities personally undertaken by employees of the eligible partnership, to the extent that the expenditure does not exceed the salaries and wages of those employees for personally undertaking those activities.

4. If the expenditure is incurred after March 26, 2009, a taxable Canadian corporation for services rendered personally by an individual if,

i. all of the issued and outstanding shares of the capital stock of the taxable Canadian corporation (other than directors’ qualifying shares) belong to the individual,

ii. the individual deals at arm’s length with the qualifying corporation, and

iii. the activities of the taxable Canadian corporation consist principally of the provision of the individual’s services.  O. Reg. 37/09, s. 25 (4); O. Reg. 70/10, s. 4 (4).

(5) The amount of the eligible reimbursement of salaries and wages or of remuneration made by a qualifying corporation in respect of an eligible production for a taxation year is the amount of the reimbursement made by the qualifying corporation to its parent of an expenditure that was previously incurred by the parent in respect of the eligible production if all of the following conditions are met:

1. The parent is a taxable Canadian corporation.

2. The qualifying corporation and its parent have filed with the Minister an agreement that this subsection applies with respect to costs incurred for the eligible production.

3. The reimbursement is made by the qualifying corporation in the taxation year or within 60 days after the end of the taxation year.

4. If the amount is being determined for the purposes of clause (2) (b), the expenditure was incurred in a particular taxation year of the parent and would have been included in the qualifying wage amount of the qualifying corporation in respect of the eligible production for the particular taxation year under clause (2) (a),

i. if the qualifying corporation had had that particular taxation year, and

ii. if the expenditure had been incurred by the qualifying corporation for the same purpose as it was incurred by its parent and had been paid at the same time and to the same person or partnership as it was paid by its parent.

5. If the amount is being determined for the purpose of clause (3) (b), the expenditure was incurred in a particular taxation year of the parent and would have been included in the qualifying remuneration amount of the qualifying corporation in respect of the eligible production for the particular taxation year under clause (3) (a),

i. if the qualifying corporation had had that particular taxation year, and

ii. if the expenditure had been incurred by the qualifying corporation for the same purpose as it was incurred by its parent and had been paid at the same time and to the same person or partnership as it was paid by its parent.  O. Reg. 37/09, s. 25 (5).

(6) An expenditure is not included under clause (2) (a) in the qualifying wage amount or under clause (3) (a) in the qualifying remuneration amount of a qualifying corporation for a taxation year with respect to an eligible production unless it meets all of the following conditions:

1. The expenditure is paid by the qualifying corporation no later than 60 days after the end of the year.

2. The expenditure was incurred for activities personally undertaken by an individual who was resident in Ontario at the end of the last calendar year ending before he or she undertook the activities.

3. In the case of the qualifying wage amount, the expenditure is paid to an employee of the qualifying corporation who reported to a permanent establishment of the qualifying corporation in Ontario where the eligible computer animation and special effects activities were undertaken for the eligible production.

4. In the case of the qualifying remuneration amount, the expenditure is paid for activities undertaken at a permanent establishment in Ontario of the qualifying corporation or of an individual, eligible partnership or corporation described in paragraph 1, 2, 3 or 4 of subsection (4).

5. The expenditure is not the subject of an agreement in respect of the eligible production referred to in paragraph 2 of subsection (5) between the qualifying corporation and a wholly-owned subsidiary of the qualifying corporation.  O. Reg. 37/09, s. 25 (6); O. Reg. 70/10, s. 4 (5).

(7) Despite paragraph 3 of subsection (5) and paragraph 1 of subsection (6), an expenditure that is excluded from the qualifying wage amount or qualifying remuneration amount of the qualifying corporation for a taxation year because it was not paid within 60 days after the end of the year may be included in the corporation’s qualifying wage amount or qualifying remuneration amount for a subsequent taxation year if it is paid within 60 days after the end of that subsequent taxation year.  O. Reg. 37/09, s. 25 (7).

(8) For the purposes of this section, an eligible partnership is a partnership carrying on business in Canada whose members are all individuals. However, a partnership is not an eligible partnership in relation to a qualifying corporation if more than 50 per cent of the income of the partnership is allocable (or would be allocable, if it had income) to one or more members of the partnership who,

(a) directly or indirectly control the qualifying corporation; or

(b) are related to one or more persons who directly or indirectly control the qualifying corporation.  O. Reg. 37/09, s. 25 (8).

Ontario Film and Television Tax Credit

Qualifying production company

26. A corporation is a qualifying production company for a taxation year for the purposes of section 91 of the Act if, throughout the year,

(a) it is a qualified corporation for the purposes of section 125.4 of the Federal Act;

(b) it has a permanent establishment in Ontario;

(c) it is not exempt from tax under Part III of the Act; and

(d) it is not controlled directly or indirectly in any manner whatever by one or more corporations all or part of whose taxable income is exempt from tax under Part I of the Federal Act.  O. Reg. 37/09, s. 26.

Eligible Ontario production

27. (1) A film or television production made by a qualifying production company is an eligible Ontario production for the purposes of section 91 of the Act if the following conditions are satisfied:

1. The production is not an excluded production for the corporation.

2. If the production is for television broadcast and is not intended primarily for children, the production or, if the production consists of two or more episodes, each episode of the production is suitable for initial broadcast in a standard television time slot of at least 30 minutes.

3. Neither the production nor any interest in any entity that has, directly or indirectly, an interest in the production is a tax shelter investment for the purposes of section 143.2 of the Federal Act.

4. The producer of the production or, if the production is an interprovincial co-production or treaty co-production, the producer of the Ontario portion of the production is at all times an individual who was resident in Ontario at the end of the last two calendar years ending before principal photography for the production commences.

5. If the production is not a treaty co-production, the Ontario Media Development Corporation or another person designated by the Minister of Culture has allotted (under the rules in subsection 1106 (5) of the Federal regulations) not less than six points,

i. to the production if it is not a television series production,

ii. to each episode if the production is a television series production.

6. Not less than 75 per cent of the cost of producing the production or, if the production is an interprovincial co-production or treaty co-production, not less than 75 per cent of the cost of producing the Ontario portion of the production, other than costs determined by reference to the amount of profits or revenue from the production, is for amounts payable to Ontario-based individuals or corporations for goods or services provided by the Ontario-based individuals or corporations in the course of carrying on their businesses at permanent establishments in Ontario.

7. If the production is not an interprovincial co-production or a treaty co-production,

i. at least 95 per cent of the cost of post-production work for the production was for post-production work carried out in Ontario, and

ii. if the production is not a documentary, the photography or key animation for the production was done in Ontario during at least 85 per cent of the total number of days during which photography or key animation was done for the production.

8. If the production is an interprovincial co-production, not less than 20 per cent of the cost of producing the production, other than costs determined by reference to the amount of profits or revenue from the production, is in respect of the Ontario portion of the production.

9. If the production is a treaty co-production and contains a Canadian portion that, if considered alone, would be an interprovincial co-production, not less than 20 per cent of the cost of producing the Canadian portion of the production, other than costs determined by reference to the amount of profits or revenue from the production, is in respect of the Ontario portion of the production.  O. Reg. 37/09, s. 27 (1).

