Budget Implementation Act, 2006 (S.C. 2006, c. 4)
Full Document:
Assented to 2006-06-22
74. (1) The portion of subsection 125.1(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Manufacturing and processing profits deductions
125.1 (1) There may be deducted from the tax otherwise payable under this Part by a corporation for a taxation year an amount equal to the corporation’s general rate reduction percentage for the taxation year (within the meaning assigned by subsection 123.4(1)) multiplied by the lesser of
(2) The portion of subsection 125.1(2) of the Act before the formula is replaced by the following:
Marginal note:Electrical energy and steam
(2) A corporation that generates electrical energy for sale, or produces steam for sale, in a taxation year may deduct from its tax otherwise payable under this Part for the year an amount equal to the corporation’s general rate reduction percentage for the taxation year (within the meaning assigned by subsection 123.4(1)) multiplied by the amount determined by the formula
75. (1) Paragraph (d) of the definition “investment tax credit” in subsection 127(9) of the Act is repealed.
(2) Paragraph (a) of the definition “flow-through mining expenditure” in subsection 127(9) of the Act is replaced by the following:
(a) that is a Canadian exploration expense incurred by a corporation after May 1, 2006 and before 2008 (including, for greater certainty, an expense that is deemed by subsection 66(12.66) to be incurred before 2008) in conducting mining exploration activity from or above the surface of the earth for the purpose of determining the existence, location, extent or quality of a mineral resource described in paragraph (a) or (d) of the definition “mineral resource” in subsection 248(1),
(3) Paragraphs (c) and (d) of the definition “flow-through mining expenditure” in subsection 127(9) of the Act are replaced by the following:
(c) an amount in respect of which is renounced in accordance with subsection 66(12.6) by the corporation to the taxpayer (or a partnership of which the taxpayer is a member) under an agreement described in that subsection and made after May 1, 2006 and before April 1, 2007, and
(d) that is not an expense that was renounced under subsection 66(12.6) to the corporation (or a partnership of which the corporation is a member), unless that renunciation was under an agreement described in that subsection and made after May 1, 2006 and before April 1, 2007;
(4) Section 127 of the Act is amended by adding the following after subsection (9):
Marginal note:Transitional application of investment tax credit definition
(9.01) For the purpose of applying each of paragraphs (c) to (f), (h) and (i) of the definition “investment tax credit” in subsection (9) in respect of a taxpayer, the reference to “10” in that paragraph is to be read as a reference to the number that is the lesser of
(a) 20, and
(b) the number that is the total of 10 and the number of taxation years by which the number of taxation years of the taxpayer that have ended after 2005 exceeds 11.
Marginal note:Transitional application of investment tax credit definition
(9.02) For the purpose of applying paragraph (g) of the definition “investment tax credit” in subsection (9) in respect of a taxpayer, the reference to “9” in that paragraph is to be read as a reference to the number that is the lesser of
(a) 19, and
(b) the number that is the total of 9 and the number of taxation years by which the number of taxation years of the taxpayer that have ended after 2005 exceeds 11.
(5) Section 127 of the Act is amended by adding the following after subsection (35);
Marginal note:Transitional application of investment tax credit recapture
(36) For the purpose of applying each of subsection (27) or (29) in respect of a taxpayer, subsection (28) in respect of a partnership or subsection (34) or (35) in respect of a purchaser and an original user, as the case may be, (which taxpayer, partnership or original user is, in this subsection, referred to as the “taxpayer”), the reference to “10” in that subsection is to be read as a reference to the number that is the lesser of
(a) 20, and
(b) the number that is the total of 10 and the number of taxation years or fiscal periods, as the case may be, by which the number of taxation years or fiscal periods of the taxpayer that have ended after 2005 exceeds 11.
(6) Subsections (1), (4) and (5) apply to the 2006 and subsequent taxation years.
(7) Subsections (2) and (3) apply to expenses renounced under agreements made after May 1, 2006.
75.1 (1) Clause 127.52(1)(h)(ii)(A) of the Act is replaced by the following:
(A) the amount deducted under paragraph 110(1)(d.01), and
(2) Subsection (1) applies to the 2006 and subsequent taxation years except that, for the 2006 taxation year, clause 127.52(1)(h)(ii)(A) of the Act, as enacted by subsection (1), shall be read as follows:
(A) the total of
(I) twice the amount deducted under paragraph 110(1)(d.01) in respect of gifts made before May 2, 2006, and
(II) the amount deducted under paragraph 110(1)(d.01) in respect of gifts made after May 1, 2006, and
76. (1) Section 127.531 of the Act is replaced by the following:
Marginal note:Basic minimum tax credit determined
127.531 An individual’s basic minimum tax credit for a taxation year is the total of all amounts each of which is
(a) an amount deducted under subsection 118(1) or (2), 118.01(2) or 118.3(1) or any of sections 118.5 to 118.7 in computing the individual’s tax payable for the year under this Part; or
(b) the amount that was claimed under section 118.1 or 118.2 in computing the individual’s tax payable for the year under this Part, determined without reference to this Division, to the extent that the amount claimed does not exceed the maximum amount deductible under that section in computing the individual’s tax payable for the year under this Part, determined without reference to this Division.
