O. Reg. 207/99: PAYMENTS IN LIEU OF CORPORATE TAXES

Electricity Act, 1998
Loi de 1998 sur l’électricité

ONTARIO REGULATION 207/99

Amended to O. Reg. 673/05

PAYMENTS IN LIEU OF CORPORATE TAXES

Historical version for the period January 1, 2006 to February 8, 2007.

This Regulation is made in English only.

Interpretation and Application

1. This Regulation applies to each corporation that is required to make a payment under section 89 or 90 of the Act. O. Reg. 207/99, s. 1.

2. In this Regulation,

“Federal Act” means the Income Tax Act (Canada);

“Federal Regulations” means the regulations made under the Federal Act;

“nuclear waste management or decommissioning fund” means,

(a) the Used Fuel Segregated Fund established pursuant to the ONFA,

(b) the Decommissioning Segregated Fund established pursuant to the ONFA,

(c) the Ontario NFWA Trust established by Ontario Power Generation Inc. as of November 15, 2002 in accordance with the Nuclear Fuel Waste Act (Canada), or

(d) a fund established on or after April 1, 1999 by Ontario Power Generation Inc. or by a subsidiary of that corporation for the sole purpose of financing the obligations of Ontario Power Generation Inc. and its subsidiaries with respect to the decommissioning of all or part of a nuclear generation facility or financing the management of nuclear waste and used fuel, but only if all or part of the fund is transferred to a fund described in clause (a), (b) or (c) in July 2003;

“ONFA” means the Ontario Nuclear Funds Agreement entered into as of April 1, 1999 by Her Majesty the Queen in right of Ontario, Ontario Power Generation Inc. and certain subsidiaries of Ontario Power Generation Inc.;

“transfer order” means an order made under section 116 of the Act. O. Reg. 207/99, s. 2; O. Reg. 673/05, s. 1.

Payments in Lieu made under Section 89 of the Act

3. The method of calculating the amount of a payment required by section 89 of the Act is modified by the rules set out in sections 4, 5 and 7 to 16.1. O. Reg. 122/02, s. 1.

4. Sections 150 to 180 and 220 to 244 of the Federal Act do not apply. O. Reg. 207/99, s. 4.

5. (1) References in the Federal Act and in the Federal Regulations to the “Minister of National Revenue” or to the “Minister” shall be read as references to Ontario’s Minister of Finance. O. Reg. 207/99, s. 5 (1).

(2) If the Federal Act or the Federal Regulations require an election, designation or other document to be filed with the Minister of National Revenue, it must instead be filed with Ontario’s Minister of Finance. O. Reg. 207/99, s. 5 (2).

Payments in lieu made under Section 90 of the Act

6. The method of calculating the amount of a payment required by section 90 of the Act is modified by the rules set out in sections 7 to 16.1. O. Reg. 122/02, s. 2.

Modifications Applicable to Payments under Sections 89 and 90 of the Act

7. A corporation shall be deemed to be a private corporation. O. Reg. 207/99, s. 7.

8. (1) The taxation year of a corporation is determined in accordance with this section, for the purposes of sections 89 and 90 of the Act. O. Reg. 207/99, s. 8 (1).

(2) For the first taxation year that ends after April 1, 1999, the taxation year ends on the same day as the corporation’s fiscal year. O. Reg. 207/99, s. 8 (2).

(3) For a subsequent taxation year, the corporation may change the date on which its taxation year ends only with the consent of the Minister of Finance. O. Reg. 207/99, s. 8 (3).

9. Property transferred under a transfer order to a corporation shall be deemed to have been acquired by the corporation at a cost equal to the fair market value of the property at the time of the transfer. O. Reg. 207/99, s. 9.

10. The undepreciated capital cost of depreciable property and the adjusted cost base of capital property owned by a corporation shall be deemed not to include an amount that is deductible in computing the income of the corporation. O. Reg. 207/99, s. 10.