(2) For the purposes of paragraph 1 of subsection (1), a film or television production is an excluded production with respect to a corporation,

(a) if the corporation has not filed an application with the Ontario Media Development Corporation or another person designated by the Minister of Culture for a certificate of completion before the production’s application deadline;

(b) if a certificate certifying that the production has been completed has not been issued within six months after the application deadline for the production by the Ontario Media Development Corporation or such other person as may be designated by the Minister of Culture;

(c) if, in the case where the production is not a treaty co-production, neither the corporation nor a prescribed taxable Canadian corporation related to the corporation,

(i) is, except to the extent of an interest in the production held by the prescribed taxable Canadian corporation as a co-producer of the production or by a person prescribed in subsection 1106 (10) of the Federal regulations, the exclusive worldwide copyright owner of the production for all commercial exploitation purposes for the 25-year period that begins at the earliest time after the production is completed that the production is commercially exploitable, and

(ii) controls the initial licensing of commercial exploitation of the production;

(d) if there is no agreement in writing, for consideration at fair market value, to have the production shown in Ontario within the two-year period that begins at the earliest time after the production is completed that the production is commercially exploitable,

(i) with a corporation having a permanent establishment in Ontario that is a Canadian and is a distributor of film or television productions, or

(ii) with a Canadian broadcaster that is not associated with the corporation,

(e) if distribution is made in Ontario by a person who is not a Canadian within the two-year period that begins at the earliest time after the production is completed that the production is commercially exploitable;

(f) if unless it is intended primarily for children, the initial broadcast of the production, if it is a television production, is not during prime time;

(g) if the production does not satisfy the requirements of the Producer Control Guidelines issued by the Department of Canadian Heritage; or

(h) if the production is described in any of subparagraphs (b) (i) to (xi) of the definition of “excluded production” in subsection 1106 (1) of the Federal regulations.  O. Reg. 37/09, s. 27 (2).

(3) For the purposes of subsection (1), a film or television production is an interprovincial co-production if the following conditions are satisfied:

1. The film or television production is jointly produced in accordance with a co-production agreement between one or more qualifying production companies and one or more other corporations.

2. All of the corporations referred to in paragraph 1 are Canadian.

3. With respect to each of the corporations referred to in paragraph 1 that is not a qualifying production company, less than 75 per cent of the cost to the corporation of producing its portion of the production, other than costs determined by reference to the amount of profits or revenue from the production, is for amounts payable by the corporation to,

i. Ontario-based individuals,

ii. one or more other corporations in respect of goods or services provided by Ontario-based individuals, or

iii. one or more corporations for goods or services provided in the course of carrying on their businesses at permanent establishments in Ontario.  O. Reg. 37/09, s. 27 (3); O. Reg. 70/10, s. 5.

(4) In this section,

“application deadline” means, in respect of an application for certification by a qualifying production company for a film or television production, the later of,

(a) the day that is 24 months after the end of the qualifying production company’s taxation year in which the production’s principal photography began, or

(b) the day that is 18 months after the day referred to in clause (a), if

(i) the qualifying production company has filed with the Ontario Minister a waiver described in subparagraph 152 (4) (a) (ii) of the Federal Act within the company’s normal reassessment period for its first and second taxation years ending after the production’s principal photography began, and

(ii) a copy of the waiver is provided to the Ontario Media Development Corporation or such other person as may be designated by the Minister of Culture;

“Canadian broadcaster” means a corporation that carries on a broadcasting undertaking licensed by the Canadian Radio-television and Telecommunications Commission under the Broadcasting Act (Canada);

“prescribed taxable Canadian corporation” means a taxable Canadian corporation that is a Canadian, other than,

(a) a corporation that is controlled directly or indirectly in any manner whatever by one or more persons all or part of whose taxable income is exempt from tax under Part I of the Federal Act, or

(b) a corporation that is a prescribed labour-sponsored venture capital corporation under section 6701 of the Federal regulations;

“prime time” means the period of four hours beginning at 7:00 p.m.;

“treaty co-production” means a film or television production whose production is contemplated under an instrument listed in any of paragraphs 1106 (3) (a) to (e) of the Federal regulations and to which the instrument applies.  O. Reg. 37/09, s. 27 (4).

First-time production

28. (1) A production is a first-time production for the purposes of section 91 of the Act if,

(a) the producer of the production or, if the production is an interprovincial co-production or treaty co-production for the purposes of section 27, the producer of the Ontario portion of the production,

(i) has not more than one previous screen credit as a producer of a production commercially released or broadcast on television during prime time, and

(ii) has not participated as a producer of any other film or television production in respect of which a certificate has been issued under section 91 of the Act or 43.5 of the Corporations Tax Act; and

(b) for the period starting immediately before principal photography for the production commenced and ending immediately after the date of issue of the last issued certificate for the production under subsection 91 (15) of the Act or subsection 43.5 (9) of the Corporations Tax Act, the corporation is not controlled directly or indirectly by,

(i) an individual with more than one previous screen credit as a producer of a production commercially released or broadcast on television during prime time, or who has participated as a producer of any other film or television production in respect of which a certificate has been issued under section 91 of the Act or section 43.5 of the Corporations Tax Act or

(ii) a corporation that is, or is associated with, a corporation to which a certificate in respect of any other film or television production has been issued under section 91 of the Act or section 43.5 of the Corporations Tax Act.  O. Reg. 37/09, s. 28 (1).

(2) In subsection (1),

“prime time” has the meaning assigned by subsection 27 (4).  O. Reg. 37/09, s. 28 (2).

Qualifying labour expenditure

29. (1) For the purposes of section 91 of the Act, a corporation’s qualifying labour expenditure for a taxation year in respect of an eligible Ontario production is the amount, if any, by which “A” exceeds “B” where,

  “A” is the amount, if any, by which “C” exceeds “D” where,

“C” is the sum of,

(a) the corporation’s Ontario labour expenditure for the year in respect of the production, and

(b) the amount by which the sum of all amounts each of which is the corporation’s Ontario labour expenditure for a previous taxation year in respect of the production exceeds the sum of all amounts each of which is a qualifying labour expenditure of the corporation in respect of the production for a previous taxation year before the end of which the principal filming or taping of the production began, and

“D” is,

(a) if the corporation is a not a parent, nil, or

(b) if the corporation is a parent, the sum of all amounts each of which is determined in respect of the production under paragraph 3 of subsection 30 (1) as a consequence of an agreement referred to in that paragraph between the corporation and the subsidiary corporation it wholly owns, and

  “B” is the sum of,

(a) all relevant assistance in respect of the production,

(i) that may reasonably be considered to be directly attributable to the amount of “A” for the year,

(ii) that, when it was required to file its return under the Act for the year, the corporation or any other person or partnership had received, was entitled to receive or was reasonably expected to receive, to the extent the assistance had not been repaid pursuant to a legal obligation to do so, and

(iii) that has not caused a reduction of the corporation’s Ontario labour expenditure for the year in respect of the production, and

(b) the amount calculated using the formula,

E × A/F

in which,

“A” is the amount of “A” for the year under this subsection,

“E” is the amount, if any, determined under subsection (3), and

“F” is the cost of the production.

O. Reg. 37/09, s. 29 (1).

(2) The amount of “A” in subsection (1) in respect of a production shall be determined without reference to any equity investment in the production held by a person prescribed under subsection 1106 (10) of the Federal regulations.  O. Reg. 37/09, s. 29 (2).

(3) The amount of “E” in clause (b) of the definition of “B” in subsection (1) is the amount, if any, by which “G” exceeds “H” where,

  “G” is the amount that would be determined under clause (a) of the definition of “B” in subsection (1) if that clause were read without reference to subclause (i) of that clause, and

  “H” is the amount determined under clause (a) of the definition of “B” in subsection (1).  O. Reg. 37/09, s. 29 (3).

(4) In this section,

“relevant assistance” means, in respect of an eligible Ontario production, an amount that is assistance for the purposes of section 125.4 of the Federal Act other than,

(a) assistance provided, or deemed by the Federal Act to be provided, under subsection 127 (5) or (6) of the Federal Act or section 125.5 of that Act, and

(b) assistance that is a tax credit under section 90, 91, 94 or 95 of the Act or section 43.5, 43.7, 43.8 or 43.12 of the Corporations Tax Act.  O. Reg. 37/09, s. 29 (4).

Ontario labour expenditure

30. (1) For the purposes of section 91 of the Act and subject to subsection (2), a qualifying corporation’s Ontario labour expenditure for a taxation year in respect of an eligible Ontario production is the sum of the following amounts to the extent that the amounts are reasonable in the circumstances and included in the cost or capital cost of the eligible Ontario production to the corporation or to another person or a partnership:

1. Salary and wages incurred in the year or the previous taxation year by the corporation that are directly attributable to the production of the eligible Ontario production for the stages of production from the production commencement time to the end of the post-production stage, if the salary and wages are paid by the corporation in the year or within 60 days after the end of the year to Ontario-based individuals, but not including salary or wages incurred in the previous taxation year that are paid within 60 days after the end of the previous taxation year.