(2) Subsection (1) applies to the 2002 and subsequent taxation years except that, for taxation years before 2005, paragraph 127.531(a) of the Act, as enacted by subsection (1), shall be read as follows:
(a) an amount deducted under subsection 118(1) or (2) or 118.3(1) or any of sections 118.5 to 118.7 in computing the individual’s tax payable for the year under this Part; or
77. (1) Subparagraph 127.54(2)(b)(ii) of the Act is replaced by the following:
(ii) the amount determined by the formula
A × B
where
- A
- is the appropriate percentage for the taxation year, and
- B
- is the individual’s foreign income for the year.
(2) Subsection (1) applies to the 2005 and subsequent taxation years.
78. (1) Clause 128(2)(e)(iii)(A) of the Act is replaced by the following:
(A) under section 118, 118.01, 118.2, 118.3, 118.5, 118.6, 118.8 or 118.9,
(2) Subsection (1) applies to the 2005 and subsequent taxation years.
79. (1) The portion of subsection 135(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Deduction in computing income
135. (1) Notwithstanding anything in this Part, other than subsections (1.1) to (2.1) and 135.1(3), there may be deducted, in computing the income of a taxpayer for a taxation year, the total of the payments made, pursuant to allocations in proportion to patronage, by the taxpayer
(2) The portion of subsection 135(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Amount to be deducted or withheld from payment to customer
(3) Subject to subsection 135.1(6), a taxpayer who makes at any particular time in a calendar year a payment pursuant to an allocation in proportion to patronage to a person who is resident in Canada and is not exempt from tax under section 149 shall, notwithstanding any agreement or any law to the contrary, deduct or withhold from the payment an amount equal to 15% of the lesser of the amount of the payment and the amount, if any, by which
(3) The portion of subsection 135(4) of the Act before the definition “allocation in proportion to patronage” is replaced by the following:
Marginal note:Definitions
(4) For the purposes of this section and section 135.1,
(4) Subsection 135(7) of the Act is replaced by the following:
Marginal note:Payment to customer to be included in income
(7) Where a payment pursuant to an allocation in proportion to patronage (other than an allocation in respect of consumer goods or services) has been received by a taxpayer, the amount of the payment shall, subject to subsection 135.1(2), be included in computing the recipient’s income for the taxation year in which the payment was received and, without restricting the generality of the foregoing, where a certificate of indebtedness or a share was issued to a person pursuant to an allocation in proportion to patronage, the amount of the payment by virtue of that issuance shall be included in computing the recipient’s income for the taxation year in which the certificate or share was received and not in computing the recipient’s income for the year in which the indebtedness was subsequently discharged or the share was redeemed.
(5) Subsections (1) to (4) apply after 2005.
80. (1) The Act is amended by adding the following after section 135:
Agricultural Cooperatives — Tax-deferred Patronage Dividends
Marginal note:Definitions
135.1 (1) The following definitions apply in this section and section 135.
“agricultural business”
« entreprise d’agriculture »
“agricultural business” means a business, carried on in Canada, that consists of one or any combination of
(a) farming (including, if the person carrying on the business is a corporation described in paragraph (a) of the definition “agricultural cooperative corporation”, the production, processing, storing and wholesale marketing of the products of its members’ farming activities); or
(b) the provision of goods or services (other than financial services) that are required for farming.
“agricultural cooperative corporation”
« coopérative agricole »
“agricultural cooperative corporation” at any time means a corporation
(a) that was incorporated or continued by or under the provisions of a law, of Canada or of a province, that provide for the establishment of the corporation as a cooperative corporation or that provide for the establishment of cooperative corporations; and
(b) that has at that time
(i) as its principal business an agricultural business, or
(ii) members, making up at least 75% of all members of the corporation, each of whom
(A) is an agricultural cooperative corporation, or
(B) has as their principal business a farming business.
“allowable disposition”
« disposition admissible »
“allowable disposition” means a disposition by a taxpayer of a tax deferred cooperative share less than five years after the day on which the share was issued if
(a) before the disposition,
(i) the agricultural cooperative corporation is notified in writing that the taxpayer has after the share was issued become disabled and permanently unfit for work, or terminally ill, or
(ii) the taxpayer ceases to be a member of the agricultural cooperative corporation; or
(b) the agricultural cooperative corporation is notified in writing that the share is held by a person on whom the share has devolved as a consequence of the death of the taxpayer.
“eligible member”
« membre admissible »
“eligible member” of an agricultural cooperative corporation means a member who carries on an agricultural business and who is
(a) an individual resident in Canada;
(b) an agricultural cooperative corporation;
(c) a corporation resident in Canada that carries on the business of farming in Canada; or
(d) a partnership that carries on the business of farming in Canada, all of the members of which are described in any of paragraphs (a) to (c) or this paragraph.
