O. Reg. 283/03: GENERAL

 

ontario regulation 283/03

made under the

corporations tax act

Made: June 4, 2003
Filed: July 7, 2003
Printed in The Ontario Gazette: July 26, 2003

Amending Reg. 183 of R.R.O. 1990

(General)

Note: Since the end of 2002, Regulation 183 has been amended by Ontario Regulation 232/03.  Previous amendments are listed in the Table of Regulations published in The Ontario Gazette dated January 18, 2003.

1. Part II of Regulation 183 of the Revised Regulations of Ontario, 1990 is amended by adding the following section:

Electricity Generation and Conservation

204. (1) In this section,

“alternative or renewable source of energy” means a source of energy that produces electricity from wind, water, a biomass resource, hydrogen, biogas, biofuel, landfill gas, an eligible fossil fuel, uranium, solar energy, geothermal energy, tidal forces or thermal waste;

“biofuel” means a liquid fuel or product made from a biomass resource and includes the liquid fuels ethanol, methanol and biodiesel;

“biogas” means a gaseous fuel or product derived from a biomass resource;

“biomass resource” means organic matter that is derived from a plant and available on a renewable basis, including organic matter derived from dedicated energy crops, dedicated  trees, agricultural food and feed crops, and waste organic material from harvesting or processing agricultural products, forestry products and sewage;

“consumer” means a person who,

(a) purchases electricity, steam, heated water or cooled water for the person’s own use,

(b) produces electricity, steam, heated water or cooled water for the person’s own use, or

(c) purchases electricity, steam, heated water or cooled water for distribution to a person in Ontario for that person’s own use;

“eligible fossil fuel” means natural gas, blast furnace gas, coke oven gas, basic oxygen furnace gas or peat;

“eligible partnership” means, in respect of a fiscal period, a partnership all of whose members throughout the fiscal period are,

(a) corporations, or

(b) persons exempt under subsection 149 (1) of the Income Tax Act (Canada) from the payment of tax under that Act;

“forestry products” include wood waste;

“IMO-controlled grid” has the same meaning as in section 2 of the Electricity Act, 1998;

“qualifying nuclear facility” means unit 1 of the Bruce nuclear generating station A, unit 2 of the Bruce nuclear generating station A, unit 1 of the Pickering nuclear generating station A, unit 2 of the Pickering nuclear generating station A or unit 3 of the Pickering nuclear generating station A;

“waste organic material” includes animal waste and rendered animal fat.

(2) References in this section to a taxpayer shall be read as references to a corporation or an eligible partnership and references to a taxation year in respect of a taxpayer that is an eligible partnership shall be read as references to a fiscal period of the partnership.

(3) For the purposes of this section and subject to subsection (5), the following types of property of a taxpayer are qualifying Ontario electrical generation and conservation property of the taxpayer:

1. Property, other than transmission equipment or distribution equipment, that is substantially used, or that is part of a system that is substantially used, by the taxpayer, or by a person to whom the taxpayer leases the property, to generate electricity in Ontario all or substantially all of which is generated from one or more alternative or renewable sources of energy, if the property would be,

i. property described in Class 43.1 of Schedule II of the regulations made under the Income Tax Act (Canada) if,

A. the description of that Class were read without reference to clauses (c) (i) (B), (c) (ii) (B) and (d) (ii) (A), and

B. subparagraph (d) (iii) of the description of that Class were read without reference to the words “if the resulting annual average generating capacity of the hydro-electric installation does not exceed 15 megawatts”, or

ii. equipment described in Class 1, 8 or 17 of Schedule II of the regulations made under the Income Tax Act (Canada).

2. Property used primarily to deliver to a consumer in Ontario or to the IMO-controlled grid electricity that is generated by,

i. the taxpayer using qualifying Ontario electrical generation and conservation property of the taxpayer described in paragraph 1, or

ii. a person to whom the taxpayer leased qualifying Ontario electrical generation and conservation property of the taxpayer described in paragraph 1.

3. Property that is piping, pumps, meters, control equipment, heat exchangers and other types of property used primarily in the delivery to a consumer in Ontario of steam, heated water or cooled water that is,

i. produced using qualifying Ontario electrical generation and conservation property of the taxpayer described in paragraph 1, and

ii. produced by the taxpayer or the person to whom the taxpayer leased the property referred to in subparagraph i.

(4) For the purposes of paragraph 1 of subsection (3),

(a) a taxpayer substantially uses property to generate electricity if the total useful energy output of the property is at least 20 per cent of the total energy input to the property and if the electrical energy output of the property is at least 25 per cent of the total useful energy output of the property; and

(b) a taxpayer substantially uses a system to generate electricity if the total useful energy output of the system is at least 20 per cent of the total energy input to the system and if the electrical energy output of the system is at least 25 per cent of the total useful energy output of the system.

