O. Reg. 470/07: Transfer Tax on Municipal Electricity Property

 

ontario regulation 470/07

made under the

Electricity Act, 1998

Made: August 15, 2007
Filed: August 20, 2007
Published on e-Laws: August 21, 2007
Printed in The Ontario Gazette: September 8, 2007

Amending O. Reg. 124/99

(Transfer Tax on Municipal Electricity Property)

1. (1) Clause 3 (12) (a) of Ontario Regulation 124/99 is revoked and the following substituted:

(a) the property is not used for any purpose at any time during the 12-month period before the transfer or, if the transfer occurs less than 12 months after October 16, 2006, during the period after October 16, 2006 and before the transfer;

(a.1) the property became obsolete before the transfer; or

(2) Paragraph 3 of subsection 3 (20) of the Regulation is revoked and the following substituted:

3. If the approval of the Ontario Energy Board for the transfer is required under the Ontario Energy Board Act, 1998, an application for approval of the transfer is made to the Ontario Energy Board before October 17, 2008.

2. The Regulation is amended by adding the following section:

Refund of Transfer Tax on Acquisition of Reinvestment Property

3.2 (1) In this section,

“eligible property” means an interest in real or personal property described in subsection 94 (1) or (1.1) of the Act, other than an interest in a corporation, partnership or other entity described in subsection 94 (2) of the Act;

“reinvestment property” means, in respect of a municipal electricity utility, land or depreciable property, within the meaning assigned by subsection 13 (21) of the Income Tax Act (Canada),

(a) that has not been used by any person or entity before being acquired by the municipal electricity utility,

(b) that is acquired by the municipal electricity utility after October 16, 2006 and that, at the time an application is made under this section,

(i) is used by the municipal electricity utility in connection with generating, transmitting, distributing or retailing electricity in Ontario, if the property is not real property or the property is real property that is not under construction, or

(ii) is proposed to be used by the municipal electricity utility, after the property is constructed, in connection with generating, transmitting, distributing or retailing electricity in Ontario, if the property is real property that is under construction, and

(c) that is not acquired by the municipal electricity utility in a transfer to which subsection 94 (1) of the Act does not apply by reason of subsection 3 (9), (11) or (14) or clause 3 (15) (a) or (b).

(2) For the purposes of this section, a shareholder of a municipal electricity utility is an eligible shareholder of the municipal electricity utility in respect of the acquisition of a reinvestment property by the shareholder if, at the time of the acquisition,

(a) the municipal electricity utility no longer generates, transmits, distributes or retails electricity, and

(b) all of the shareholders of the municipal electricity utility are municipal electricity utilities.

(3) On an application made to the Minister of Finance in accordance with this section, a municipal electricity utility is entitled to a refund in the amount determined in accordance with this section with respect to the amount paid by it under subsection 94 (1) of the Act in respect of the transfer of an eligible property if,

(a) the municipal electricity utility or an eligible shareholder of the municipal electricity utility acquires a reinvestment property after the transfer and continues to hold it at the time of the application;

(b) a refund in respect of the cost or portion of the cost of the reinvestment property to which the application relates has not previously been made under this section to the municipal electricity utility; and

(c) the amount of the municipal electricity utility’s refundable balance in respect of the application exceeds nil.

(4) An application for a refund under this section in respect of a reinvestment property must be made during the period that is,

(a) after the municipal electricity utility or eligible shareholder,

(i) incurred costs for the construction of the reinvestment property, if the reinvestment property is real property constructed or under construction for the municipal electricity utility or eligible shareholder,

(ii) entered into a binding agreement for the construction of the reinvestment property, if the reinvestment property is real property to be constructed by the municipal electricity utility or eligible shareholder and it is reasonable to believe that the construction is intended to commence within six months after the date of the agreement, or

(iii) acquired the reinvestment property, in any other case; and

(b) before the end of the first taxation year of the municipal electricity utility after the taxation year in which the municipal electricity utility or eligible shareholder,

(i) incurred the costs, if the reinvestment property is real property constructed or under construction for the municipal electricity utility or eligible shareholder,

(ii) entered into the agreement referred to in subclause (a) (ii), if the reinvestment property is real property to be constructed by the municipal electricity utility or eligible shareholder, or

(iii) acquired the reinvestment property, in any other case.

(5) An application under subsection (4) must contain the following:

1. A detailed calculation of the amount of the refund claimed by the municipal electricity utility, including a calculation of the utility’s refundable balance in respect of the application, as determined under this section, and copies of the documents on which it relied in making the calculations.

2. Copies of invoices, statements and such other material as may be necessary,

i. to verify that the property qualifies as a reinvestment property under this section, and

ii. to confirm the amount of the costs to which the application relates and the date of acquisition of the property by the municipal electricity utility or eligible shareholder or, in the case of real property constructed or under construction for the municipal electricity utility or eligible shareholder, the dates the costs were incurred.

3. A statement signed by a signing officer of the municipal electricity utility certifying that no prior application has been made by the municipal electricity utility under this section in respect of the cost or part of the cost of the property to which the application relates. 

4. Such other information or material as may be requested by the Minister of Finance for the purposes of determining if the municipal electricity utility is entitled to a refund under this section and the amount of any refund to which it is entitled.

(6) If the Minister of Finance determines that a municipal electricity utility is entitled to a refund under this section in respect of the acquisition of a reinvestment property, the Minister of Finance may direct the Financial Corporation to pay to the municipal electricity utility an amount equal to the lesser of,

(a) the amount of the municipal electricity utility’s refundable balance in respect of the application, as determined under this section; and

(b) 33 per cent of the cost or portion of the cost of the reinvestment property to which the application relates.

