O. Reg. 312/04: Ontario Film and Television Tax Credit

 

ontario regulation 312/04

made under the

Corporations Tax Act

Made: September 30, 2004
Filed: October 4, 2004
Printed in The Ontario Gazette: October 23, 2004

Amending O. Reg. 322/97

(Ontario Film and Television Tax Credit)

1. (1) The definition of “investor” in subsection 1 (2) of Ontario Regulation 322/97 is revoked.

(2) The definition of “shared copyright production” in subsection 1 (2) of the Regulation is revoked.

(3) Subsection 1 (5) of the Regulation is revoked and the following substituted:

(5) For the purposes of this Regulation, the following rules apply in the application of section 125.4 of the Federal Act:

1. Section 125.4 shall be read as if that section were revised in the manner described in Schedule 2 to this Regulation, and apply as specified in Schedule 2, until such time as the amendments described in Schedule 2 are enacted by the Parliament of Canada.

2. Each reference in Schedule 2 to a “Canadian film or video production” shall be read as a reference to an “eligible Ontario production”.

3. Each reference in Schedule 2 to a “qualified corporation” shall be read as a reference to a “qualifying production company”.

(6) The definition of “investor” in subsection (2), as it read immediately before its repeal by Ontario Regulation 312/04 continues to apply in respect of taxation years ending before November 15, 2003 but does not apply with respect to taxation years ending after November 14, 2003 or to a production in respect of which a qualifying production company has, in a tax return filed before November 14, 2003, claimed an amount in computing its Ontario film and television tax credit for qualifying labour expenditures incurred after June 30, 1998.

2. Subsection 2 (2) of the Regulation is revoked.

3. (1) Paragraph 5 of subsection 3 (1) of the Regulation is revoked and the following substituted:

5. The production, or an interest in a person or partnership that has, directly or indirectly, an interest in the production, is not a tax shelter investment for the purposes of section 143.2 of the Federal Act.

(2) Subparagraph 6 i of subsection 3 (1) of the Regulation is amended by striking out the portion before sub-subparagraph A and substituting the following:

i. The Ontario Media Development Corporation, or another person designated by the Minister of Culture, has allotted (under the rules in subsection 1106 (4) of the Federal Regulations) not less than the following number of points to the production:

. . . . .

(3) Subparagraph 7 i of subsection 3 (1) of the Regulation is amended by striking out the portion before sub-subparagraph A and substituting the following:

i. The Ontario Media Development Corporation, or another person designated by the Minister of Culture, has allotted (under the rules in subsection 1106 (4) of the Federal Regulations) not less than the following number of points to the production:

. . . . .

(4) Section 3 of the Regulation is amended by adding the following subsection:

(3) Paragraph 5 of subsection (1) applies with respect to taxation years ending after November 14, 2003 and to a production in respect of which a qualifying production company has, in a tax return filed before November 14, 2003, claimed an amount in computing its Ontario film and television tax credit for qualifying labour expenditures incurred after June 30, 1998.

4. (1) Subclause 4 (1) (a) (ii) of the Regulation is revoked and the following substituted:

(ii) all references to the Minister of Canadian Heritage were read as references to the Ontario Media Development Corporation or to another person designated by the Minister of Culture,

(2) Subclause 4 (1) (a) (iii) of the Regulation is revoked.

5. (1) Subsection 7 (0.1) of the Regulation is amended by striking out “Subsections (1) and (1.1)” and substituting “Subsections (1) to (2)”.

(2) Subsection 7 (1.1) of the Regulation is amended by adding “and before March 28, 2003” after “May 2, 2000” in the portion before the definition of “A”.

(3) Subsections 7 (2) and (3) of the Regulation are revoked and the following substituted:

(2) The qualifying labour expenditure for a taxation year of a qualifying production company in respect of an eligible Ontario production that commences principal photography after March 27, 2003 is the amount, if any, by which “A” exceeds “H” where,

 “A” has the same meaning as in subsection (1.1),

“F” has the same meaning as in subsection (1.2),

  “G” has the same meaning as in subsection (1.2), and

  “H” is the amount, if any, by which “F” exceeds “G”.