2. That portion of the remuneration (excluding salary and wages and excluding remuneration that relates to services rendered in the previous taxation year for which the remuneration was paid within 60 days after the end of the previous taxation year) that is directly attributable to the production of the eligible Ontario production and relates to services rendered in the year or the previous taxation year for the stages of production from the production commencement time to the end of the post-production stage if the remuneration is paid by the corporation in the year or within 60 days after the end of the year to,

i. an Ontario-based individual who is not an employee of the corporation, to the extent that the amount paid,

A. is attributable to services personally rendered by the individual for the production of the eligible Ontario production, or

B. is attributable to, and does not exceed the salary and wages of, Ontario-based individuals who are employees of the Ontario-based individual, to the extent the salary and wages are paid to the employees for personally rendering services for the production of the eligible Ontario production,

ii. another taxable Canadian corporation, to the extent that the amount paid is attributable to, and does not exceed the salary and wages of Ontario-based individuals who are employees of the other corporation, if the salary and wages are paid to the employees for personally rendering services for the production of the eligible Ontario production,

iii. another taxable Canadian corporation,

A. if all the issued and outstanding shares of the capital stock of that corporation (except directors’ qualifying shares) belong to an Ontario-based individual and the activities of that corporation consist principally of the provision of the Ontario-based individual’s services, and

B. to the extent the amount paid is attributable to services rendered personally by the Ontario-based individual for the production of the eligible Ontario production, or

iv. a partnership that is carrying on business in Canada, to the extent that the amount paid,

A. is attributable to services personally rendered by a member of the partnership who is an Ontario-based individual and the services are rendered for the production of the eligible Ontario production, or

B. is attributable to, and does not exceed the salary and wages of Ontario-based individuals who are employees of the partnership, to the extent the salary and wages are paid to the employees for personally rendering services for the production of the eligible Ontario production.

3. If the corporation is a subsidiary of a parent that is a taxable Canadian corporation and the corporation and its parent have agreed that this paragraph applies in respect of the production, the reimbursement made by the corporation in the year, or within 60 days after the end of the year, of an expenditure that was incurred by the parent in a particular taxation year of the parent in respect of that production and that would be included in the corporation’s Ontario labour expenditure in respect of the property for the particular taxation year because of paragraph 1 or 2 if,

i. the corporation had had such a particular taxation year, and

ii. the expenditure were incurred by the corporation for the same purpose as it was by the parent and were paid at the same time and to the same person or partnership as it was by the parent.  O. Reg. 37/09, s. 30 (1).

(2) For the purposes of determining the Ontario labour expenditure of a qualifying production company,

(a) remuneration does not include remuneration determined by reference to profits or revenues;

(b) an expenditure incurred in respect of an eligible Ontario production by a qualifying production company (in this clause referred to as the “co-producer”) in respect of goods supplied or services rendered by another qualifying production company to the co-producer in respect of the production is not a labour expenditure to the co-producer and, for the purpose of applying this section to the co-producer, is not a cost or capital cost of the production; and

(c) no amount shall be included to the extent section 37 of the Federal Act applies to the amount.  O. Reg. 37/09, s. 30 (2).

(3) In this section,

“production commencement time” means, in respect of a film or television production, the earlier of,

(a) the day when principal photography of the production begins, and

(b) the latest of,

(i) the day when a qualified production company that has an interest in the production, or the parent of the company, first makes an expenditure for salary, wages or other remuneration for activities of scriptwriters that are directly attributable to the development by the company of script material of the production,

(ii) the day when the company or the parent of the company acquires a property on which the production is based that is a published literary work, screenplay, play, personal history or all or part of the script material of the production, and

(iii) two years before the day on which principal photography of the production begins.  O. Reg. 37/09, s. 30 (3).

Ontario Production Services Tax Credit

Eligible production

31. A film or television production is an eligible production for the purposes of section 92 of the Act for a taxation year if the following conditions are satisfied:

1. The principal photography for the production commences before the end of the year.

2. If the production is a television series production or is a pilot episode for a television series production, the total expenditures included in the cost of each episode or, if the production is a depreciable property, in the capital cost of each episode, during the 24 months after principal photography for the production commences, exceed,

i. $100,000 if the episode has a running time that is less than 30 minutes, or

ii. $200,000 in any other case.

3. If the production is not the type of production referred to in paragraph 2, the total expenditures included in the cost of the production or, if the production is a depreciable property, in the capital cost of the production, during the 24 months after principal photography for the production commences, exceed $1 million.

4. The production is not a production described in any of subparagraphs (b) (i) to (x) of the definition of “excluded production” in subsection 1106 (1) of the Federal regulations.

5. The production is not a production for which public financial support would be contrary to public policy.  O. Reg. 37/09, s. 31.

Qualifying corporation

32. A corporation is a qualifying corporation in respect of an eligible production for a taxation year for the purposes of section 92 of the Act if the corporation would be an “eligible production corporation” throughout the year, within the meaning of the definition of that term in subsection 125.5 (1) of the Federal Act if,

(a) the references to “accredited production” and “in Canada” in that definition were read as “eligible production” and “in Ontario”, respectively;

(b) the reference to “(as defined by regulation)” in that definition were struck out; and

(c) the reference to “eligible production corporation” in paragraph (b) of the definition were read as “qualifying corporation”.  O. Reg. 37/09, s. 32.

Qualifying Ontario labour expenditure

33. (1) For the purposes of section 92 of the Act, a corporation’s qualifying Ontario labour expenditure for a taxation year in respect of an eligible production is the amount, if any, by which “A” exceeds “B” where,

  “A” is the sum of all amounts each of which is the corporation’s Ontario labour expenditure for the year or a previous taxation year in respect of the production, and

  “B” is the sum of,

(a) all relevant assistance as defined in subsection 92 (13) of the Act in respect of the production,

(i) that may reasonably be considered to be directly attributable to the amount of “A” for the year,

(ii) that, when it was required to file its return under the Act for the year, the corporation or any other person or partnership had received, was entitled to receive or was reasonably expected to receive, to the extent the assistance had not been repaid pursuant to a legal obligation to do so, and

(iii) that has not caused a reduction of the corporation’s Ontario labour expenditure for the year in respect of the production,

(b) the sum of all amounts, each of which is the corporation’s qualifying Ontario labour expenditure in respect of the production for a previous taxation year before the end of which the principal photography of the production began, and

(c) if the corporation is a parent, the sum of all amounts each of which is determined in respect of the production under paragraph 3 of subsection (2) as a consequence of an agreement referred to in that paragraph between the corporation and the subsidiary corporation it wholly owns.  O. Reg. 37/09, s. 33 (1); O. Reg. 70/10, s. 6 (1).