(7) Subject to subsections (8) and (9) and subparagraph 2 ii of subsection (11), the amount of a municipal electricity utility’s refundable balance in respect of an application is the amount calculated using the formula,

A – B – C

where,

  “A” is the total of all amounts paid by the municipal electricity utility under subsection 94 (1) of the Act in respect of the transfer of an eligible property,

(a) before the reinvestment property was acquired or the costs were incurred to which the application relates, and

(b) on or after the commencement of the second taxation year immediately preceding the taxation year in which the reinvestment property was acquired or the costs were incurred to which the application relates,

  “B” is the total of all amounts, if any, included in the calculation of “A” that were previously paid to the municipal electricity utility under this section or that are payable to the municipal electricity utility pursuant to a previous application for a refund under this section, and

  “C” is the total of all amounts, if any, included in the calculation of “A” that were previously paid or that are payable to the municipal electricity utility as a refund otherwise than pursuant to this section.

(8) The following rules apply for the purposes of determining a municipal electricity’s refundable balance in respect of an application: 

1. All amounts paid before October 17, 2006 by a municipal electricity utility under subsection 94 (1) of the Act in respect of the transfer of an eligible property are deemed to have been paid on October 17, 2006.

2. If the reinvestment property to which a particular application relates is acquired by an eligible shareholder of the municipal electricity utility, the amount of “A” in subsection (7) includes, for the purposes of that application, only amounts that are paid by the municipal electricity utility before October 17, 2006 and deemed under paragraph 1 to have been paid on October 17, 2006.

(9) Subject to subsection (11), a municipal electricity utility’s refundable balance is deemed to be nil immediately after the issue or transfer of any shares representing a direct or indirect interest in the municipal electricity utility. 

(10) Subject to subsection (11), only the municipal electricity utility that paid an amount under subsection 94 (1) of the Act is entitled to a refund under this section in respect of that amount.

(11) The following rules apply if a municipal electricity utility amalgamates or merges with another entity:

1. The entity formed as a result of the amalgamation or merger shall not be considered to have paid any amount under subsection 94 (1) of the Act that was paid or payable before the amalgamation or merger by the municipal electricity utility if,

i. the amalgamation or merger is after October 16, 2006, or

ii. the amalgamation or merger is with an entity that is not a municipal electricity utility.

2. If the amalgamation or merger is with another municipal electricity utility to form a municipal electricity utility and occurs before October 17, 2006,

i. the municipal electricity utility formed as a result of the amalgamation or merger shall be considered for the purposes of subsection (10) to be the same as and a continuation of each of its predecessor municipal electricity utilities, and

ii. the municipal electricity utility formed as a result of the amalgamation or merger shall have a refundable balance equal to the sum of the refundable balances, if any, of each of its predecessor municipal electricity utilities immediately before the amalgamation or merger.

(12) The cost or portion of the cost of a reinvestment property that is real property under construction for a municipal electricity utility,

(a) shall include all costs related to the construction that are incurred by the municipal electricity utility after October 16, 2006 and before the application is made;

(b) shall not include any costs incurred by the municipal electricity utility before October 17, 2006 or any progress billings related to the construction paid or payable before that day; and

(c) shall be reduced by the amount of any holdbacks the municipal electricity utility has claimed or is entitled to claim in respect of amounts that would otherwise be included in the cost or portion of the cost of the reinvestment property to which the application relates.

(13) If the Financial Corporation pays a refund under this section to which a municipal electricity utility is not entitled or pays a refund in an amount in excess of the amount to which the municipal electricity utility is entitled,

(a) the refund or portion of the refund to which the municipal electricity utility is not entitled is a liability of the municipal electricity utility; and

(b) the Minister may assess the municipal electricity utility for the amount of the liability plus interest from the day the refund was paid to the day the amount of the liability is paid to the Minister, calculated at the rate or rates and in the manner applicable to unpaid taxes under the Corporations Tax Act.

(14) For the purposes of subsection (13), a municipal electricity utility shall be considered to have received a refund to which it was not entitled or a refund in an amount in excess of the amount to which it was entitled if it receives a refund under this section in respect of the acquisition of a reinvestment property after the transfer of an eligible property and it is subsequently determined that,

(a) subsection 94 (1) of the Act did not apply to the transfer of the eligible property; or

(b) the amount payable under subsection 94 (1) of the Act with respect to the transfer of the eligible property is less than the amount used in the calculation of the municipal electricity utility’s refundable balance.

(15) No interest is payable to a municipal electricity utility in respect of any amounts refunded under this section.

(16) An amount paid as a refund under this section shall not be included in computing an amount payable by a municipal electricity utility under section 93 of the Act except to the extent that the refund relates to an amount paid under subsection 94 (1) of the Act that has been claimed or deducted as an outlay or expense by a municipal electricity utility in computing an amount payable under section 93 of the Act for a taxation year.

3. Subsection 4 (2) of the Regulation is revoked and the following substituted:

(2) The notice of the proposed transfer must be received by the Minister,

(a) at any time before the date of the proposed transfer if,

(i) subsection 94 (1) of the Act does not apply to the transfer by reason of section 3, or

(ii) the amount required to be paid under subsection 94 (1) of the Act is reduced to nil by the deduction of amounts permitted to be deducted under subsection 94 (3) or (4) of the Act; or

(b) at least 60 days before the date of the proposed transfer in any other case.

4. This Regulation shall be deemed to have come into force on October 17, 2006.

Made by:

Gregory Sorbara

Minister of Finance

Date made: August 15, 2007.