11. (1) Depreciable property transferred under a transfer order by Ontario Hydro to a corporation shall be deemed to have been acquired by the corporation at the time Ontario Hydro acquired it. O. Reg. 207/99, s. 11 (1).

(2) If a corporation owns two or more properties that are nuclear reactors and are properties described in Class 1 or Class 2 of Schedule II to the Federal Regulations, the corporation shall be deemed to hold each of the properties in a separate class. O. Reg. 207/99, s. 11 (2).

(3) Property described in Class 24 or Class 27 of Schedule II to the Federal Regulations that is transferred under a transfer order by Ontario Hydro to a corporation shall be deemed after the transfer to be property described in one of those classes,

(a) if Ontario Hydro acquired the property before 1999; and

(b) if the federal Minister of the Environment has accepted that the primary use of the property is the prevention, reduction or elimination of pollution. O. Reg. 207/99, s. 11 (3).

12. (1) This section applies if, under the Corporations Tax Act, a corporation is considered to have a permanent establishment in a province of Canada other than Ontario. O. Reg. 207/99, s. 12 (1).

(2) For the purposes of sections 39, 57.6 and 67 of the Corporations Tax Act, the corporation shall be deemed not to have a permanent establishment in that province if the corporation is not subject to taxation on its income under the laws of that province by reason of a tax statute of that province or a tax statute of Canada. O. Reg. 207/99, s. 12 (2).

13. (1) This section applies to a corporation,

(a) if the corporation owns at least 10 per cent of the fair market value of the issued and outstanding shares of another corporation (the “subject corporation”)at any time during the applicable taxation year of the corporation; and

(b) if the subject corporation meets the criteria described in subsection (2)throughout its taxation year that ends during or on the same day as the applicable taxation year of the corporation. O. Reg. 207/99, s. 13 (1).

(2) The subject corporation must be exempt under subsection 149 (1) of the Federal Act from the payment of tax under that Act, exempt under subsection 57 (1), section 57.11 or subsection 71 (1) of the Corporations Tax Act from the payment of tax under that Act, and must not be required to make a payment under section 89, 90 or 93 of the Electricity Act, 1998. O. Reg. 207/99, s. 13 (2).

(3) For the applicable taxation year of the corporation, the subject corporation shall be treated as if it were a partnership in which the corporation owns a partnership interest equal to the amount calculated using the formula,

A/B

where,

“A” is the fair market value of the issued and outstanding shares of the subject corporation that are owned by the corporation (determined as of the last day of the subject corporation’s taxation year referred to in clause (1) (b)); and

“B” is the fair market value of all the issued and outstanding shares of the subject corporation (determined as of the same day).

O. Reg. 207/99, s. 13 (3).

14. (1) A corporation shall include the following amounts in computing its income from a business or property for a taxation year:

1. The aggregate of all amounts paid or payable during the year by a nuclear waste management or decommissioning fund,

i. to the corporation in respect of its interest in the fund, or

ii. to another person for the benefit of the corporation in respect of the corporation’s interest in the fund.

2. If the corporation disposes of all or part of its interest in a nuclear waste management or decommissioning fund during the year, the aggregate of all amounts received by the corporation in the year as the consideration for the disposition. However, this does not include consideration that is the assumption of an obligation to decommission a nuclear facility or an obligation to manage the nuclear waste and used fuel of a nuclear facility. O. Reg. 207/99, s. 14 (1); O. Reg. 673/05, s. 2 (1).

(2) A corporation may deduct the following amounts in computing its income from a business or property for a taxation year:

1. Such amount as the corporation may claim, not exceeding the total contributions by the corporation to one or more nuclear waste management or decommissioning funds in the taxation year or a previous taxation year.

2. The amount of the consideration payable by the corporation in the year to acquire all or part of the corporation’s interest in a nuclear waste management or decommissioning fund. However, this does not include consideration that is the assumption of an obligation to decommission a nuclear facility or an obligation to manage the nuclear waste and used fuel of a nuclear facility.