(2) For the purposes of this section and subject to subsection (3), a qualifying corporation’s Ontario labour expenditure for a taxation year in respect of an eligible production is the sum of the following amounts in respect of the production to the extent that they are reasonable in the circumstances:

1. The salary and wages directly attributable to the production that are incurred by the corporation in the year or the previous taxation year, that relate to services rendered in Ontario for the stages of production of the production, from the final script stage to the end of the post-production stage, and that are paid by it in the year or within 60 days after the end of the year to the corporation’s employees who were Ontario-based individuals at the time the payments were made (other than amounts incurred in the previous year that were paid within 60 days after the end of the previous year);

2. That portion of the remuneration (other than salary or wages and other than remuneration that relates to services rendered in the previous taxation year that was paid within 60 days after the end of the previous year) that is directly attributable to the production, that relates to services rendered in Ontario in the year or the previous year to the corporation for the stages of producing the production, from the final script stage to the end of the post-production stage, and that is paid by it in the year or within 60 days after the end of the year to a person or partnership that carries on a business in Ontario through a permanent establishment and that is,

i. an Ontario-based individual at the time the amount is paid and who is not an employee of the corporation, to the extent that the amount paid,

A. is attributable to services personally rendered by the individual in Ontario in respect of the production, or

B. is attributable to and does not exceed the salary or wages paid by the individual to the individual’s employees at a time when they were Ontario-based individuals for personally rendering services in Ontario in respect of the production,

ii. another corporation that is a taxable Canadian corporation, to the extent that the amount paid is attributable to and does not exceed the salary or wages paid to the other corporation’s employees at a time when they were Ontario-based individuals for personally rendering services in Ontario in respect of the production,

iii. another corporation that is a taxable Canadian corporation, all the issued and outstanding shares of the capital stock of which (except directors’ qualifying shares) belong to an Ontario-based individual and the activities of which consist principally of the provision of the individual’s services, to the extent that the amount paid is attributable to services rendered personally in Ontario by the individual in respect of the production, or

iv. a partnership, to the extent that the amount paid,

A. is attributable to services personally rendered in respect of the production by an Ontario-based individual who is a member of the partnership, or

B. is attributable to and does not exceed the salary or wages paid by the partnership to its employees at a time when they were Ontario-based individuals for personally rendering services in Ontario in respect of the production; and

3. If the corporation has a parent that is a taxable Canadian corporation and if the corporation and the parent have agreed that paragraph (c) of the definition “Canadian labour expenditure” in subsection 125.5 (1) of the Federal Act applies in respect of the production, the reimbursement made by the corporation in the year, or within 60 days after the end of the year, of an expenditure that was incurred by the parent in a particular taxation year of the parent in respect of the production, if the amount would be included in the corporation’s Ontario labour expenditure in respect of the production for the particular taxation year under paragraph 1 or 2 if the corporation had had that particular taxation year and the expenditure had been incurred by the corporation for the same purpose as it was incurred by the parent and paid at the same time and to the same person or partnership as it was paid by the parent.  O. Reg. 37/09, s. 33 (2).

(3) Subsection (2) does not apply to remuneration determined by reference to profits or revenues, to an amount to which section 37 of the Federal Act applies nor, for greater certainty, to an amount that is not a production cost (including an amount in respect of advertising, marketing, promotion, market research) or an amount related in any way to another film or video production.  O. Reg. 37/09, s. 33 (3).

(4) The prescribed conditions for the purpose of the definition of “relevant assistance” in subsection 92 (13) of the Act are as follows:

1. The amount is assistance in respect of a production under subsection 125.5 of the Federal Act.

2. The amount is not assistance provided, or deemed by the Federal Act to be provided, under subsection 127 (5) or (6) or section 125.4 of the Federal Act.

3. The amount is not assistance provided under section 90, 92, 94 or 95 of the Act or section 43.7, 43.8, 43.10 or 43.12 of the Corporations Tax Act.

4. The amount is not assistance provided after June 30, 2009 and before April 1, 2010 by the Canadian Television Fund or after March 31, 2010 by the Canada Media Fund under the License Fee Program referred to in subsection 1106 (11) of the Federal regulations.  O. Reg. 70/10, s. 6 (2); O. Reg. 204/12, s. 1.

Division B — Other Refundable Tax Credits for Corporations

Ontario Interactive Digital Media Tax Credit

Eligible product

34. (1) In this section,

“interactive digital media product” means a combination of one or more application files and one or more data files, all in a digital format, that are integrated and are intended to be operated together and that have the following characteristics when they are being operated:

1. Their primary purpose is to educate, inform or entertain the user.

2. They achieve their primary purpose by presenting information in at least two of the following forms:

i. text,

ii. sound,

iii. images.

3. They are intended to be used by individuals.

4. By interacting with them, the user can choose what information is to be presented and the form and sequence in which it is to be presented.  O. Reg. 37/09, s. 34 (1).

(2) For the purposes of this section, a combination of application files and data files developed primarily for use as system software is not an interactive digital media product.  O. Reg. 37/09, s. 34 (2).

(3) A product that is not a specified product is an eligible product for the purposes of section 93 of the Act if the following conditions are satisfied:

1. The product is an interactive digital media product.

2. If the product was completed before May 12, 2005,

i. all or substantially all of the product was developed in Ontario by the qualifying corporation or by the qualifying corporation and a qualifying predecessor corporation, and

ii. the product was developed for commercial exploitation by the qualifying corporation or by the qualifying corporation and a qualifying predecessor corporation.

3. If the product is completed after May 11, 2005,

i. all or substantially all of the product was developed in Ontario by the qualifying corporation or by the qualifying corporation and a qualifying predecessor corporation, and

ii. the product was developed for sale or licensing by the qualifying corporation to one or more persons dealing at arm’s length with the qualifying corporation who have not previously entered into an arrangement with the qualifying corporation or a qualifying predecessor corporation for the development of the product.

4. The product is not used primarily for interpersonal communication.

5. The product is not used primarily to present or promote the qualifying corporation or a qualifying predecessor corporation.

6. The product is not used primarily to present, promote or sell the products or services of the qualifying corporation or of a qualifying predecessor corporation.  O. Reg. 37/09, s. 34 (3).

(4) The following are the conditions referred to in paragraph 1 of subsection 93 (15) of the Act with respect to a specified product:

1. The product is an interactive digital media product.

2. The product is not used primarily for interpersonal communication.

3. Development of the product was started by a qualifying corporation or a qualifying predecessor corporation and completed by the qualifying corporation in Ontario.

4. The product is not used primarily to present or promote the qualifying corporation, a qualifying predecessor corporation or the purchaser referred to in paragraphs 2 and 3 of subsection 93 (15) of the Act.

5. The product is not used primarily to present, promote or sell the products or services of the qualifying corporation, a qualifying predecessor corporation or the purchaser referred to in paragraphs 2 and 3 of subsection 93 (15) of the Act.  O. Reg. 37/09, s. 34 (4).

Ontario labour expenditure

35. (1) For the purposes of section 93 of the Act, the Ontario labour expenditure of a qualifying corporation for a taxation year for an eligible product is the sum of,

(a) the qualifying wage amount of the qualifying corporation or qualifying predecessor corporation for the year with respect to the eligible product;

(b) for expenditures incurred before March 27, 2009, if the eligible product is not a specified product, 50 per cent of the qualifying remuneration amount of the qualifying corporation or qualifying predecessor corporation for the year with respect to the eligible product; and

(c) for expenditures incurred after March 26, 2009, the qualifying remuneration amount of the qualifying corporation or qualifying predecessor corporation for the year with respect to the eligible product.  O. Reg. 37/09, s. 35 (1); O. Reg. 70/10, s. 7 (1).

(2) Subject to subsection (4), the qualifying wage amount of a qualifying corporation or qualifying predecessor corporation for a taxation year with respect to an eligible product is the amount incurred during the year on account of salaries or wages for the corporation’s employees.  O. Reg. 37/09, s. 35 (2).

(3) Subject to subsection (4), the qualifying remuneration amount of a qualifying corporation or qualifying predecessor corporation for a taxation year with respect to an eligible product is the sum of all amounts each of which is an expenditure incurred during the year by the qualifying corporation or qualifying predecessor corporation on account of remuneration paid to any of the following persons or entities in the circumstances that are described:

1. An individual who is not an employee of the qualifying corporation or qualifying predecessor corporation, as the case may be, and who deals at arm’s length with that corporation, to the extent that the expenditure is attributable to services personally rendered by the individual.

2. An individual described in paragraph 1 for services rendered by the individual’s employees, to the extent that the expenditure does not exceed the salaries and wages of those employees for personally rendering those services.

3. A taxable Canadian corporation for services rendered personally by an individual,

i. if all of the issued and outstanding shares of the capital stock of the taxable Canadian corporation (other than directors’ qualifying shares) are owned by the individual,

ii. if the individual deals at arm’s length with the qualifying corporation or qualifying predecessor corporation, as the case may be, and

iii. if the taxable Canadian corporation’s primary activity is the provision of the individual’s services.