6. (1) Paragraph 1 of subsection 8 (1) of the Regulation is revoked and the following substituted:

1. Each reference to “corporation” or to “qualified corporation” shall be read as a reference to a qualifying production company.

(2) Subsection 8 (2) of the Regulation is revoked.

7. Section 9 of the Regulation is revoked.

8. The Regulation is amended by adding the following Schedule:

SCHEDULE 2
PROPOSED AMENDMENTS TO SECTION 125.4 OF THE FEDERAL ACT (NOVEMBER 14, 2003)

1. (1) The definition of “labour expenditure” in subsection 125.4 (1) of the Federal Act is amended by striking out the portion before subparagraph (b) (i) and substituting the following:

“labour expenditure” of a corporation for a taxation year in respect of a Canadian film or video production means, in the case of a corporation that is not a qualified corporation for the taxation year, nil, and in the case of a corporation that is a qualified corporation for the taxation year, subject to subsection (2), the total of the following amounts to the extent that they are reasonable in the circumstances and included in the cost to, or in the case of depreciable property the capital cost to, the corporation, or any other person or partnership, of the production:

(a) the salary or wages directly attributable to the production that are incurred after 1994 and in the taxation year, or the preceding taxation year, by the corporation for the stages of production of the property, from the production commencement time to the end of the post-production stage, and paid by it in the taxation year or within 60 days after the end of the taxation year (other than amounts incurred in that preceding taxation year that were paid within 60 days after the end of that preceding taxation year),

(b) that portion of the remuneration (other than salary or wages and other than remuneration that relates to services rendered in the preceding taxation year and that was paid within 60 days after the end of that preceding  taxation year) that is directly attributable to the production of property, that relates to services rendered  after 1994 and in the taxation year, or that preceding taxation year, to the corporation for the stages of production, from the production commencement time to the end of the post-production stage, and that is paid by it in the taxation year or within 60 days after the end of the taxation year to

. . . . .

(2) Subsection 125.4 (1) of the Federal Act is amended by adding the following definitions:

“production commencement time” in respect of a Canadian film or video production means the earlier of

(a) the time at which principal photography of the production begins, and

(b) the latest of

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

(ii) the time at which the corporation or the parent of the corporation 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 date on which principal photography of the production begins.

“script material” of a production is written material describing the story on which the production is based and, for greater certainty, includes a draft script, original story, screen story, narration, television production concept, outline, or scene-by-scene schematic, synopsis or treatment.

(3) Subsection 125.4 (2) of the Federal Act is amended by striking out “and” at the end of paragraph (b), by adding “and” at the end of paragraph (c) and by adding the following paragraph:

(d) an expenditure incurred in respect of a film or video production by a qualified corporation (in this paragraph referred to as the “co-producer”) in respect of goods supplied or services rendered by another qualified corporation to the co-producer in respect of the production is not a labour expenditure to the co-producer or, for the purpose of applying this section to the co-producer, a cost or capital cost of the production.

2. (1) The amendments described in section 1 apply in respect of an eligible Ontario production in the following circumstances:

1. The production commencement time that would be determined if the amendments described in section 1 applied is on or after November 14, 2003.

2. The production commencement time that would be determined if the amendments described in section 1 applied is before November 14, 2003, there is only one qualifying production company, and

i. principal photography for the production commences after 2003, or

ii. the company elects, in accordance with subsection (2), to have the amendments described in section 1 apply and principal photography commences,

A. after the last taxation year that ended before November 14, 2003, or

B. if the first taxation year of the company includes November 14, 2003, in that taxation year.

3. The production commencement time that would be determined if the amendments described in section 1 applied is before November 14, 2003, there is more than one qualifying production company, and

i. principal photography for the production commences after 2003, or

ii. the companies jointly elect, in accordance with subsection (2), to have the amendments described in section 1 apply and principal photography commences,

A. after the last taxation year of any of the companies that ended before November 14, 2003, or

B. if the first taxation year of each of the companies includes November 14, 2003, in that taxation year.

(2) An election made under subparagraph 2 ii or 3 ii of subsection (1) of this Schedule shall satisfy the following criteria:

1. The election shall be in writing.

2. The company or companies, as the case may be, shall file the election with the Minister.

3. The company or companies, as the case may be, shall provide the Ontario Media Development Corporation with a copy of the election.