3. Subject to subsection (3), the aggregate amount of the expenses incurred by the corporation in the year to decommission a nuclear facility or manage the nuclear waste and used fuel of a nuclear facility.

4. Any amount that, but for this paragraph, is included in the corporation’s income from property for the year from property held in a nuclear waste management or decommissioning fund. O. Reg. 207/99, s. 14 (2); O. Reg. 673/05, s. 2 (2-4).

(2.1) For the purposes of paragraph 1 of subsection (2), the transfer by the corporation of an amount from one nuclear waste management or decommissioning fund to another nuclear waste management or decommissioning fund shall not be included in the calculation of the amount of total contributions to the fund to which the amount is transferred. O. Reg. 673/05, s. 2 (5).

(2.2) In calculating the amount of a deduction under subsection (2) for a taxation year, the corporation shall not include any amount that was deducted under that subsection in determining its income from a business or property for a previous taxation year. O. Reg. 673/05, s. 2 (5).

(3) Despite paragraph 3 of subsection (2), the corporation cannot deduct the amount by which “A” exceeds “B” where,

“A” is the sum of,

(a) the aggregate amount deducted by the corporation under that paragraph for any previous taxation year, and

(b) the amount described by that paragraph for the current taxation year; and

“B” is the aggregate amount included in the corporation’s income under paragraph 1 of subsection (1)for the current taxation year and any previous taxation year. O.  Reg. 207/99, s. 14 (3).

15. (1) This section applies if a corporation has an interest in a nuclear waste management or decommissioning fund that ceases to be such a fund. O. Reg. 207/99, s. 15 (1); O. Reg. 673/05, s. 3.

(2) The corporation shall be deemed to have received from the fund, immediately before it ceases to be such a fund, an amount equal to that portion of the fair market value of the property of the fund that can reasonably be considered to be the corporation’s interest in the fund. O. Reg. 207/99, s. 15 (2).

(3) The corporation shall be deemed to have acquired an interest in the fund, immediately after it ceases to be such a fund, at a cost equal to the amount calculated under subsection (2). O. Reg. 207/99, s. 15 (3).

16. (1) This section applies if the corporation disposes of shares of a subsidiary and, as a result of the disposition, subsection 149 (10)of the Federal Act applies to the subsidiary. O.  Reg. 207/99, s. 16 (1).

(2) The amount, if any, otherwise payable by the corporation under sections 89 and 90 of the Act as a consequence of the disposition of the shares is reduced by the amount, if any, payable by the subsidiary under section 89 or 90 of the Act, determined as if the subsidiary’s only income in the taxation year arose as a result of the deemed disposition of its assets under subsection 149 (10)of the Federal Act. O. Reg. 207/99, s. 16 (2).

16.1 (1) This section applies, and section 16 does not apply, if the corporation ceases to be exempt under subsection 149 (1) of the Federal Act and subsection 57 (1), section 57.11 and subsection 71 (1) of the Corporations Tax Act from the payment of tax under those Acts in circumstances in which a deemed disposition occurs under paragraph 149 (10) (b) of the Federal Act. O. Reg. 122/02, s. 3.

(2) The taxation year of the corporation shall be deemed to end immediately before the time that the corporation ceases to be exempt from the payment of tax under the Federal Act and the Corporations Tax Act. O. Reg. 122/02, s. 3.

(3) Subject to subsections (4) and (5), the corporation shall pay the amount determined under sections 89 and 90 of the Act calculated by reference to the deemed disposition under paragraph 149 (10) (b) of the Federal Act (as that paragraph applies for the purposes of determining the amount payable under sections 89 and 90 of the Act). O. Reg. 122/02, s. 3.

(4) The corporation is not required to pay an amount under subsection (3) in respect of a deemed disposition of shares of a subsidiary corporation,

(a) if the corporation owns at least 90 per cent of the issued and outstanding shares of the subsidiary corporation; and

(b) if the subsidiary corporation is required to pay the amount determined under sections 89 and 90 of the Act calculated by reference to the deemed disposition under paragraph 149 (10) (b) of the Federal Act (as that paragraph applies for the purposes of determining the amount payable under sections 89 and 90 of the Act). O. Reg. 122/02, s. 3.