4. For expenditures incurred before March 27, 2009 in respect of an eligible product and for expenditures incurred after March 26, 2009 in respect of an eligible product that is not a digital game, as referred to in paragraph 2 of subsection 93.1 (9) of the Act, a taxable Canadian corporation that deals at arm’s length with the qualifying corporation or qualifying predecessor corporation for services rendered by employees of the taxable Canadian corporation, to the extent that the expenditure does not exceed the salaries and wages of those employees for personally rendering those services.

5. An eligible partnership described in subsection (6),

i. for services rendered personally by a member of the eligible partnership, or

ii. for services rendered personally by employees of the eligible partnership, to the extent that the expenditure does not exceed the salaries and wages of those employees for personally rendering those services.  O. Reg. 37/09, s. 35 (3); O. Reg. 70/10, s. 7 (2).

(4) An expenditure is not included in the qualifying wage amount or qualifying remuneration amount of the qualifying corporation or qualifying predecessor corporation, as the case may be, for a taxation year with respect to an eligible product unless all the following conditions are satisfied:

1. The expenditure is directly attributable to the development of the eligible product.

2. The expenditure is included in the cost or, in the case of depreciable property, the capital cost of the eligible product.

3. The expenditure is paid no later than 60 days after the end of the year.

4. The expenditure was incurred for services personally rendered by an individual who was resident in Ontario at the end of the calendar year that precedes the calendar year in which he or she rendered the services.

5. In the case of the qualifying wage amount, the expenditure is paid to an employee of the qualifying corporation or qualifying predecessor corporation, as the case may be, who reported to a permanent establishment of that corporation in Ontario at which the eligible product was being developed.

6. In the case of the qualifying remuneration amount, the expenditure is paid for services rendered at a permanent establishment in Ontario of the qualifying corporation, of a qualifying predecessor corporation or of a person or entity described in one of the paragraphs of subsection (3).

7. The expenditure is not an amount for which the qualifying corporation or qualifying predecessor corporation makes a claim under section 90, 91 or 92 of the Act or section 43.5, 43.8 or 43.10 of the Corporations Tax Act.

8. The expenditure is not an amount incurred by the qualifying corporation or a qualifying predecessor corporation in carrying out activities that constitute scientific research and experimental development for the purposes of paragraph 37 (1) (a) of the Federal Act or subparagraph 37 (1) (b) (i) of that Act.  O. Reg. 37/09, s. 35 (4).

(5) An expenditure that is not included in the qualifying wage amount or qualifying remuneration amount of the qualifying corporation or qualifying predecessor corporation, as the case may be, for a taxation year because of paragraph 3 of subsection (4) may be included in the qualifying wage amount or qualifying remuneration amount for a subsequent taxation year if the expenditure is paid no later than 60 days after the end of that subsequent taxation year.  O. Reg. 37/09, s. 35 (5).

(6) For the purposes of paragraph 5 of subsection (3), an eligible partnership is a partnership carrying on business in Canada whose members are all individuals. However, a partnership is not an eligible partnership in relation to a qualifying corporation or in relation to a qualifying predecessor corporation, as the case may be, if more than 50 per cent of the income of the partnership is allocable (or would be allocable if it had income) to one or more members,

(a) who directly or indirectly control the qualifying corporation or qualifying predecessor corporation; or

(b) who are related to one or more persons who directly or indirectly control the qualifying corporation or qualifying predecessor corporation.  O. Reg. 37/09, s. 35 (6); O. Reg. 70/10, s. 7 (3).

(7) For the purposes of the definition of “marketing and distribution expenditure” in subsection 93 (14) of the Act and subject to subsection (8), the marketing and distribution expenditure incurred by a qualifying corporation or qualifying predecessor corporation in respect of an eligible product is sum of all amounts each of which is an expenditure incurred by the qualifying corporation or qualifying predecessor corporation in a taxation year that satisfies all of the following conditions:

1. The expenditure is directly attributable to advertising or promoting the eligible product or distributing the eligible product to customers or potential customers.

2. The expenditure is paid no later than 60 days after the end of the year.

3. The expenditure is not an amount for which the qualifying corporation or qualifying predecessor corporation, as the case may be, makes a claim under 90, 91 or 92 of the Act or section 43.5, 43.8 or 43.10 of the Corporations Tax Act.

4. The expenditure is not incurred by the qualifying corporation or qualifying predecessor corporation in carrying out activities that constitute scientific research and experimental development for the purposes of paragraph 37 (1) (a) of the Federal Act or subparagraph 37 (1) (b) (i) of that Act.

5. If the qualifying corporation sells the eligible product directly to a consumer of the eligible product, the expenditure is not directly related to processing an order by a consumer or shipping an eligible product to a consumer.

6. If the expenditure relates to an amount paid or payable for meals or entertainment, only 50 per cent of the amount is included in the marketing and distribution expenditure incurred by the qualifying corporation or qualifying predecessor corporation, as the case may be, in a taxation year.  O. Reg. 37/09, s. 35 (7).

(8) An expenditure that is not included in the marketing and distribution expenditure incurred by a qualifying corporation or a qualifying predecessor corporation, as the case may be, in a taxation year because of paragraph 2 of subsection (7) may be included in the marketing and distribution expenditure incurred by the corporation in a subsequent taxation year if the expenditure is paid no later than 60 days after the end of that subsequent taxation year.  O. Reg. 37/09, s. 35 (8).

Interactive digital media product of a qualifying digital game corporation

35.1 (1) For the purposes of paragraph 1 of subsection 93.1 (9) of the Act, a product is an interactive digital media product if the product is an interactive digital media product as defined in subsection 34 (1).  O. Reg. 70/10, s. 8.

(2) For the purposes of section 93.1 of the Act, the Ontario labour expenditure of a qualifying digital game corporation for a taxation year for an eligible digital game is the amount that would be determined under subsections 35 (1) to (6) in respect of the game if,

(a) all references to “qualifying corporation” were read as “qualifying digital game corporation”;

(b) all references to “eligible product” were read as “eligible digital game”; and

(c) those subsections were read without reference to clause 35 (1) (b) and paragraph 4 of subsection 35 (3).  O. Reg. 70/10, s. 8.

Interactive digital media product of a specialized digital game corporation

35.2 (1) For the purposes of paragraph 1 of subsection 93.2 (11) of the Act, a product is an interactive digital media product if the product is an interactive digital media product as defined in subsection 34 (1).  O. Reg. 70/10, s. 8.

(2) For the purposes of section 93.2 of the Act, the Ontario labour expenditure of a specialized digital game corporation for a taxation year for an eligible digital game is the amount that would be determined under subsections 35 (1) to (6) in respect of the game if,

(a) all references to “qualifying corporation” were read as “specialized digital game corporation”;

(b) all references to “eligible product” were read as “eligible digital game”;

(c) those subsections were read without reference to clause 35 (1) (b) and paragraph 4 of subsection 35 (3); and

(d) those subsections were read without reference to any qualifying predecessor corporations.  O. Reg. 70/10, s. 8.

Ontario Sound Recording Tax Credit

Ontario sound recording tax credit

36. (1) This section applies for the purposes of section 94 of the Act.  O. Reg. 37/09, s. 36 (1).

(2) In this section,

“amalgamated corporation” means a corporation formed on the amalgamation or merger of two or more corporations;

“Canadian-controlled corporation” means a corporation that would be a Canadian-controlled entity for the purposes of the Investment Canada Act (Canada) if references to the Minister in sections 26 to 28 of that Act were read as references to the Ontario Minister;

“Canadian group” means a group of musicians, vocalists or both, at least 75 per cent of whom are qualified Canadians;

“government assistance” means, in respect of a corporation, assistance that the corporation has received, is entitled to receive or may reasonably be expected to receive from a government, municipality or other public authority in any form, including a grant, subsidy, forgivable loan, deduction from tax and investment allowance, but not including an Ontario sound recording tax credit under section 94 of the Act or section 43.12 of the Corporations Tax Act;

“master recording” means, in respect of a sound recording, the initial fully completed sound recording from which all copies of the sound recording are made;

“parent corporation” means, in respect of a subsidiary corporation, the corporation that controls the subsidiary corporation;

“predecessor corporation” means a corporation that amalgamates or merges with one or more other corporations to form an amalgamated corporation;

“qualified Canadian” means an individual ordinarily resident in Canada who is described in paragraph (a) of the definition of “Canadian” in subsection 1106 (1) of the Federal regulations;

“small eligible sound recording company” means, in respect of a taxation year of the company, an eligible sound recording company that has never claimed a tax credit for a previous taxation year and whose gross revenue for the 12-month period immediately before the beginning of the taxation year does not exceed $500,000;

“sound recording business” means a business in which the principal activities are managing musicians or vocalists or both, publishing music, producing sound recordings, marketing and distributing sound recordings or a combination of those activities, carried out under contract with musicians, vocalists or copyright holders;

“subsidiary corporation” means a corporation that is controlled by another corporation.  O. Reg. 37/09, s. 36 (2).

(3) In section 94 of the Act,

“emerging Canadian artist” means a qualified Canadian,

(a) who is a musician, vocalist or both,

(b) who has never had a gold sound recording (as determined by the Canadian Recording Industry Association, the Recording Industry Association of America, the International Federation of the Phonographic Industry or a successor of any of them) both in the United States of America and in Canada, the United Kingdom, France, Germany, Asia or Latin America, and

(c) who has never been a member of a musical group that has had a gold sound recording described in clause (b);

“emerging Canadian group” means a Canadian group that has never had a gold sound recording described in clause (b) of the definition of “emerging Canadian artist” and of which at least 75 per cent of the members are emerging Canadian artists;

“sound recording” means a recording of music, with or without lyrics,

(a) that is produced by analog, digital or similar technology, and

(b) that is,

(i) on a vinyl record, compact disc, digital versatile disc or audiotape, if the recording is made before May 12, 2005, or

(ii) on a vinyl record, compact disc, digital versatile disc, audiotape or any other fixed medium from what a recording is capable of being played, if the recording is made after May 11, 2005.  O. Reg. 37/09, s. 36 (3).

(4) For the purposes of section 94 of the Act, a corporation is an eligible sound recording company for a taxation year in respect of an eligible Canadian sound recording if the following conditions are satisfied:

1. The corporation is a Canadian-controlled corporation that carries on a sound recording business during the year as its primary activity.

2. The corporation carried on a sound recording business throughout the 12-month period ending immediately before the taxation year.

3. The corporation carries on its sound recording business primarily at a permanent establishment in Ontario.

4. The corporation’s Ontario allocation factor for its previous taxation year is at least one-half.

5. The corporation bears the financial risks associated with its sound recording business or is related to a Canadian-controlled corporation that bears the financial risks.

6. Within the 12-month period ending immediately before the first taxation year for which the corporation claimed a tax credit in respect of the sound recording,

i. the corporation implemented a plan for the distribution of at least one sound recording, and

ii. a person designated by the Minister of Culture considered the plan to be appropriate for the commercial exploitation of the sound recording.  O. Reg. 37/09, s. 36 (4); O. Reg. 70/10, s. 9 (1).

(5) An amalgamated corporation is deemed to satisfy,

(a) the condition described in paragraph 2 of subsection (4) for a taxation year if, throughout the 12-month period ending immediately before the taxation year, the amalgamated corporation and any of its predecessor corporations carried on a sound recording business;

(b) the condition described in paragraph 4 of subsection (4) for its first taxation year after amalgamation or merger if the Ontario allocation factor of its predecessor corporations would be at least one-half for their last taxation years ending before the amalgamation or merger if that Ontario allocation factor were determined as if the predecessor corporations were a single corporation; and

(c) the condition described in paragraph 6 of subsection (4) for its first taxation year after amalgamation or merger if the plan for distribution described in that paragraph is implemented by at least one of its predecessor corporations.  O. Reg. 70/10, s. 9 (2).

(6) If a subsidiary corporation is wound up into its parent corporation, the parent corporation,

(a) is deemed to satisfy the condition described in paragraph 2 of subsection (4) for a taxation year if, throughout the 12-month period ending immediately before the year, either or both of the subsidiary corporation and the parent corporation carried on a sound recording business;

(b) is deemed, if the winding-up occurred in the taxation year, to satisfy the condition described in paragraph 4 of subsection (4) for the year if the Ontario allocation factor of the parent corporation and the subsidiary corporation would be at least one-half for their last taxation years ending before the winding-up if that Ontario allocation factor were determined as if both corporations were a single corporation; and

(c) is deemed to satisfy the condition described in paragraph 6 of subsection (4) if the plan for distribution described in that paragraph is implemented within the period specified in that paragraph by the subsidiary corporation.  O. Reg. 37/09, s. 36 (6); O. Reg. 70/10, s. 9 (3).

(7) The following rules apply for the purposes of paragraphs 2, 4 and 6 of subsection (4):

1. If a sound recording business carried on by a corporation was previously carried on by a sole proprietor or by a partnership, the sole proprietor or partnership is deemed to be a corporation for the period of time that he, she or it carried on the business before the corporation was incorporated, and that corporation is deemed to be the same corporation as, and a continuation of, the corporation that is deemed to have existed.

2. If all or substantially all of the assets used in a sound recording business are transferred by one corporation to another corporation and section 85 of the Federal Act applies to the transfer, the transferee corporation is deemed to be the same corporation as, and a continuation of, the transferor corporation with respect to the operation of the business.  O. Reg. 37/09, s. 36 (7).

(8) Subject to subsection (9), a sound recording is an eligible Canadian sound recording for the purposes of section 94 of the Act if the following conditions are satisfied:

1. The recording is produced by an eligible sound recording company.

2. The music or the lyrics to the music, if there are lyrics, are performed on the recording by an individual or group that was an emerging Canadian artist or emerging Canadian group both when the contract was entered into with the eligible sound recording company for the production of the recording and when the master recording was made.

3. At least one of the following conditions is satisfied:

i. The music was composed primarily by one or more individuals or groups that were qualified Canadians or Canadian groups when they composed the music.

ii. If there are lyrics, the lyrics were written primarily by one or more individuals or groups that were qualified Canadians or Canadian groups when they wrote the lyrics.

iii. Substantially all of the activities carried out to produce the recording were performed in Ontario.

4. The eligible sound recording company retains the right to exclusive control of the master recording for at least five years after the master recording is completed.

5. The eligible sound recording company that claims a tax credit in respect of the sound recording has a plan for the distribution of the recording that a person designated by the Minister of Culture considers to be appropriate for the commercial exploitation of the recording.  O. Reg. 37/09, s. 36 (8).

(9) A sound recording is not an eligible Canadian sound recording if any of the following applies:

1. The sound recording is primarily of the spoken word or of wildlife or nature sounds.

2. The total playing time of the sound recording is less than 15 minutes.

3. The sound recording is produced for use as an instructional tool or for advertising or promotional purposes.

4. The sound recording can be reasonably considered to be capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, gender, sexual orientation or ethnic origin.

5. The dominant characteristic of any lyrics on the recording is the undue exploitation of sex or of sex and one or more of crime, horror, cruelty or violence.

6. Public financial support for the recording is contrary to public policy.  O. Reg. 37/09, s. 36 (9).

(10) The amount of an eligible sound recording company’s qualifying expenditures in respect of an eligible Canadian sound recording for a taxation year for the purposes of section 94 of the Act is the sum of any of the following expenditures that are incurred by the corporation during the year and not excluded under subsection (11), less the sum of all government assistance in respect of the expenditures:

1. Expenditures incurred for the production of the sound recording that are on account of property used primarily in Ontario or services provided primarily in Ontario, including artists’ royalties, musicians’ session fees, graphics, artwork, photography, layout and colour separations, software, digital scanning, programming and beta testing.