(5) Subject to subsection (6), a property is a qualifying Ontario electrical generation and conservation property of a taxpayer if the following criteria are satisfied:

1. For property that generates or is part of a system that generates electricity from uranium,

i. the property is used to generate electricity or is part of a system used to generate electricity at a qualifying nuclear facility, and

ii. the taxpayer acquired the property after June 1, 2003 and before January 1, 2008.

2. For any other property, the taxpayer acquired the property after November 25, 2002 and before January 1, 2008.

(6) Property referred to in subsection (5) that is used to generate electricity or is part of a system used to generate electricity at more than one nuclear facility is a qualifying Ontario electrical generation and conservation property only to the extent that the property or system is used to generate electricity at a qualifying nuclear facility and only if the criterion set out in subparagraph 1 ii of subsection (5) is also satisfied.

(7) The Minister of Energy or his or her delegate may give opinions to taxpayers or to the Minister of Finance relating to engineering and scientific matters raised in the interpretation of the definitions in subsection (1) and in the interpretation of subsection (4), and any opinion given by the Minister of Energy or his or her delegate with respect to those matters is conclusive for the purposes of this section.

(8) For the purposes of clause 11 (10) (a) of the Act, there is allowed to a taxpayer as a deduction in computing its income for a taxation year ending after November 25, 2002 the amount determined under subsection (9) in respect of the capital cost of the taxpayer’s qualifying Ontario electrical generation and conservation property, if the taxpayer does not claim a deduction for the year in respect of the property under section 201.

(9) The amount of the deduction described in subsection (8) is an amount not exceeding the amount that would be the undepreciated capital cost of the qualifying Ontario electrical generation and conservation property as of the end of the taxation year before any deduction for the year under this section.

(10) Subject to the following rules, Part XI of the regulations made under the Income Tax Act (Canada), including the definitions contained in subsection 1104 (13), apply for the purposes of this section:

1. All references to property described in Class 43.1 in Schedule II of those regulations shall be read as if they were references to qualifying Ontario electrical generation and conservation property as defined in this section.

2. Subsection 1100 (2) does not apply for the purposes of determining the amount of a deduction under this section in respect of qualifying Ontario electrical generation and conservation property.

3. All references to “fossil fuel” in Part XI of the regulations shall be read as if they were references to “eligible fossil fuel” as defined in this section.

(11) Despite subsection (5), a corporation or, in the case of an eligible partnership, all of the members of the eligible partnership may elect to treat property that satisfies the following conditions, other than property described in subsection (12), as qualifying Ontario electrical generation and conservation property for the purposes of the deduction allowed under this section:

1. The property was acquired by the corporation or eligible partnership after October 30, 1998 and before November 26, 2002.

2. The property would be qualifying Ontario electrical generation and conservation property of the corporation or eligible partnership if it had been acquired after November 25, 2002 and before January 1, 2008.

(12) The election described in subsection (11) does not apply to qualifying Ontario electrical generation and conservation property that is used to generate electricity from uranium.

(13) The capital cost and undepreciated capital cost to a taxpayer of property that is the subject of an election under subsection (11) shall be deemed, immediately after the election is made, to be the same as the capital cost and undepreciated capital cost of the property to the taxpayer immediately before the election.

(14) An election under subsection (11) shall be made by attaching a letter to the tax return delivered under the Act by the corporation or by each member of the eligible partnership, as the case may be, for the first taxation year ending after November 25, 2002 for which a deduction is claimed under this section by the corporation or by the eligible partnership in respect of the property.

(15) Despite subsection (14), the Minister may accept a late election that is filed not later than the third anniversary of the date by which the tax return referred to in subsection (14) is required to be delivered under the Act.

(16) For the purposes of this section, a reference to the regulations made under the Income Tax Act (Canada) shall be deemed to be a reference to those regulations as amended from time to time; and those regulations shall be read as if the following amendments had been made to them:

1. The draft amendments set out as Appendices A to I in Explanatory Notes Relating to Income Tax, dated March 2001, published by the Department of Finance (Canada).

2. The draft amendments set out in Appendices B and C in Explanatory Notes Relating to the Air Travellers Security Charge and to Income Tax, dated February 2002, published by the Department of Finance (Canada).  However, the proposed subparagraph (d) (iii.1) of Class 43.1 shall be read without reference to the words “if the resulting rated capacity at the hydro-electric installation site does not exceed 50 megawatts”.