(5) The corporation is not required to pay the amount described in subsection (3) if both of the following conditions are satisfied:

1. The corporation ceases to be exempt from the payment of tax under the Federal Act and the Corporations Tax Act as a result of a lawful distribution to the public of shares of the corporation or a related corporation pursuant to a prospectus, registration statement or similar document filed with and, if required by law, accepted for filing by a public authority in Canada under the laws of Canada or of a province. The distribution must be the first distribution to the public of shares of the corporation or related corporation.

2. With the consent of the Minister, the corporation pays to the Financial Corporation an amount that, in the Minister’s opinion, reasonably approximates the additional amounts, if any, that would be payable by the corporation under sections 89 and 90 of the Act if the corporation were required, but for this subsection, to pay the amount described in subsection (3). O. Reg. 122/02, s. 3.

(6) An amount paid to the Financial Corporation under paragraph 2 of subsection (5) cannot be varied on objection or appeal under the Corporations Tax Act. O. Reg. 122/02, s. 3.

(7) The Minister is not permitted, on a reassessment, to vary an amount paid to the Financial Corporation under paragraph 2 of subsection (5) unless, in the Minister’s opinion, the corporation, a related corporation or a person acting on behalf of the corporation or related corporation makes a misrepresentation to the Minister that is attributable to neglect, carelessness or wilful default or commits a fraud in giving information under the Act in respect of the determination of the amount paid under that paragraph. O. Reg. 122/02, s. 3.

Returns and Payments

17. (1) If a corporation is required to make a payment under section 89 of the Act for a taxation year, it shall deliver to the Minister of Finance a return for the taxation year, in the form and containing the information required by section 150 of the Federal Act. O. Reg. 673/05, s. 4.

(2) If a corporation is required to make a payment under section 90 of the Act for a taxation year, it shall deliver to the Minister of Finance a return for the taxation year, in the form and containing the information required by section 75 of the Corporations Tax Act. O. Reg. 673/05, s. 4.

(3) A return required to be delivered under subsection (1) or (2) must be delivered within six months after the end of the taxation year to which the return relates. O. Reg. 673/05, s. 4.

18. (1) The following rules apply with respect to each instalment payable by the corporation under section 89 or 90 of the Act for its first taxation year ending after April 1, 1999:

1. If the corporation’s first taxation year is less than 12 months long, the reference to one-twelfth in subclause 78 (2) (a) (i) of the Corporations Tax Act shall be read as a reference to a fraction in which the numerator is one and the denominator is the number of months in the taxation year.

2. Subclauses 78 (2) (a) (ii) and (iii) and subsections 78 (4) and (6) of the Corporations Tax Act do not apply.

3. Subsections 79 (1) and 83 (1) of the Corporations Tax Act do not apply if,

i. the corporation’s first taxation year ending after April 1, 1999 ends before January 1, 2006, and

ii. the corporation has made a reasonable attempt, in the opinion of the Minister of Finance, to calculate the amount of its instalments payable for the taxation year.

4. Despite paragraph 3,

i. subsection 79 (1) of the Corporations Tax Act applies after December 31, 2005 if the corporation has a deficiency in its tax account on January 1, 2006, and interest shall be calculated commencing January 1, 2006, and

ii. subsection 83 (1) of the Corporations Tax Act applies after December 31, 2005 if the corporation has a surplus in its instalment account on January 1, 2006, and interest shall be calculated commencing January 1, 2006. O. Reg. 207/99, s. 18 (1); O. Reg. 673/05, s. 5.

(2) The following rule applies with respect to each instalment payable by the corporation under section 89 or 90 of the Act for its second taxation year ending after April 1, 1999:

1. Subclause 78 (2) (a) (iii) and subsections 78 (4) and (6) of the Corporations Tax Act do not apply. O. Reg. 207/99, s. 18 (2).