2. Expenditures incurred for the production of a qualifying music video for the sound recording that are on account of property used primarily in Ontario or services provided primarily in Ontario, including rehearsal costs.

3. Expenditures incurred for direct marketing of the sound recording that are on account of property used primarily in Ontario or services performed primarily in Ontario, including fees for consultants and salaries and wages for employees whose primary function is public relations or marketing, but excluding launch costs for the recording other than,

i. rental costs for sound and light equipment and physical facilities,

ii. the portion of the cost of food beverages and entertainment determined under section 67.1 of the Federal Act,

iii. the cost of event planning services,

iv. the cost of designing, printing and mailing invitations,

v. the cost of security services,

vi. the cost of business location permits and licences,

vii. the cost of photography, and

viii. the cost of promotional gifts and souvenirs.

4. 50 per cent of the expenditures that are not qualifying expenditures under paragraphs 2 and 3 only because they are expenditures on account of property used outside Ontario or services provided outside Ontario.

5. Expenditures for the repayment of government assistance to the extent that the assistance reduced the amount of the Ontario sound recording tax credit for the recording that would otherwise have been available to the recording company for a previous taxation year.  O. Reg. 37/09, s. 36 (10).

(11) The following expenditures in respect of an eligible Canadian sound recording are excluded from the calculation of an eligible sound recording company’s qualifying expenditures for the sound recording for a taxation year for the purposes of section 94 of the Act:

1. Any expenditure other than an expenditure described in paragraph 5 of subsection (10) that is incurred more than 24 months after the eligible sound recording company incurs its first qualifying expenditure in respect of the sound recording.

2. Expenditures for touring costs incurred in connection with a concert or live performance.  O. Reg. 37/09, s. 36 (11).

(12) A music video is a qualifying music video for the purposes of paragraph 2 of subsection (10) if all the following conditions are met:

1. The music video is produced by an eligible sound recording company in connection with an eligible Canadian sound recording produced by the company.

2. The primary purpose for producing and distributing the music video is to promote and sell the sound recording.

3. The principal performer in the audio component of the music video is the same emerging Canadian artist or emerging Canadian group that is the principal performer on the sound recording.

4. The director of the video component of the music video is a qualified Canadian, or the production facility at which the video component is filmed and produced is located in Ontario.

5. The eligible sound recording company has exclusive contractual control of the copyright for the music video for at least five years after production of the music video is completed.  O. Reg. 37/09, s. 36 (12).

(13) Despite subsection (12), a music video that meets any of the following conditions is not a qualifying music video for the purposes of paragraph 2 of subsection (10):

1. The music video is capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, gender, sexual orientation or ethnic origin.

2. The dominant characteristic of the material in the music video is the undue exploitation of sex or of sex and one or more of crime, horror, cruelty or violence.

3. Public financial support for the music video is contrary to public policy.  O. Reg. 37/09, s. 36 (13).

Ontario Book Publishing Tax Credit

Ineligible publication

37. (1) For the purposes of paragraph 6 of subsection 95 (14) of the Act, the following are ineligible publications:

1. A translation of a previously published literary work.

2. A calendar, agenda, almanac, colouring book or comic.

3. An instructional book or other printed material that forms part of a children’s product which is primarily a toy or play kit.

4. A university or college dissertation, a conference paper or report, a government report or catalogue of exhibitions.

5. An instruction book or manual, including a computer manual, guidebook, arts and crafts book, recipe book and musical performance method book.

6. A publication primarily containing maps.

7. A publication that is used primarily as learning material, including a workbook, kit, activity manual and educational game.

8. A publication that is primarily a reference book, including a directory, index compilation, compilation of statutes, rulebook and bibliography.

9. A publication that is primarily musical notation.

10. A publication that is a combination of any of the publications described in paragraphs 1 to 9.

11. A publication whose author’s identity is unknown to its publisher.

12. A publication whose pages are typewritten, individually photocopied, mimeographed or handwritten.

13. The publication is capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, gender, sexual orientation or ethnic origin.

14. The dominant characteristic of the publication is the undue exploitation of sex or of sex and one or more of crime, horror, cruelty or violence.

15. Public financial support for the publication would be contrary to public policy.  O. Reg. 37/09, s. 37.

Ontario Business-Research Institute Tax Credit

Ontario business-research institute tax credit

38. (1) For the purposes of clause 97 (4) (d) of the Act, an eligible research institute and a corporation are connected if the corporation is controlled directly or indirectly in any manner whatever by the institute and one or more other eligible research institutes or would be controlled directly or indirectly in any manner whatever if the institutes were to act in concert.  O. Reg. 37/09, s. 38 (1).

(2) For the purposes of subclause 97 (8) (c) (ii) of the Act, each of the following types of expenditures is prescribed not to be a qualified expenditure:

1. An expenditure made to an entity that ceased to be an eligible research institute before the expenditure was incurred.

2. An expenditure made under the contract,

i. if information provided to the Ontario Minister or the Minister of Revenue or any representation made to either of them for the purpose of or in connection with obtaining a ruling under subsection 97 (9) of the Act or subsection 43.9 (10) of the Corporations Tax Act in respect of the contract or the expenditure is not correct, and it is reasonable to believe that a favourable ruling would not have been given if the correct information had been provided or if the representation had not been made,

ii. if any undertaking given in connection with an application for a ruling referred to in subparagraph i is not fulfilled, or

iii. if information is not disclosed to the Ontario Minister or the Minister in connection with a ruling referred to in subparagraph i in respect of the contract or the expenditure, and it is reasonable to believe that a favourable ruling would not have been given if the information had been disclosed.

3. An expenditure made under an eligible contract to an eligible research institute that is prescribed by subsection (7) and is not a hospital research institute referred to in clause (8) (a), unless teaching staff, students or research fellows of an eligible research institute referred to in clause (a) of the definition of “eligible research institute” in subsection 97 (27) of the Act or a hospital research institute described in clause (8) (a) are significantly involved in carrying out the scientific research and experimental development activities required under the contract.

4. An expenditure made under an eligible contract for work described in paragraph (d) of the definition of “scientific research and experimental development” in subsection 248 (1) of the Federal Act that is clinical research in Phase IV, as described in Application Policy SR&ED 96-09R entitled Eligibility of Clinical Research in the Pharmaceutical Industry, dated May 17, 2001 and issued by the Canada Revenue Agency, unless the work is directly in support of work described in paragraph (a), (b) or (c) of that definition that is carried out,

i. by the eligible research institute,

ii. by a wholly-owned and controlled non-profit subsidiary of the eligible research institute, or

iii. by another eligible research institute under a contract referred to in subsection 97 (23) of the Act with the eligible research institute.  O. Reg. 37/09, s. 38 (2); O. Reg. 70/10, s. 10 (1).

(3) For the purposes of subsection 97 (21) of the Act, the qualified expenditure limit for a taxation year of a corporation that is not associated at any time in the year with another corporation is,

(a) $20 million if the year is 51 weeks or more; or

(b) $20 million multiplied by the ratio of the number of days in the year to 365 if the year is less than 51 weeks.  O. Reg. 37/09, s. 38 (3).

(4) If two or more corporations are associated at any time in a calendar year, the qualified expenditure limit of each of them for each of their taxation years ending in the calendar year for the purposes of subsection 97 (21) of the Act is determined in accordance with the following rules:

1. Subject to paragraphs 3, if the associated corporations file with the Ontario Minister an agreement in a form acceptable to the Ontario Minister under which, for the purposes of section 97 of the Act, the corporations allocate an amount to one or more of them and the total amount allocated does not exceed $20 million for the calendar year, the qualified expenditure limit of each of them is the amount allocated to it.

2. If the Ontario Minister notifies any of the associated corporations in writing that an agreement referred to in paragraph 1 in respect of a calendar year is required to be filed and no agreement is filed within 30 days after the notice is sent,

i. the Ontario Minister may allocate not more than $20 million among the associated corporations for the calendar year, and, subject to paragraph 3, the amount allocated to a corporation is its qualified expenditure limit for that taxation year, or

ii. if the Ontario Minister does not make an allocation described in subparagraph i, the qualified expenditure limit of each associated corporation for the relevant year is nil.

3. If an associated corporation has more than one taxation year ending in a calendar year or only one taxation year ending in the calendar year and it has fewer than 51 weeks, its qualified expenditure limit for each taxation year ending in the calendar year shall not exceed the corporation’s qualified expenditure limit for the calendar year as otherwise determined under paragraph 1 or 2, multiplied by the ratio of the number of days in the taxation year to 365.  O. Reg. 37/09, s. 38 (4).

(5) For the purposes of clause 97 (24) (b) of the Act, an employee of an eligible research institute is connected to a corporation if,

(a) the employee and one or more persons each of whom is an employee of the same or another eligible research institute or each of whom is related to the employee or to another employee of the same or another eligible research institute control the corporation directly or indirectly in any manner whatever, or would control the corporation directly or indirectly in any manner whatever if they acted in concert; or

(b) the employee was an employee of the corporation or of a corporation related to the corporation and there is an arrangement under which the employee will be employed by the corporation or a corporation related to the corporation after the completion of the contract.  O. Reg. 37/09, s. 38 (5).

(6) For the purposes of clause (a) of the definition of “eligible research institute” in subsection 97 (27) of the Act,

“university” includes all affiliated or federated colleges or universities of the university that are operated on a non-profit basis.  O. Reg. 37/09, s. 38 (6).

(7) For the purposes of clause (c) of the definition of “eligible research institute” in subsection 97 (27) of the Act, a non-profit organization that meets the conditions in any of the following paragraphs is an eligible research institute:

1. A non-profit organization,

i. that is exempt from tax under the Federal Act by reason of paragraph 149 (1) (f), (j) or (l) of that Act,

ii. that is affiliated with a university or college referred to in clause (a) of the definition of “eligible research institute” in subsection 97 (27) of the Act and has entered into an exchange of information agreement with the university or college under which teaching staff, students and research fellows of the university or college may actively participate in and receive educational benefits from the scientific research and experimental development activities carried out by the non-profit organization,

iii. that is capable of supporting and conducting scientific research and experimental development at its premises or the premises of the university or college through qualified employees who have sufficient expertise and experience and the use of appropriate facilities and services located at those premises,

iv. that is not primarily funded by businesses or industries operating in the private sector, and

v. of which no single member who is not exempt from tax under Division H of Part I of the Federal Act, if the non-profit organization is constituted without share capital, has more than 10 per cent of the votes that may be cast by members or, if the organization is incorporated with share capital, no single shareholder who is not exempt from tax under Division H of Part I of the Federal Act holds, directly or indirectly, shares that carry more than 10 per cent of the voting rights attached to voting securities, within the meaning of the Securities Act, of the non-profit organization.

2. A non-profit organization,

i. that is exempt from tax under the Federal Act by reason of paragraph 149 (1) (j) of that Act,

ii. that makes all of its expenditures on account of scientific research and experimental development by way of payments to one or more eligible research institutes, each of which is a university or college referred to in clause (a) of the definition of “eligible research institute” in subsection 97 (27) of the Act, an Ontario Centre of Excellence, a network of Centres of Excellence or a hospital research institute referred to in clause (d) of that definition,

iii. the board of directors of which may be appointed or elected only by the eligible research institutes referred to in subparagraph ii to which the non-profit organization makes all of its expenditures on account of scientific research and experimental development, and

iv. all of the shares of which, if the non-profit organization is incorporated with share capital, are held by the eligible research institutes referred to in subparagraph ii.  O. Reg. 37/09, s. 38 (7).

(8) For the purposes of clause (d) of the definition of “eligible research institute” in subsection 97 (27) of the Act, a hospital research institute is an eligible research institute if,

(a) it is a hospital described in clause 1 (1) (a), (d), (h) or (l) of Regulation 964 of the Revised Regulations of Ontario, 1990 (Classification of Hospitals), made under the Public Hospitals Act, and has been assigned to Group A, D, H or L in the list of public hospitals maintained under section 32.1 of that Act; or

(b) it is a corporation,

(i) that is exempt from tax under the Federal Act by reason of paragraph 149 (1) (f), (j) or (l) of that Act,

(ii) that is affiliated with a hospital referred to in clause (a) and has entered into an agreement with the hospital under which teaching staff from the hospital and students in the health professions may actively participate in and receive educational benefits from the scientific research and experimental development activities carried out by the corporation,

(iii) that is capable of supporting and conducting scientific research and experimental development at its premises or the premises of the hospital with which it is affiliated, through qualified employees who have sufficient expertise and experience and the use of appropriate facilities and services at those premises, and

(iv) that is not primarily funded by businesses or industries operating in the private sector.  O. Reg. 37/09, s. 38 (8).

(9) For the purposes of subsections (7) and (8), the following types of payments made to a non-profit organization or corporation shall not be considered to be funding of the organization or corporation:

1. An unconditional donation or gift.

2. An amount that is an expenditure to the payer described in paragraph 37 (1) (a) of the Federal Act or subparagraph 37 (1) (b) (i) of that Act.

3. An amount advanced as a loan if, under all arrangements that reasonably relate to the loan, the lender has the right to receive only payments on account of principal and interest at a commercially reasonable rate.  O. Reg. 37/09, s. 38 (9).

(10) Despite subsections (7) and (8), a non-profit organization or hospital research institute is not an eligible research institute for the purposes of section 97 of the Act until it is designated an eligible research institute by the Minister of Finance under subsection (11); however, a non-profit organization or hospital research institute that was designated an eligible research institute under subsection 1101 (15) of Regulation 183 of the Revised Regulations of Ontario, 1990 (General), made under the Corporations Tax Act, is an eligible research institute for the purposes of section 97 of the Act if the designation is not revoked.  O. Reg. 37/09, s. 38 (10).

(11) A non-profit organization or hospital research institute may apply to the Minister of Finance to be designated and shall be designated by the Minister of Finance to be an eligible research institute if,

(a) in the case of a non-profit organization, it is an eligible research institute under subsection (7); or

(b) in the case of a hospital research institute, it is an eligible research institute under subsection (8).  O. Reg. 37/09, s. 38 (11).

(12) The Minister of Finance may designate a non-profit organization or hospital research institute to be an eligible research institute under subsection (11) effective as of a date that is before or after the day on which the Minister of Finance authorizes the designation.  O. Reg. 37/09, s. 38 (12); O. Reg. 70/10, s. 10 (2).

(13) The Minister of Finance may revoke the designation of a non-profit organization or hospital research institute granted under subsection (11) or under section 1101 of Regulation 183 of the Revised Regulations of Ontario, 1990 (General), made under the Corporations Tax Act, if the organization or institute no longer qualifies as an eligible research institute under subsection (7) or (8).  O. Reg. 37/09, s. 38 (13); O. Reg. 70/10, s. 10 (3).

(14) Despite subsections (7) and (8), a non-profit organization or hospital research institute that has been designated an eligible research institute continues to be an eligible research institute for the purposes of section 97 of the Act after it ceases to qualify under subsection (7) or (8) until the effective date of revocation of the designation.  O. Reg. 37/09, s. 38 (14).

(15) The Minister of Finance may revoke a designation under subsection (13) effective as of a date that is before or after the day on which the Minister of Finance authorizes the revocation of the designation, except that the effective date may not be before the date on which the non-profit organization or hospital research institute ceased to qualify as an eligible research institute under subsection (7) or (8).  O. Reg. 37/09, s. 38 (15); O. Reg. 70/10, s. 10 (4).

(16) The Minister of Finance shall publicize designations granted under subsection (11), revocations of designations made under subsection (13) and the effective date of each designation and revocation by bulletin or by any other means of communication that, in the opinion of the Minister of Finance, will bring these matters to the attention of those affected.  O. Reg. 37/09, s. 38 (16).

39. Omitted (provides for coming into force of provisions of this Regulation).  O. Reg. 37/09, s. 39.