“tax deferred cooperative share”
« part à imposition différée »
“tax deferred cooperative share” at any time means a share
(a) issued, after 2005 and before 2016, by an agricultural cooperative corporation to a person or partnership that is at the time the share is issued an eligible member of the agricultural cooperative corporation, pursuant to an allocation in proportion to patronage;
(b) the holder of which is not entitled to receive on the redemption, cancellation or acquisition of the share by the agricultural cooperative corporation or by any person with whom the agricultural cooperative corporation does not deal at arm’s length an amount that is greater than the amount that would, if this Act were read without reference to this section, be included under subsection135(7) in computing the eligible member’s income for their taxation year in which the share was issued;
(c) that has not before that time been deemed by subsection (4) to have been disposed of; and
(d) that is of a class
(i) the terms of which provide that the agricultural cooperative corporation shall not, otherwise than pursuant to an allowable disposition, redeem, acquire or cancel a share of the class before the day that is five years after the day on which the share was issued, and
(ii) that is identified by the agricultural cooperative corporation in prescribed form and manner as a class of tax deferred cooperative shares.
“tax paid balance”
« solde libéré d’impôt »
“tax paid balance” of a taxpayer at the end of a particular taxation year of the taxpayer means the amount, if any, by which
(a) the total of
(i) the taxpayer’s tax paid balance at the end of the immediately preceding taxation year, and
(ii) the amount, if any, that is included in computing the taxpayer’s income under this Part for the particular taxation year because of an election described in subparagraph (2)(a)(ii),
exceeds
(b) the total of all amounts each of which is the taxpayer’s proceeds of disposition of a tax deferred cooperative share that the taxpayer disposed of in the particular taxation year.
Marginal note:Income inclusion
(2) In computing the income of a taxpayer for a particular taxation year, there shall be included under subsection 135(7), in respect of the taxpayer’s receipt, as an eligible member, of tax deferred cooperative shares of an agricultural cooperative corporation in the particular taxation year, only the total of
(a) the lesser of
(i) the total of all amounts, in respect of the taxpayer’s receipt in the particular taxation year of tax deferred cooperative shares, that would, if this Act were read without reference to this section, be included under subsection 135(7) in computing the taxpayer’s income for the particular taxation year, and
(ii) the greater of nil and the amount, if any, specified by the taxpayer in an election in prescribed form that is filed with the taxpayer’s return of income for the particular taxation year, and
(b) the amount, if any, by which
(i) the total of all amounts each of which is the taxpayer’s proceeds of disposition of a tax deferred cooperative share disposed of by the taxpayer in the particular taxation year
exceeds
(ii) the total of
(A) the taxpayer’s tax paid balance at the end of the immediately preceding taxation year, and
(B) the amount, if any, that is included in computing the taxpayer’s income for the particular taxation year because of an election described in subparagraph (a)(ii).
Marginal note:Deductibility limit
(3) The amount that may be deducted under subsection 135(1) for a particular taxation year by an agricultural cooperative corporation in respect of payments, in the form of tax deferred cooperative shares, made pursuant to allocations in proportion to patronage shall not exceed 85% of the agricultural cooperative corporation’s income of the taxation year attributable to business done with members.
Marginal note:Deemed disposition
(4) A taxpayer who holds a tax deferred cooperative share is deemed to have disposed of the share, for proceeds of disposition equal to the amount that would, if this Act were read without reference to this section, have been included under subsection 135(7), in respect of the share, in computing the taxpayer’s income for the taxation year in which the share was issued, at the earliest time at which
(a) the paid-up capital of the share is reduced otherwise than by way of a redemption of the share; or
(b) the taxpayer pledges, or for civil law hypothecates, assigns or in any way alienates the share as security for indebtedness of any kind.
Marginal note:Reacquisition
(5) A taxpayer who is deemed by subsection (4) to have disposed at any time of a tax deferred cooperative share is deemed to have reacquired the share, immediately after that time, at a cost equal to the taxpayer’s proceeds of disposition from that disposition.
Marginal note:Exclusion from withholding obligation
(6) Subsection 135(3) does not apply to a payment pursuant to an allocation in proportion to patronage that is paid by an agricultural cooperative corporation through the issuance of a tax deferred cooperative share.
Marginal note:Withholding on redemption
(7) If a share that was, at the time it was issued, a tax deferred cooperative share of an agricultural cooperative corporation is redeemed, acquired or cancelled by the agricultural cooperative corporation, or by a person or partnership with whom the agricultural cooperative corporation does not deal at arm’s length, the agricultural cooperative corporation or the person or partnership, as the case may be, shall withhold and forthwith remit to the Receiver General, on account of the shareholder’s tax liability, 15% from the amount otherwise payable on the redemption, acquisition or cancellation.
Marginal note:Application of subsections 84(2) and (3)
(8) Subsections 84(2) and (3) do not apply to a tax deferred cooperative share.
(2) Subsection (1) applies after 2005, except that paragraph 135.1(4)(b) of the Act, as enacted by subsection (1), does not apply to any indebtedness entered into before 2006.
- Date modified: