Bill 8 — First Session, 25Th Legislature, 50 Elizabeth Ii the Legislative Assembly of Alberta Bill 8 Alberta Corporate Tax Amendment Act, 2001 (Legislature 25, Session 1)

L25 S1 103

Alberta — Bills

2001 BILL 8 First Session, 25th Legislature, 50 Elizabeth II THE LEGISLATIVE ASSEMBLY OF ALBERTA BILL 8 ALBERTA CORPORATE TAX AMENDMENT ACT, 2001 mr. M cClelland First Reading Second Reading Committee of the Whole Third Reading Royal Assent Title: 2001 (25th, 1st) Bill 8, Alberta Corporate Tax Amendment Act, 2001

Bill 8 Mr. McClelland BILL 8 2001 ALBERTA CORPORATE TAX AMENDMENT ACT, 2001 (Assented to , 2001) HER MAJESTY, by and with the advice and consent of the Legislative Assembly of Alberta, enacts as follows: Amends RSA 1980 cA-17 1 The Alberta Corporate Tax Act is amended by this Act. 2

Section 1 is amended (

a) by repealing subsection (2)(g.3); (

b) by adding the following after subsection (2):

(2.1) For the purposes of this Act, a reference to the Minister of National Revenue, the Minister or the Deputy Minister of National Revenue is to be read as including a reference to the Commissioner of the Canada Customs and Revenue Agency established under the Canada Customs and Revenue Agency Act (Canada). 1

Explanatory Notes 1 Amends

chapter A-17 of the Revised Statutes of Alberta 1980. 2

Section 1(2) presently reads:

(2) In this Act and in the application of the provisions of the federal Act and regulations made under that Act that are by this Act made applicable for the purposes of this Act, (a) “Alberta allocation factor” means the Alberta allocation factor determined in accordance with Division 1 of

Part 4; (b) “amount taxable in Alberta” means the amount taxable determined in accordance with

Part 4; (b.1) “balance-due day” of a corporation for a taxation year means the day on or before which the corporation is required under

section 38 to pay the remainder of its tax payable under

Part 5 for the year or would be so required if such a remainder were payable; (c) “court” means the Court of Queen’s Bench; (d) “federal Act” means the Income Tax Act (Canada) and includes any rules of application that are contained in any Act of the Parliament of Canada that amends the Income Tax Act (Canada); (d.1) “federal assessment action” means any of the following actions taken by the Minister of National Revenue under the federal Act: 1 Explanatory Notes

(

i) an assessment, reassessment or additional assessment of tax, interest or penalties; (ii) a determination or redetermination of a loss or an amount; (iii) a confirmation of an assessment, reassessment or additional assessment of tax, interest or penalties or of a determination or redetermination of a loss or an amount; (e) “jurisdiction” means a province of Canada or a country or political subdivision of a country; (e.1) “federal regulation” means a regulation, as amended from time to time, made under the federal Act; (f) “permanent establishment” means a fixed place of business of the corporation, including an office, a branch, a mine, an oil well, a farm, a timber land, a factory, a workshop or a warehouse, and (

i) if the corporation does not have any fixed place of business it means the principal place in which the corporation’s business is conducted, (ii) if a corporation carries on business through an employee or agent, established in a particular place, who has general authority to contract for his employer or principal or who has a stock of merchandise owned by his employer or principal from which he regularly fills orders which he receives, the corporation shall be deemed to have a permanent establishment in that place, (iii) an insurance corporation is deemed to have a permanent establishment in each province and country in which the corporation is registered or licensed to do business, (iv) if a corporation, otherwise having a permanent establishment in Canada, owns land in a province, that land shall be deemed to be a permanent establishment, (

v) if a corporation uses substantial machinery or equipment in a particular place at any time in a taxation year it shall be deemed to have a permanent establishment in that place, (vi) the fact that a corporation has business dealings through a commission agent, broker or other independent agent or maintains an office solely for the purchase of merchandise shall not of itself be held to mean that the corporation has a permanent establishment, and 2 Explanatory Notes

Section 2(6) is amended by striking out “An” and substituting “Subject to sections 14.1, 14.2, 14.3, 16.1 and 16.2, an”. 3

(vii) the fact that a corporation has a subsidiary controlled corporation in a place or a subsidiary controlled corporation engaged in trade or business in a place shall not of itself be held to mean that the corporation is operating a permanent establishment in that place; (g) “prescribed” means (

i) with respect to a form, the information to be given on a form or the manner of filing a form, authorized by the Provincial Treasurer, (i.1) with respect to the manner of making or filing an election, authorized by the Provincial Treasurer, or (ii) in any other case, prescribed by regulation; (g.1) “refundable tax credit” means a tax credit to which a corporation is entitled under

Part 6; (g.2) “royalty tax credit” means a tax credit to which a corporation is entitled under

section 26.1; (g.3) “royalty tax credit gas supplement” means a tax credit to which a corporation is entitled under

section 26.2; (h) “royalty tax deduction” means the royalty tax deduction determined in accordance with

section 20(3); (h.1) “specified future tax consequence" for a taxation year means specified future tax consequence as defined in subsection 248(1) of the federal Act, except that the following replaces paragraph (

a) of that definition: (

a) the consequence of the deduction or exclusion of an amount referred to in

section 39(3)(

a) of the Alberta Corporate Tax Act, and; (i) “tax payable” with respect to a corporation, means the tax payable by that corporation as fixed by assessment or reassessment and subject to variation or objection or on appeal; (j) “taxable income” means the income of a corporation calculated in accordance with

Part 3. 3

Section 2(6) presently reads:

(6) An election or designation by a corporation that may be made under the federal Act may be filed with the Provincial Treasurer and if so filed the rules respecting that election or designation in the federal Act apply but, in the event that the election or designation is not filed with the Provincial Treasurer, the Provincial Treasurer shall accept an election or designation made under the federal Act and the provisions of the federal Act imposing penalties for late filing 3 Explanatory Notes

Section 6 is amended by striking out “The” and substituting “Subject to sections 6.1 and 6.2, the”. 4

of elections or designations are not applicable for the purposes of this Act. 4

Section 6 presently reads: 6 The income of a corporation for a taxation year is its income for the year determined by the following rules: (

a) determine the aggregate of amounts each of which is the corporation’s income for the year (other than a taxable capital gain from the disposition of a property) from a source inside or outside Canada, including, without restricting the generality of the foregoing, its income for the year from each business and property; (

b) determine the amount, if any, by which (

i) the aggregate of its taxable capital gains for the year from dispositions of property other than listed personal property, and its taxable net gain for the year from dispositions of listed personal property, exceeds (ii) the amount, if any, by which its allowable capital losses for the year from dispositions of property other than listed personal property exceed its allowable business investment losses for the year; (

c) determine the amount, if any, by which the aggregate determined under clause (

a) plus the amount determined under clause (

b) exceeds the aggregate of the deductions permitted by Division 4 of this

Part in computing the corporation’s income for the year (except such of or such part of those deductions, if any, as have been taken into account in determining the aggregate referred to in clause (a)); (

d) determine the amount, if any, by which the remainder determined under clause (

c) exceeds the aggregate of amounts each of which is its loss for the year from a business or property or its allowable business investment loss for the year; and for the purposes of this Act, (

e) where an amount is determined under clause (

d) for the year in respect of the corporation, the corporation’s income for the year is the amount so determined, and (

f) in any other case, the corporation shall be deemed to have income for the year in an amount equal to zero. 4 Explanatory Notes

5 The following is added after

section 6: Cost amount of property 6.1 Where the cost amount of property owned by a corporation is relevant in the computation of income for the purposes of this Act, the cost amount, for the purposes of this Act, of any property owned by the corporation at the time it establishes a permanent establishment in Alberta is deemed to be the cost amount of such property, at that time, for purposes of the computation of income under the federal Act. Rules for depreciable property 6.2 Where the property referred to in

section 6.1 is depreciable property and the capital cost of such property to the corporation immediately prior to the time the corporation establishes a permanent establishment in Alberta exceeds the cost amount of such property as determined under

section 6.1, for the purposes of applying those sections of this Act that make applicable for the purposes of this Act sections 13 and 20 of the federal Act and any federal regulations made for the purposes of paragraph 20(1)(

a) of the federal Act, (

a) the capital cost of the property to the corporation is deemed to be the capital cost to the corporation of the property for the purposes of the federal Act immediately prior to the time it established a permanent establishment in Alberta, and (

b) the excess is deemed to have been deducted by the corporation under the sections of this Act that make applicable paragraph 20(1)(

a) of the federal Act. 6(1)

Section 8 is amended by adding the following after subsection (2.2):

(2.3) In determining the income of a corporation for a taxation year, taxes imposed by another province or territory of Canada and computed by reference to the amount of a corporation’s capital are not deductible for the purposes of this Act.

(2) This

section applies to taxation years beginning after March 31, 2001. 7 The following is added after

section 8.3: 5

5 Cost amount of property. 6 Deductions of capital tax from other Provinces and Territories. 7 Federal transfer pricing rules. 5 Explanatory Notes

Federal transfer pricing rules 8.4(1)

Section 247, except subsections (3) and (11), of the federal Act applies in computing income for the purposes of this Act.

(2) This

section applies to taxation years and fiscal periods that begin after 1997. 8

Section 12(2) is amended by striking out “Subsection 67.5(2) of the federal Act does” and substituting “Subsections 67.5(2) and 69(12) of the federal Act do”. 9(1)

Section 14 is amended (

a) by repealing subsection (1) and substituting the following: Computation of income of corporations 14(1) Subject to subsections (2), (3), (3.01), (3.02), (3.1), (3.2) and (4) and sections 14.1, 14.2 and 14.3, subdivision h of Division B of

Part I of the federal Act applies for the purposes of this Act. (

b) by adding the following after subsection (3):

(3.01) Section 86.1 of the federal Act, except subsection (5), applies for the purposes of this Act if the information and the election required to be filed with the federal Minister are also filed with the Minister of Revenue within the time period set out in

section 86.1 of the federal Act.

(3.02) Where the cost amount to the corporation of the original shares referred to in subsection 86.1(3) of the federal Act is different for the purposes of this Act than for the purposes of the federal Act, the information filed with the Minister of Revenue under subsection (3.01) of this

section must include the cost adjustment calculation described in subsection 86.1(3) of the federal Act using the cost amount to the corporation of the original shares calculated for the purposes of this Act. (2) Subsection (1) applies to distributions received after 1997, except that (

a) information referred to in paragraph 86.1(2)(

e) of the federal Act, as it applies for the purposes of the Alberta Corporate Tax Act, is deemed to be provided to the Minister of Revenue on a timely basis if it is filed with the Minister of Revenue before the day that 6

Section 12(2) presently reads:

(2) Subsection 67.5(2) of the federal Act does not apply for the purposes of this Act. 9

Section 14(1) presently reads: 14(1) Subject to subsections (2), (3), (3.1), (3.2) and (4), subdivision h of Division B of

Part I of the federal Act applies for the purpose of this Act. 6 Explanatory Notes

is 90 days after the day on which

section 86.1 of the federal Act comes into force, and (

b) the election referred to in paragraph 86.1(2)(

f) of the federal Act, as it applies for the purposes of the Alberta Corporate Tax Act, is deemed to be filed on a timely basis if it is filed with the Minister of Revenue before the day that is 90 days after the day on which

section 86.1 of the federal Act comes into force.

(3) This

section applies only if the proposal to enact, with or without amendments,

section 86.1 of the federal Act as contained in the Ways and Means Motion tabled in the House of Commons on December 21, 2000 is enacted by the Parliament of Canada. 10 The following is added after

section 14: Transfer of property to a corporation 14.1(1) Subsection 85(1) of the federal Act applies in respect of the transfer of property to a corporation for the purposes of this Act only if (

a) a valid federal election has been made under subsection 85(1) of the federal Act in respect of the transfer of that property, and (

b) a copy of the prescribed federal election form filed under the federal Act is filed with the Minister of Revenue in accordance with

section 14.3 of this Act.

(2) Subject to subsection (3), where subsection 85(1) of the federal Act applies for the purposes of this Act in respect of the transfer of property from a corporation, the amount deemed to be the proceeds of disposition of the property to the corporation disposing of the property and the cost of the property to the corporation acquiring the property for the purposes of the federal Act is the amount to be deemed for the purposes of this Act.

(3) If (

a) the corporation disposing of the property was a qualified party for the taxation year in which it disposed of the property, and 7

10 Transfer of property to a corporation. Transfer of property from a partnership. Filing of election form, 7 Explanatory Notes

(

b) the corporation acquiring the property was a qualified party for the taxation year in which it acquired the property and throughout all of its taxation years beginning in the 36 months subsequent to the end of the taxation year in which it acquired the property, the corporation disposing of the property and the corporation acquiring the property may, for the purposes of this Act, jointly elect in the prescribed form and in accordance with

section 14.3(3) an amount under subsection (4) to be the proceeds of disposition of the property to the corporation disposing of the property and the cost of the property to the corporation acquiring the property.

(4) For the purposes of an election under subsection (3), one of the following may be elected: (

a) the amount deemed to be the proceeds of disposition and the cost of the property under the federal Act; (

b) the amount equal to the amount in clause (

a) less the cost amount of the property for the purposes of the computation of income under the federal Act, plus the cost amount of the property for the purposes of the computation of income under this Act, both determined immediately before the disposition to which the election relates; (

c) an amount that is greater than the lesser of the amounts described in clauses (

a) and (b), but less than the greater of the amounts described in clauses (

a) and (b).

(5) For the purposes of subsection (3), a qualified party is a corporation whose Alberta allocation factor for the particular taxation year, as determined by

section 19(1), is at least 90%. Transfer of property from a partnership 14.2(1) Subsection 85(2) of the federal Act applies in respect of the transfer of property to a corporation from a partnership for the purposes of this Act only if (

a) a valid federal election has been made under subsection 85(2) of the federal Act in respect of the transfer of that property, and 8

8 Explanatory Notes

(

b) a copy of the prescribed federal election form filed under the federal Act is filed with the Minister of Revenue in accordance with

section 14.3 of this Act.

(2) Subject to subsection (3), where subsection 85(2) of the federal Act applies for the purposes of this Act and a corporation is a member of the partnership disposing of the property, the amount deemed to be the proceeds of disposition of the property to the partnership disposing of the property and the cost of the property to the corporation acquiring the property for the purposes of the federal Act is the amount to be deemed for the purposes of this Act.

(3) If (

a) one or more of the members of the partnership disposing of the property is a corporation, (

b) the partnership disposing of the property was a qualified party for the fiscal period in which it disposed of the property, and (

c) the corporation acquiring the property was a qualified party for the taxation year in which it acquired the property and throughout all of its taxation years beginning in the 36 months subsequent to the end of the taxation year in which it acquired the property, all of the members of the partnership disposing of the property and the corporation acquiring the property may, for the purposes of this Act, jointly elect in the prescribed form and in accordance with

section 14.3(3) an amount under subsection (4) to be the proceeds of disposition of the property to the partnership disposing of the property and the cost of the property to the corporation acquiring the property.

(4) For the purposes of an election under subsection (3), one of the following may be elected: (

a) the amount deemed to be the proceeds of disposition and the cost of the property under the federal Act; (

b) the amount equal to the amount in clause (

a) less the cost amount of the property for the purposes of the computation of income under the federal Act, plus the cost amount of the property for the purposes of the computation of income under this Act, both 9

9 Explanatory Notes

determined immediately before the disposition to which the election relates; (

c) an amount that is greater than the lesser of the amounts described in clauses (

a) and (b), but less than the greater of the amounts described in clauses (

a) and (b).

(5) For the purposes of subsection (3), a qualified party is (

a) in the case of a corporation, a corporation whose Alberta allocation factor for the particular taxation year, as determined by

section 19(1), is at least 90%, and (

b) in the case of a partnership, a partnership which, if it were treated as a corporation having a taxation year corresponding to its fiscal period, would have an Alberta allocation factor for the particular taxation year, as determined by

section 19(1), of at least 90%. Filing of election form 14.3(1) The copy of the prescribed federal election form to be filed with the Minister of Revenue under

section 14.1(1) or 14.2(1) must be filed within the time limitations that apply for filing the prescribed federal election form under the federal Act. (2) Subsections 85(7), 85(7.1), 85(8) and 85(9) of the federal Act apply for the purposes of the filing of the prescribed federal election form with the Minister of Revenue in accordance with subsection (1) except that in applying those subsections for the purposes of this Act, the penalties payable to the Minister of Revenue are 1/2 of the amounts described in those subsections.

(3) The election form referred to in sections 14.1(3) and 14.2(3) must be filed with the Minister of Revenue by the corporation that acquired the property at the time its income tax return is due for the last taxation year beginning in the 36-month period referred to in

section 14.1(3)(

b) or 14.2(3)(c), as the case may be. 11

Section 16 is repealed and the following is substituted: 10

Section 16 presently reads: 16 Subdivision j of Division B of

Part I of the federal Act applies for the purposes of computing the income of a corporation. 10 Explanatory Notes

Partnership16 Subject to sections 16.1 and 16.2, subdivision j of Division B of

Part I of the federal Act applies for the purposes of computing the income of a corporation. 12 The following is added after

section 16: Transfer of property to a partnership 16.1(1) Subsection 97(2) of the federal Act applies in respect of the transfer of property from a corporation to a partnership for the purposes of this Act only if (

a) a valid federal election has been made under subsection 97(2) of the federal Act in respect of the transfer of that property, and (

b) a copy of the prescribed federal election form filed under the federal Act is filed with the Minister of Revenue in accordance with

section 16.2 of this Act.

(2) Subject to subsection (3), where subsection 97(2) of the federal Act applies for the purposes of this Act, the amount deemed to be the proceeds of disposition of the property to the corporation disposing of the property and the cost of the property to the partnership acquiring the property for the purposes of the federal Act is the amount to be deemed for the purposes of this Act.

(3) If (

a) the corporation disposing of the property was a qualified party in the taxation year in which it disposed of the property, (

b) one or more of the members of the partnership acquiring the property was a corporation, and (

c) the partnership acquiring the property was a qualified party for the fiscal period in which the acquisition occurred and throughout all of its fiscal periods beginning in the 36 months subsequent to the end of the fiscal period in which it acquired the property, the corporation disposing of the property and all of the members of the partnership acquiring the property may, for the purposes of this Act, jointly elect in the prescribed form and in accordance with

section 16.2(3) an amount under subsection (4) to be the proceeds of disposition of the 11

12 Transfer of property to a partnership. Filing of election form. 11 Explanatory Notes

property to the corporation disposing of the property and the cost of the property to the partnership acquiring the property.

(4) For the purposes of an election under subsection (3), one of the following may be elected: (

a) the amount deemed to be the proceeds of disposition and the cost of the property under the federal Act; (

b) the amount equal to the amount in clause (

a) less the cost amount of the property for the purposes of the computation of income under the federal Act, plus the cost amount of the property for the purposes of the computation of income under this Act, both determined immediately before the disposition to which the election relates; (

c) an amount that is greater than the lesser of the amounts described in clauses (

a) and (b), but less than the greater of the amounts described in clauses (

a) and (b).

(5) For the purposes of subsection (3), a qualified party is (

a) in the case of a corporation, a corporation whose Alberta allocation factor for the particular taxation year, as determined by

section 19(1), is at least 90%, and (

b) in the case of a partnership, a partnership which, if it were treated as a corporation having a taxation year corresponding to its fiscal period, would have an Alberta allocation factor for the particular taxation year, as determined by

section 19(1), of at least 90%. Filing of election form 16.2(1) The copy of the prescribed federal election form to be filed with the Minister of Revenue under

section 16.1(1) must be filed within the time limitations that apply for filing the prescribed federal election form under the federal Act. (2) Subsections 96(5), 96(5.1), 96(6) and 96(7) of the federal Act apply for the purposes of the filing of the prescribed federal election form with the Minister of Revenue in accordance with subsection (1) except that in applying those subsections for the purposes of this Act, the penalties payable to the Minister of Revenue are 1/2 of the amounts described in those subsections. 12

12 Explanatory Notes

(3) The election form referred to in

section 16.1(3) must be filed by all of the members of the partnership with the Minister of Revenue at the time when the income tax return is first due for a member of the partnership that is a corporation for its taxation year that includes the last fiscal period of the partnership beginning in the 36-month period referred to in

section 16. l(3)(c). 13(1)

Section 21 is amended by striking out “or” at the end of clause (

d) and by repealing clause (

e) and substituting the following: (

e) beginning after March 31, 1991 and ending before April 1, 2001 is 15.5% of the amount taxable in Alberta for the year, (

f) part of which is before April 1, 2001 and part of which is after March 31, 2001, is the aggregate of (i) 15.5% of the proportion of the amount taxable in Alberta for the year that the number of days in the year before April 1, 2001 bears to the number of days in the year, and (ii) 13.5% of the proportion of the amount taxable in Alberta for the year that the number of days in the year after March 31, 2001 bears to the number of days in the year, or (

g) beginning after April 1, 2001 is 13.5% of the amount taxable in Alberta for the year.

(2) This

section applies after March 31, 2001. 14(1)

Section 22 is amended (

a) in subsection (2) by striking out “under

section 21 for a taxation year” and substituting “under

section 21 for a taxation year ending before April 1, 2001”; (

b) by repealing subsection (2.1)(

g) and substituting the following: (

g) for a taxation year beginning after March 31, 1991 and ending before April 1, 2001 is 9.5%. 13

Section 21 presently reads in part: 21 Except where otherwise provided in this Part, the tax payable under this Act by a corporation that has a taxation year (

d) part of which is before April 1, 1991 and part of which is after March 31, 1991 is the aggregate of (i) 15% of the proportion of the amount taxable in Alberta for the year that the number of days in the year before April 1, 1991 bears to the number of days in the year, and (ii) 15.5% of the proportion of the amount taxable in Alberta for the year that the number of days in the year after March 31, 1991 bears to the number of days in the year, or (

e) beginning after March 31, 1991 is 15.5% of the amount taxable in Alberta for the year. 14

Section 22 presently reads in part:

(2) Subject to subsection (2.01), there may be deducted from the tax payable under

section 21 for a taxation year by a corporation that was, throughout the year, a Canadian-controlled private corporation, an amount equal to the product obtained when the small business allocation factor is multiplied by the applicable percentage for the taxation year of the least of (

a) the amount, if any, by which the aggregate of (

i) the aggregate of all amounts each of which is the income of the corporation for the year from an 13 Explanatory Notes

(

c) by adding the following after subsection (2.1):

(2.11) Subject to subsection (2.13), there may be deducted from the tax payable under

section 21 for a taxation year beginning before April 1, 2001 and ending after March 31, 2001 by a corporation that was, throughout the taxation year, a Canadian-controlled private corporation an amount equal to the product obtained by the multiplication of the following: (

a) the small business allocation factor for the year; (b) 9.5%; (

c) the proportion of the least of the following amounts that the number of days in the year before April 1, 2001 bears to the number of days in the year: (

i) the amount determined under subsection (2)(a); (ii) the amount determined under subsection (2)(b); (iii) the corporation’s business limit for the year.

(2.12) Subject to subsection (2.13), there may be deducted from the tax payable under

section 21 for a taxation year ending after March 31, 2001 by a corporation that was, throughout the year, a Canadian-controlled private corporation an amount equal to the product obtained by the multiplication of the following: (

a) the small business allocation factor for the year; (b) 8.5%; (

c) the proportion of the least of the following amounts that the number of days in the year after March 31, 2001 bears to the number of days in the year: (

i) the amount determined under subsection (2)(a); (ii) the amount determined under subsection (2)(b); (iii) 150% of the corporation’s business limit for the year.

(2.13) No amount may be deducted 14

active business carried on in Canada other than the income of the corporation for the year from a business carried on by it as a member of a partnership, and (ii) the specified partnership income of the corporation for the year exceeds the aggregate of (iii) the aggregate of all amounts each of which is a loss of the corporation for the year from an active business carried on in Canada other than a loss of the corporation for the year from a business carried on by it as a member of a partnership, (iv) the specified partnership loss of the corporation for the year, and (

v) the corporation’s royalty tax deduction for the year, (

b) the amount, if any, by which the corporation’s taxable income for the year exceeds the aggregate of (

i) the aggregate of the amounts determined under subparagraphs 125(1)(b)(

i) and (ii) of the federal Act, (i.

l) that part, if any, of the amount taxable in Alberta for the year that is not subject to income tax under this Act, and (ii) the corporation’s royalty tax deduction for the year, and (

c) the corporation’s business limit for the year.

(2.1) For the purposes of subsections (2) and (2.01), the applicable percentage (

g) for a taxation year beginning after March 31, 1991 is 9.5%. 14 Explanatory Notes

(

a) under subsection (2.11) for a taxation year in excess of the product obtained when the proportion of the amount determined under

section 20(2) that the number of days in the taxation year before April 1, 2001 bears to the number of days in the taxation year is multiplied by 9.5%, or (

b) under subsection (2.12) for a taxation year in excess of the product obtained when the proportion of the amount determined under

section 20(2) that the number of days in the taxation year after March 31, 2001 bears to the number of days in the taxation year is multiplied by 8.5%. (

d) in subsection (2.2) by striking out “of subsection (2),” and substituting “of subsections (2), (2.11) and (2.12),”.

(2) This

section applies after March 31, 2001. 15

Section 22.1 is repealed. 15

Section 22.1 presently reads: 22.1(1) In this section, except as otherwise provided in subsections (8) and (9), (a) “adjusted business income” of a corporation for a taxation year has the meaning assigned to it by

section 5202 of the federal regulations; (b) “Alberta cost of manufacturing and processing capital” of a corporation for a taxation year means 100/85 of that portion of the cost of capital of the corporation for that year that reflects the extent to which each property included in that calculation was used directly in qualified activities of the corporation during the year, but the amount so calculated shall not exceed the cost of capital of the corporation for the year; (c) “Alberta cost of manufacturing and processing labour” of a corporation for a taxation year means 100/75 of that portion of the cost of labour of the corporation for that year that reflects the extent to which (

i) the salaries and wages included in that calculation were paid or payable to persons for the portion of their time that they were directly engaged in qualified activities of the corporation during the year, and (ii) the other amounts included in that calculation were paid or payable to persons for the performance of 15 Explanatory Notes

functions that would be directly related to qualified activities of the corporation during the year if those persons were employees of the corporation, but the amount so calculated shall not exceed the cost of labour of the corporation for the year; (d) “Canadian investment income” of a corporation for a taxation year has the meaning assigned to it by subsection 129(4) of the federal Act; (e) “cost of capital” of a corporation for a taxation year has the meaning assigned to it by

section 5202 of the federal regulations; (f) “cost of labour” of a corporation for a taxation year has the meaning assigned to it by

section 5202 of the federal regulations; (g) "foreign investment income" of a corporation for a taxation year has the meaning assigned to it by subsection 129(4) of the federal Act; (h) “manufacturing or processing” does not include (

i) farming or fishing, (ii) logging, (iii) construction, (iv) operating an oil or gas well, extracting petroleum or natural gas from a natural accumulation of it or processing heavy crude oil recovered from a natural reservoir in Canada to a stage that is not beyond the crude oil stage or its equivalent, (

v) extracting minerals from a mineral resource, (vi) processing ore, other than iron ore or tar sands, from a mineral resource to any stage that is not beyond the prime metal stage or its equivalent, (vii) processing iron ore from a mineral resource to any stage that is not beyond the pellet stage or its equivalent, (vii.1) processing tar sands to any stage that is not beyond the crude oil stage or its equivalent, (viii) producing industrial minerals other than sulphur produced by processing natural gas, (ix) producing or processing electrical energy or steam, for sale, 16 Explanatory Notes

(

x) processing gas, if such gas is processed as part of the business of selling or distributing gas in the course of operating a public utility, or (xi) any manufacturing or processing of goods for sale or lease, if, for any taxation year of a corporation in respect of which the expression is being applied, less than 10% of its gross revenue from all active businesses carried on in Canada was from (

A) the selling or leasing of goods manufactured or processed in Canada by it, and (

B) the manufacturing or processing in Canada of goods for sale or lease, other than goods for sale or lease by it; (i) “qualified activities” means (

i) any of the following activities when they are performed in Alberta in connection with manufacturing or processing, not including the activities listed in clause (h)(

i) to (x), in Alberta of goods for sale or lease: (

A) engineering design of products and production facilities; (

B) receiving and storing of raw materials; (

C) producing, assembling and handling of goods in process; (

D) inspecting and packaging of finished goods; (

E) line supervision; (

F) production support activities including security, cleaning, heating and factory maintenance; (

G) quality and production control; (

H) repair of production facilities; (

I) pollution control; (ii) all other activities when they are performed in Alberta directly in connection with manufacturing or processing, not including the activities in clause (h)(

i) to (x), in Alberta of goods for sale or lease, and (iii) scientific research as defined in

section 2900 of the federal regulations, but does not include 17 Explanatory Notes

(iv) storing, shipping, selling and leasing of finished goods, (

v) purchasing of raw materials, (vi) administration, including clerical and personnel activities, (vii) purchase and resale operations, (viii) data processing, or (ix) providing facilities for employees, including cafeterias, clinics and recreational facilities; (j) “salaries and wages” has the meaning assigned to it by

section 5202 of the federal regulations.

(2) Subject to subsection (3), “Alberta manufacturing and processing profits ” of a corporation for a taxation year means that proportion of its adjusted business income that the aggregate of its Alberta cost of manufacturing and processing capital for the year and its Alberta cost of manufacturing and processing labour for the year is of the aggregate of its cost of capital for the year and its cost of labour for the year.

(3) The “Alberta manufacturing and processing profits” of a corporation for a taxation year are deemed to be equal to the corporation’s adjusted business income for the year if (

a) the activities of the corporation during the year were primarily manufacturing or processing in Canada of goods for sale or lease, (

b) the aggregate of (

i) the aggregate of all amounts each of which is the income of the corporation for the year from an active business minus the aggregate of all amounts each of which is the loss of the corporation for the year from an active business, and (ii) if the corporation is associated in the year with a Canadian corporation, the aggregate of all amounts each of which is the income of the latter corporation from an active business for its taxation year ending in the year, did not exceed $200 000, and (

c) the corporation did not carry on any active business outside Canada at any time during the year.

(4) For the purposes of subsection (3)(b)(ii), if a corporation is associated in the year with a Canadian corporation that did not have a permanent establishment in Alberta in its taxation year referred to in subsection (3)(b)(ii), the income of the latter corporation from an 18 Explanatory Notes

active business shall be deemed to be its income from an active business as determined under the federal Act.

(5) There may be deducted from the tax otherwise payable under

section 21 for a taxation year by a corporation an amount equal to the aggregate of (a) 5% of the lesser of (

i) the product obtained when the least of the amounts determined under

section 22(2)(

a) to (

c) in respect of the corporation for the year is multiplied by the Alberta allocation factor, and (ii) the corporation’s Alberta manufacturing and processing profits for the year, and (b) 6% of the lesser of (

i) the amount, if any, by which the corporation’s Alberta manufacturing and processing profits for the year exceed the amount determined under clause (a)(i), and (ii) the amount, if any, by which the amount of the corporation’s amount taxable in Alberta for the year exceeds the aggregate of (

A) the amount determined under clause (a)(i), and (

B) the product obtained when the Alberta allocation factor is multiplied by the amount, if any, by which the aggregate of the corporation’s Canadian investment income for the year and its foreign investment income for the year exceeds the amount, if any, deducted under paragraph 111(1)(

b) of the federal Act from the corporation’s income for the year.

(6) Where a corporation has a taxation year part of which is before April 1, 1985, the amount determined under subsection (5) for that taxation year shall be the proportion of the amount otherwise determined that the number of days following March 31, 1985 in that taxation year is to the number of days in the whole of the taxation year.

(7) Where a corporation has a taxation year part of which is after March 31, 1990, the amount determined under subsection (5) for that taxation year shall be the proportion of the amount otherwise determined that the number of days preceding April 1, 1990 in that taxation year is to the number of days in the whole of that taxation year.

(7.1) This

section does not apply to taxation years commencing after March 31, 1990. 19 Explanatory Notes

16(1)

Section 22.2 is amended (

a) in subsection (5) by striking out “There” and substituting “Subject to subsection (10), there” . (

b) by adding the following after subsection (9): 20

(8) Where a corporation has resource activities for a taxation year pursuant to subsection 5203(2) of the federal regulations the following applies, except as otherwise provided in subsection (9): (a) “adjusted business income” of the corporation for the year has the meaning assigned to it by subsection 5203(1) of the federal regulations; (b) “cost of capital” of the corporation for the year has the meaning assigned to it by subsection 5203(1) of the federal regulations; (c) “cost of labour” of the corporation for the year has the meaning assigned to it by subsection 5203(1) of the federal regulations.

(9) Where a corporation is a member of a partnership at any time in the taxation year of the corporation, the following applies: (a) “cost of capital ” of the corporation for the year has the meaning assigned to it by

section 5204 of the federal regulations; (b) “cost of labour” of the corporation for the year has the meaning assigned to it by

section 5204 of the federal regulations; (c) “Alberta cost of manufacturing and processing capital” of the corporation for the year has the meaning assigned to the words “cost of manufacturing and processing capital” by

section 5204 of the federal regulations except that the reference to “qualified activities” shall be deemed to be a reference to “qualified activities” as defined in subsection (1)(i); (d) “Alberta cost of manufacturing and processing labour" of the corporation for the year has the meaning assigned to the words “cost of manufacturing and processing labour” by

section 5204 of the federal regulations except that the reference to “qualified activities” shall be deemed to be a reference to “qualified activities" as defined in subsection (1)(i).

(10) For the purposes of subsection (1)(h)(xi), if a corporation was a member of a partnership at any time in a taxation year, paragraphs 125.1(4)(

a) and (

b) of the federal Act apply. 16

Section 22.2 presently reads in part:

(5) There may be deducted from the tax otherwise payable under

section 21 for a taxation year by a corporation an amount equal to 1% of the lesser of (

a) the amount, if any, by which (

i) the corporation's Alberta manufacturing and processing profits for the year 20 Explanatory Notes

(10) Where a corporation has a taxation year beginning before April 1, 2001 and ending after March 31, 2001, the amount determined under subsection (5) for that taxation year is the proportion of the amount otherwise determined that the number of days in the taxation year before April 1, 2001 bears to the number of days in the taxation year.

(11) This

section does not apply to taxation years beginning after March 31, 2001.

(2) This

section applies after March 31, 2001. 17(1)

Section 23 is amended (

a) in subsection (2.1) by striking out “subsection (2)” and substituting “this section”; (

b) by adding the following after subsection (2.1): (2.2) Subsections 126(4.1), (4.2), (4.3) and (4.4) of the federal Act apply for the purposes of computing a corporation’s non-business-income tax. (

c) by adding the following after subsection (3):

(4) For the purposes of this section, if any income from a source in a particular country would be tax-exempt income but for the fact that a portion of the income is subject to an income or profits tax imposed by the government of a country other than Canada, or of a state, province or other political subdivision of such a country, the portion is deemed to be income from a separate source in the particular country. (2) Subsection (1)(

a) and (

b) apply to the 1998 and subsequent taxation years. (3) Subsection (1)(

c) applies to taxation years that begin after February 24, 1998. 18

Section 26 is amended (

a) in subsection (1)(

c) by adding “, subject to subsection (1.1),” after “taxation year”; 21

exceed (ii) the product obtained when the least of the amounts determined under

section 22(2)(

a) to (

c) in respect of the corporation for the year is multiplied by the Alberta allocation factor, and (

b) the amount, if any, by which the amount of the corporation’s amount taxable in Alberta for the year exceeds the aggregate of (

i) the amount determined under clause (a)(ii), and (ii) where the corporation was a Canadian-controlled private corporation throughout the year, the product obtained when the corporation’s aggregate investment income for the year (within the meaning assigned by subsection 129(4) of the federal Act) is multiplied by the Alberta allocation factor. 17

Section 23 presently reads in part:

(2.1) For the purposes of subsection (2), “non-business-income tax” has the meaning assigned to it by subsection 126(7) of the federal Act without reference to paragraph (

c) in the definition of “non-business-income tax”.

(3) If the income of a corporation for a taxation year includes income from sources in more than one country other than Canada, subsection (2) shall be deemed to provide for a separate deduction in respect of each of the countries other than Canada. 18

Section 26 presently reads in part: 26(1) In this Division, 21 Explanatory Notes

(

b) by repealing subsections (1.3), (1.4) and (1.8) 22

(c) “Alberta crown royalty ” of a corporation for a taxation year means the aggregate of (

i) any amount required to be included in computing the corporation’s income for the year by virtue of paragraph 12(1)(

o) of the federal Act, and (ii) any amount in respect of which no deduction is allowed in computing the corporation’s income for the year by virtue of paragraph 18(1)(

m) of the federal Act, less any amount that (iii) is a reimbursement received by the corporation under the terms of a contract if the reimbursement was for an amount paid or payable by the corporation that is (

A) required to be included in computing its income for the year by virtue of paragraph 12(1)(

o) of the federal Act, or (

B) denied as a deduction in computing its income by virtue of paragraph 18(1)(

m) of the federal Act where each of the amounts is or is in respect of a qualified royalty;

(1.3) The Provincial Treasurer may deem a corporation to be an above-limit corporation if at any time in the 365 day period ending August 24, 1982, the corporation (

a) was formed by the amalgamation of 2 or more corporations, or (

b) acquired an Alberta resource property and if the corporation, had it had 3 different taxation years for the purposes of computing its income under the federal Act and this Act (with those 3 taxation years being represented separately by the calendar month periods of July, August and September of 1982), would have had Alberta crown royalty for any one of those taxation years in excess of $444 444.

(1.4) The Provincial Treasurer may deem a corporation that is an above-limit corporation within the meaning of subsection (1)(

a) not to be an above-limit corporation if that corporation (

a) disposed of an Alberta resource property at any time in the 365 day period ending August 24, 1982, and (

b) had it had 3 different taxation years for the purposes of computing its income under the federal Act and this Act (with the 3 taxation years being represented separately by the calendar month periods of July, August and September of 1982), would have had Alberta crown 22 Explanatory Notes

19(1)

Section 26.1 is amended (

a) in subsection (2) by striking out “subsection” and substituting “subsections (2.1), (2.11) and”; (

b) by adding the following after subsection (2):

(2.1) Subject to subsection (2.14), a corporation that is not associated with one or more corporations in a taxation year is not entitled to a royalty tax credit for the taxation year unless the amount determined by the following formula is a minimum of $10 000: Alberta crown royalty ______365_____ for the taxation year X number of days in the taxation year

(2.11) Subject to subsection (2.14), a corporation (referred to in this subsection and in subsections (2.12) and (2.13) as the claiming corporation) that is associated with one or more corporations in a taxation year is not entitled to a royalty tax credit for the taxation year unless the aggregate of the amounts determined by the following formula for the claiming corporation and each of its associated corporations is a minimum of $10 000: Alberta crown royalty ______365_____ for the taxation year X number of days in the taxation year where “taxation year” refers, subject to subsections (2.12) and (2.13), to the taxation year of the claiming corporation when the formula is applied to that corporation and refers to the taxation year of an associated corporation ending in the same calendar year as the taxation year of the claiming corporation when the formula is applied to that associated corporation.

(2.12) If one of the corporations referred to in subsection (2.11) that is associated with the claiming corporation has more than one taxation year ending in the calendar year in which it is associated with the claiming corporation, the reference to taxation year in the formula in subsection (2.11) in respect of that associated corporation refers to the 23

royalty for any one of those taxation years that was less than $444 444.

(1.8) Notwithstanding subsections (1)(

e) and (1.7), if after August 24, 1982 and before March 31, 1983 an exempt corporation has transferred all or substantially all of its Alberta resource properties to another corporation with which it was associated as of the date of the transfer, that other corporation shall be deemed to be an exempt corporation as of the date of the transfer. 19

Section 26.1 presently reads:

(2) Subject to subsection (14), a corporation that has Alberta crown royalty in a taxation year is entitled to a royalty tax credit for the year in the amount obtained when the weighted average rate for that year is multiplied by the lesser of (

a) its crown royalty shelter for the year, and (

b) its Alberta crown royalty for the year.

(3) If a corporation is not associated with one or more corporations in a taxation year, its crown royalty shelter for the taxation year is (

a) if the taxation year ends before January 1, 1995, the lesser of (i) $2 500 000, and (ii) the proportion of $2 500 000 that the number of days in the taxation year bears to 365, and (

b) if the taxation year begins after December 31, 1994, the lesser of (i) $2 000 000, and (ii) the proportion of $2 000 000 that the number of days in the taxation year bears to 365.

(3.1) Notwithstanding subsection (3), if a corporation is not associated with one or more corporations in a taxation year and part of the taxation year is before January 1, 1995 and part of it is after December 31, 1994, the crown royalty shelter of the corporation for that taxation year is the aggregate of (

a) the lesser of (i) $2 000 000, and (ii) the proportion of $2 000 000 that the number of days in the taxation year bears to 365, and 23 Explanatory Notes

associated corporation’s longest taxation year ending in the calendar year.

(2.13) Notwithstanding subsection (2.12), if a corporation referred to in subsection (2.1) or (2.11) has 2 consecutive taxation years and (

a) in the case of a corporation referred to in subsection (2.1) or the claiming corporation, the total number of days in the 2 taxation years is less than or equal to 365 days, or (

b) in the case of a corporation referred to in subsection (2.11) other than the claiming corporation, the 2nd of the consecutive taxation years is its last taxation year ending in the calendar year in which it is associated with the claiming corporation and the total number of days in the two taxation years is less than or equal to 365 days, the total number of days in the 2 consecutive years is deemed to be the number of days in the taxation year for the corporation for the purposes of subsection (2.1) or (2.11).

(2.14) Subject to subsection (14), where the taxation year of a corporation begins in 2000 and ends in 2001 and the corporation is not otherwise entitled to a royalty tax credit in the 2001 taxation year because of the application of subsection (2.1) or (2.11), the corporation’s royalty tax credit for that taxation year is the amount obtained when the lesser of (

a) Alberta crown royalty incurred in the period that begins on the first day of the taxation year and ends on December 31, 2000, and (

b) that proportion of the corporation’s crown royalty shelter that the number of days in the period referred to in clause (

a) bears to 365 is multiplied by the weighted average rate for that year. (

c) by repealing subsection (3)(a); (

d) by repealing subsections (3.1), (3.2), (3.3), (3.4) and (3.5); (

e) in subsection (4) by striking out “(3.2), (3 5),” and “, (7.02) or (7.05)”; 24

(

b) the proportion of $500 000 that the number of days in the taxation year before January 1, 1995 bears to 365.

(3.2) Notwithstanding subsection (5), if 2 or more corporations are associated with each other in a taxation year and the taxation year of one of them begins before January 1, 1995 and ends after December 31, 1994, the aggregate of the crown royalty shelters for those corporations for the taxation year in which they are associated is the aggregate of (

a) the lesser of (i) $2 000 000, and (ii) the proportion of $2 000 000 that the number of days in the taxation year of the corporation with the longest taxation year bears to 365, and (

b) the proportion of $500 000 that the number of days before January 1, 1995 in the taxation year of the corporation with the greatest number of days before January 1, 1995 bears to 365.

(3.3) Notwithstanding subsection (3), if in a taxation year of a corporation commencing after December 31, 1994 the corporation is not associated with one or more corporations and is a member of one or more partnerships whose fiscal periods ending in that taxation year commenced before January 1, 1995, the crown royalty shelter of the corporation for that taxation year is the aggregate of (

a) the proportion of the lesser of (i) $2 000 000, and (ii) the proportion of $2 000 000 that the number of days in that taxation year bears to 365, that the difference between the Alberta crown royalty of the corporation for the year and the Alberta crown royalty deemed by subsection (12) or (12.1) to be the Alberta crown royalty for the year from all those partnerships bears to the Alberta crown royalty of the corporation for the year, and (

b) the amount for each of those partnerships that is equal to the proportion of the aggregate of (

i) the lesser of (A) $2 000 000, and (

B) the proportion of $2 000 000 that the number of days in the fiscal period of that partnership bears to 365, and 24 Explanatory Notes

(

f) by repealing subsection (5)(a); (

g) in subsection (5)(

b) by striking out “if the taxation year begins after December 31, 1994,”; (

h) in subsection (6)(

b) by striking out “(3.2), (3.5),” and “, (7.02) or (7.05)”; (

i) in subsection (7) by striking out “(3.2), (3.5),” and “, (7.02) or (7.05)”; (

j) by repealing subsections (7.01) to (7.05); (

k) in subsection (11)(

a) by striking out “or to a taxation year commencing before January 1, 1982”. (2) Subsection (1)(

a) and (

b) apply after December 31, 2000. 25

(ii) the proportion of $500 000 that the number of days in the fiscal period of that partnership before January 1, 1995 bears to 365, that the Alberta crown royalty deemed by subsection (12) or (12.1) to be the Alberta crown royalty of the corporation for the year from that partnership bears to the Alberta crown royalty of the corporation for the year.

(3.4) Notwithstanding subsections (3) and (3.1), if in a taxation year of a corporation part of which is before January 1, 1995 and part of which is after December 31, 1994 the corporation is not associated with one or more corporations and is a member of one or more partnerships whose fiscal periods ending in that taxation year (

a) ended in 1994 (in this subsection referred to as a “1994 partnership”), or (

b) commenced before January 1, 1995 and ended after December 31, 1994 (in this subsection referred to as a “1995 partnership"), the crown royalty shelter of the corporation for that taxation year is the aggregate of (

c) the proportion of the aggregate of (

i) the lesser of (A) $2 000 000, and (

B) the proportion of $2 000 000 that the number of days in the taxation year bears to 365, and (ii) the proportion of $500 000 that the number of days in the taxation year before January 1, 1995 bears to 365 that the difference between the Alberta crown royalty of the corporation for the year and the Alberta crown royalty deemed by subsection (12) or (12.1) to be Alberta crown royalty of the corporation for the year from all the 1994 partnerships and the 1995 partnerships bears to the Alberta crown royalty of the corporation for the year, (

d) an amount for each of the 1994 partnerships that is equal to the proportion of the lesser of (i) $2 500 000, and (ii) the proportion of $2 500 000 that the number of days in the fiscal period of that partnership bears to 365, that the Alberta crown royalty deemed by subsection (12) or (12.1) to be Alberta crown royalty of the corporation 25 Explanatory Notes

for the year from that partnership bears to the Alberta crown royalty of the corporation for the year, and (

e) an amount for each of the 1995 partnerships that is equal to the proportion of the aggregate of (

i) the lesser of (A) $2 000 000, and (

B) the proportion of $2 000 000 that the number of days in the fiscal period of that partnership bears to 365, and (ii) the proportion of $500 000 that the number of days in the fiscal period of that partnership before January 1, 1995 bears to 365, that the Alberta crown royalty deemed by subsection (12) or (12.1) to be Alberta crown royalty of the corporation for the year from that partnership bears to the Alberta crown royalty of the corporation for the year.

(3.5) Notwithstanding subsections (3.2) and (5), if 2 or more corporations are associated with each other in a taxation year and one or more of the corporations is a corporation to which subsection (3.3) or (3.4) would apply if it were not associated with one or more corporations in that taxation year, the aggregate of the crown royalty shelters for those corporations for the taxation year in which they are associated is the greater of (

a) the crown royalty shelter of the corporation with the greatest crown royalty shelter for that taxation year determined pursuant to subsection (3), (3.1), (3.3) or (3.4) as if it were not associated, and (

b) an amount that is equal to the aggregate of (

i) the lesser of (A) $2 000 000, and (

B) the proportion of $2 000 000 that the number of days in the taxation year of the corporation with the longest taxation year bears to 365, and (ii) the proportion of $500 000 that the number of days before January 1, 1995 in the taxation year of the corporation with the greatest number of days before January 1, 1995 bears to 365.

(4) If a corporation is associated with one or more corporations in a taxation year, its crown royalty shelter for the taxation year is that portion of the aggregate of the crown royalty shelters calculated 26 Explanatory Notes

under subsection (3.2), (3.5), (5), (7.02) or (7.05) that is allocated to the corporation under subsection (6) or (7).

(5) The aggregate of the crown royalty shelters to be allocated among 2 or more corporations that are associated with each other in a taxation year is (

a) if the taxation year ends before January 1, 1995, the lesser of (i) $2 500 000, and (ii) the proportion of $2 500 000 that the number of days in the taxation year of the corporation with the longest taxation year bears to 365, and (

b) if the taxation year begins after December 31, 1994, the lesser of (i) $2 000 000, and (ii) the proportion of $2 000 000 that the number of days in the taxation year of the corporation with the longest taxation year bears to 365.

(6) If 2 or more corporations that are associated with each other file an agreement in the prescribed form with the Provincial Treasurer, the Provincial Treasurer shall allocate the aggregate of the crown royalty shelters among the corporations in accordance with the agreement if the agreement (

a) is among all of the corporations, and (

b) allocates the aggregate of the crown royalty shelters of the corporations calculated under subsection (3.2), (3.5), (5), (7.02) or (7.05).

(7) If the corporations referred to in subsection (6) do not file an agreement in accordance with subsection (6) within 60 days after notice by the Provincial Treasurer that an agreement under subsection (6) for a taxation year is required for the purposes of this Act is mailed to any of them, the Provincial Treasurer shall allocate the aggregate of the crown royalty shelters of the corporations calculated under subsection (3.2), (3.5), (5), (7.02) or (7.05) to one or more of the corporations, and the crown royalty shelter of each corporation for that taxation year is the amount, if any, allocated to it.

(7.01) Notwithstanding subsection (3), if a corporation is not associated with one or more corporations in a taxation year and part of the taxation year is before January 1, 1990 and part of it is after December 31, 1989, the crown royalty shelter of the corporation for that taxation year is the aggregate of (

a) the lesser of 27 Explanatory Notes

(i) $2 500 000, and (ii) the proportion of $2 500 000 that the number of days in the taxation year bears to 365, and (

b) the proportion of $1 500 000 that the number of days in the taxation year before January 1, 1990 bears to 365.

(7.02) Notwithstanding subsection (5), if 2 or more corporations are associated with each other in a taxation year and the taxation year of one of them begins before January 1, 1990 and ends after December 31, 1989, the aggregate of the crown royalty shelters for those corporations for the taxation year in which they are associated is the aggregate of (

a) the lesser of (i) $2 500 000, and (ii) the proportion of $2 500 000 that the number of days in the taxation year of the corporation with the longest taxation year bears to 365, and (

b) the proportion of $1 500 000 that the number of days before January 1, 1990 in the taxation year of the corporation with the greatest number of days before January 1, 1990 bears to 365.

(7.03) Notwithstanding subsection (3), if in a taxation year of a corporation commencing after December 31, 1989 the corporation is not associated with one or more corporations and is a member of one or more partnerships whose fiscal periods ending in that taxation year commenced before January 1, 1990 and ended after December 31, 1989, the crown royalty shelter of the corporation for that taxation year is the aggregate of (

a) the proportion of the lesser of (i) $2 500 000, and (ii) the proportion of $2 500 000 that the number of days in the taxation year bears to 365, that the difference between the Alberta crown royalty of the corporation for the year and the Alberta crown royalty deemed by subsection (12) or (12.1) to be Alberta crown royalty for the year from all those partnerships bears to the Alberta crown royalty of the corporation for the year, and (

b) an amount for each of those partnerships that is equal to the proportion of the aggregate of (

i) the lesser of 28 Explanatory Notes

(A) $2 500 000 , and (

B) the proportion of $2 500 000 that the number of days in the fiscal period of that partnership bears to 365, and (ii) the proportion of $1 500 000 that the number of days in the fiscal period of that partnership before January 1, 1990 bears to 365, that the Alberta crown royalty deemed by subsection (12) or (12.1) to be the Alberta crown royalty of the corporation for the year from that partnership bears to the Alberta crown royalty of the corporation for the year.

(7.04) Notwithstanding subsections (3) and (7.01), if in a taxation year of a corporation part of which is before January 1, 1990 and part of which is after December 31, 1989 the corporation is not associated with one or more corporations and is a member of one or more partnerships whose fiscal periods ending in that taxation year (

a) ended in 1989, in this subsection referred to as a “1989 partnership”, or (

b) commenced before January 1, 1990 and ended after December 31, 1989, in this subsection referred to as a “1990 partnership”, the crown royalty shelter of the corporation for that taxation year is the aggregate of (

c) the proportion of the aggregate of (

i) the lesser of (A) $2 500 000, and (

B) the proportion of $2 500 000 that the number of days in the taxation year bears to 365, and (ii) the proportion of $1 500 000 that the number of days in the taxation year before January 1, 1990 bears to 365 that the difference between the Alberta crown royalty of the corporation for the year and the Alberta crown royalty deemed by subsection (12) or (12.1) to be Alberta crown royalty of the corporation for the year from all the 1989 partnerships and the 1990 partnerships bears to the Alberta crown royalty of the corporation for the year, (

d) an amount for each of the 1989 partnerships that is equal to the proportion of the lesser of 29 Explanatory Notes

(i) $4 000 000, and (ii) the proportion of $4 000 000 that the number of days in the fiscal period of that partnership bears to 365 that the Alberta crown royalty deemed by subsection (12) or (12.1) to be Alberta crown royalty of the corporation for the year from that partnership bears to the Alberta crown royalty of the corporation for the year, and (

e) an amount for each of the 1990 partnerships that is equal to the proportion of the aggregate of (

i) the lesser of (A) $2 500 000, and (

B) that proportion of $2 500 000 that the number of days in the fiscal period of that partnership bears to 365, and (ii) the proportion of $1 500 000 that the number of days in the fiscal period of that partnership before January 1, 1990 bears to 365, that the Alberta crown royalty deemed by subsection (12) or (12.1) to be Alberta crown royalty of the corporation for the year from that partnership bears to the Alberta crown royalty of the corporation for the year.

(7.05) Notwithstanding subsections (5) and (7.02), if 2 or more corporations are associated with each other in a taxation year and one or more of the corporations is a corporation to which subsection (7.03) or (7.04) would apply if it were not associated with one or more corporations in that taxation year, the aggregate of the crown royalty shelters for those corporations for the taxation year in which they are associated is the greater of (

a) the crown royalty shelter of the corporation with the greatest crown royalty shelter for that taxation year determined pursuant to subsection (3), (7.01), (7.03) or (7.04) as if it were not associated, and (

b) an amount that is equal to the aggregate of (

i) the lesser of (A) $2 500 000, and (

B) the proportion of $2 500 000 that the number of days in the taxation year of the corporation with the longest taxation year bears to 365, and 30 Explanatory Notes

(ii) the proportion of $1 500 000 that the number of days before January 1, 1990 in the taxation year of the corporation with the greatest number of days before January 1, 1990 bears to 365.

(7.1) Notwithstanding anything in this Division, if at any time (in this subsection referred to as the “particular time”) after November 3, 1983 (

a) control of a corporation (in this subsection referred to as the “particular corporation”) has been acquired by a person, and (

b) the Provincial Treasurer is satisfied that the result of the acquisition of control of the particular corporation is that the amount of the royalty tax credit to which the particular corporation, or any corporation or group of corporations with which it is associated in the calendar year in which the particular time falls, is entitled is greater than the amount of the royalty tax credit to which the particular corporation, or any corporation or group of corporations with which the particular corporation is associated in the calendar year in which the particular time falls, would have been entitled, had control of the particular corporation not been acquired, the Provincial Treasurer may determine the amount of the royalty tax credit to which the particular corporation or any corporation or group of corporations with which it is associated in the calendar year in which the particular time falls shall be entitled for taxation years that end in the same calendar year as that in which the particular time falls.

(7.2) Notwithstanding anything in this Division, if at any time after November 3, 1983, a corporation (in this subsection referred to as the “particular corporation”), by reason of an amalgamation or otherwise (

a) has a taxation year that ends before the time that it otherwise would have ended, or (

b) has 2 or more taxation years ending in the same calendar year, the Provincial Treasurer may determine the amount of the royalty tax credit to which (

c) the particular corporation, (

d) any successor corporation formed on the amalgamation of the particular corporation with another corporation, or (

e) any corporation with which the particular corporation was associated in the calendar year in which any of the taxation years described in clauses (

a) and (

b) of the particular corporation end, 31 Explanatory Notes

shall be entitled for any of the taxation years of any of the corporations described in clauses (c), (

d) and (

e) that end in the same calendar year as any of the taxation years described in clauses (

a) and (

b) of the particular corporation.

(8) In computing the Alberta crown royalty of a corporation, no amount shall be included that would, if included, artificially increase the Alberta crown royalty of that corporation.

(9) If the Provincial Treasurer is satisfied that (

a) the separate existence of 2 or more corporations in a taxation year is not solely for the purpose of carrying out the business of those corporations in the most effective manner, and (b) 1 of the main reasons for the separate existence of the corporations in that year is to increase the amount of royalty tax credit that would otherwise be determined under this Act, the Provincial Treasurer may direct that all of the corporations shall be deemed to be associated with each other for the purposes of this Division.

(10) If in the opinion of the Provincial Treasurer, 2 or more corporations have at any time entered into 1 or more sales, exchanges, declarations of trust or other transactions that (

a) lack any substantial business purpose, other than increasing the aggregate amount of the royalty tax credit that may be claimed, or (

b) artificially increase the royalty tax credit that may be claimed, the Provincial Treasurer may direct that all of those corporations shall be deemed to be associated with each other for the purposes of this Division.

(11) A direction made under subsection (9) or (10) (

a) shall not apply to a taxation year of any corporation prior to the taxation year for which the direction is made or to a taxation year commencing before January 1, 1982, and (

b) may be revoked by the Provincial Treasurer and, if revoked, shall not apply to the taxation year for which the revocation occurs or to any subsequent taxation year.

(12) If a corporation, other than an exempt corporation, is a member of a partnership, its share of the amount that would be the Alberta crown royalty of that partnership, if the partnership were a corporation other than an exempt corporation, shall be deemed to be Alberta crown royalty of the corporation. 32 Explanatory Notes

Section 26.2 is repealed. 33

(12.1) If an exempt corporation is a member of a partnership, its share of the amount that would be the Alberta crown royalty of that partnership, if the partnership were an exempt corporation, shall be deemed to be Alberta crown royalty of the corporation.

(14) A corporation is entitled to a royalty tax credit in respect of the taxation year only if it files an application for the credit in the prescribed form (

a) with its return for that taxation year, or (

b) on a day after the return has been filed, but in any case no later than 3 years after the end of the taxation year.

(14.1) A corporation is deemed to have paid on the day on which it files an application in accordance with subsection (14) in respect of a taxation year an amount on account of its liability under this Act for the year equal to the amount, if any, by which the royalty tax credit to which it is entitled for the year exceeds the aggregate of amounts paid by the Provincial Treasurer under

section 26.4 for the year. 20

Section 26.2 presently reads: 26.2(1) In this section, “weighted supplemental rate” means the weighted supplemental rate determined in accordance with the regulations.

(2) This

section applies to a corporation that has a taxation year that begins or ends in 1991 if the corporation is not associated with one or more corporations in the taxation year.

(3) This

section applies to a corporation if the corporation is associated with one or more corporations in a taxation year and one of the associated corporations has a taxation year that begins or ends in 1991.

(4) Subject to subsections (10) and (11), a corporation that has Alberta crown royalty in a taxation year is entitled to a royalty tax credit gas supplement for the year in the amount calculated under subsection (5) or (6).

(5) If a corporation is not associated with one or more corporations in a taxation year, its royalty tax credit gas supplement for the taxation year is the amount obtained when the weighted supplemental rate is multiplied by that proportion of (

a) the amount by which the lesser of (

i) its Alberta crown royalty for the year, and (ii) its crown royalty shelter for the year exceeds the aggregate of 33 Explanatory Notes

(

b) the amount deemed by

section 26.1(12) or (12.1) to be Alberta crown royalty of the corporation for the year from one or more partnerships whose fiscal periods ending in that taxation year commenced before January 1, 1990, and (

c) the Alberta crown royalty of the corporation for the year attributable to the production of petroleum and natural gas liquids, other than any amounts included in clause (

b) that the number of days in the taxation year in 1991 is of the number of days in the taxation year.

(6) If a corporation is associated with one or more corporations in a taxation year, its royalty tax credit gas supplement for the taxation year is the product obtained when the aggregate royalty tax credit gas supplement is multiplied by the percentage of the aggregate royalty tax credit gas supplement that is allocated to the corporation under subsection (8) or (9).

(7) For the purposes of this section, the aggregate royalty tax credit gas supplement is the product obtained when the weighted supplemental rate for the associated corporations is multiplied by that proportion of (

a) the amount by which the lesser of (

i) the aggregate of the Alberta crown royalty, and (ii) the aggregate of the crown royalty shelters of the associated corporations for the taxation year exceeds the aggregate of (

b) the aggregate of the amounts deemed by

section 26.1(12) or (12.1) to be Alberta crown royalty of the associated corporations for the taxation year from one or more partnerships whose fiscal periods commenced before January 1, 1990, and (

c) the aggregate Alberta crown royalty of the associated corporations for the taxation year attributable to the production of petroleum and natural gas liquids, other than any amounts included in clause (

b) that the aggregate of the number of days in 1991 in each of the taxation years of the associated corporations is of the aggregate of the number of days in each of the taxation years of the associated corporations.

(8) If 2 or more corporations that are associated with each other file an agreement in the prescribed form with the Provincial Treasurer, for the purposes of subsection (6) the Provincial Treasurer shall allocate the percentage of the aggregate royalty tax credit gas supplement specified in the agreement to each corporation if the agreement 34 Explanatory Notes

Section 26.4(4)(a)(ii) is amended by striking out “as determined without reference to

section 26.1(3.3), (3.4), (3.5), (7.03), (7.04) and (7.05)”. 35

(

a) is among all of the corporations, and (

b) specifies the percentage of the aggregate royalty tax credit gas supplement to be allocated to each corporation.

(9) If the corporations referred to in subsection (8) do not file an agreement in accordance with subsection (8) within 60 days after notice that an agreement under subsection (8) for a taxation year is required for the purposes of this Act is mailed to any of them by the Provincial Treasurer, the Provincial Treasurer shall allocate a percentage of the aggregate royalty tax credit gas supplement to one or more of the corporations and, for the purposes of subsection (6), the percentage allocated to each corporation for that taxation year is the percentage, if any, allocated by the Provincial Treasurer.

(10) If a corporation is not associated with any other corporation in the taxation year, the corporation is entitled to the royalty tax credit gas supplement determined under subsection (5) on the day on which it files an application for the credit in the prescribed form (

a) with its return for that taxation year, or (

b) on a day after the return has been filed, but in any case no later than 3 years after the end of the taxation year.

(11) If a corporation is associated with one or more corporations in a taxation year, the corporation is entitled to the royalty tax credit gas supplement determined under subsection (6) on the day that is the later of (

a) the day on which one of the associated corporations submits a calculation in respect of the aggregate royalty tax credit gas supplement in the prescribed form on a day that is not more than 3 years after the end of the corporation’s taxation year, and (

b) the day on which all of the associated corporations have filed their returns for the taxation year.

(12) A corporation is deemed to have paid on the day on which it becomes entitled to the royalty tax credit gas supplement in respect of a taxation year an amount on account of its liability under this Act for the year equal to the amount of the royalty tax credit gas supplement to which it is entitled.

(13) For the purposes of this section,

section 26.1(7.1), (7.2), (9) and (10) apply as if references in those subsections to “royalty tax credit” were references to “royalty tax credit gas supplement". 21

Section 26.4(4)(

a) presently reads:

(4) A corporation's royalty tax credit instalment for a month in a taxation year is the amount by which 35 Explanatory Notes

Section 26.41 is amended (

a) in subsection (1) by striking out “and royalty tax credit gas supplements”; (

b) in subsection (2) by striking out “and royalty credit gas supplements”. 36

(

a) the product obtained when the lesser of (

i) the corporation’s estimated Alberta crown royalty for the year, and (ii) the corporation’s estimated crown royalty shelter for the year as determined without reference to

section 26.1(3.3), (3.4), (3.5), (7.03), (7.04) and (7.05) is multiplied by (iii) the proportion that the number of days from the beginning of the taxation year to the last day of that month bears to the number of days in the taxation year, and (iv) the moving average of the specified rates determined in respect of that month, exceeds 22

Section 26.41 presently reads: 26.41(1) The aggregate of all royalty tax credits and royalty tax credit gas supplements paid under this Act shall (

a) be applied by the Provincial Treasurer to reduce non-renewable resource revenue, as defined in the Alberta Heritage Savings Trust Fund Act, and (

b) be deducted from the total amounts used to determine the transfers required to be made to the Alberta Heritage Savings Trust Fund pursuant to

section 9 of the Alberta Heritage Savings Trust Fund Act or any Special Act referred to in that

section and enacted before or after the commencement of this section, notwithstanding anything in those Acts.

(2) The aggregate of all royalty credits and royalty credit gas supplements paid under

Part 11 shall (

a) be applied by the Provincial Treasurer to reduce non-renewable resource revenue, as defined in the Alberta Heritage Savings Trust Fund Act, and (

b) be deducted from the total amounts used to determine the transfers required to be made to the Alberta Heritage Savings Trust Fund pursuant to

section 9 of the Alberta Heritage Savings Trust Fund Act or any Special Act referred to in that

section and enacted before or after the commencement of this section, notwithstanding anything in those Acts. 36 Explanatory Notes

23(1)

Section 28(1) is amended by striking out “other than a mutual fund corporation” and substituting “other than a corporation that was a mutual fund corporation throughout the year”. (2) Subsection (1) applies to the 1993 and subsequent taxation years. 24

Section 30 is amended by repealing subsections (2), (2.01)(

a) and (b), (4), (4.1), (5) and (5.1)(

a) and (b). 37

Section 28(1) presently reads: 28(1) If a corporation is throughout a taxation year an investment corporation, other than a mutual fund corporation, subsections 131(1) and (2) of the federal Act, as made applicable by

section 30 of this Act, apply as if (

a) the corporation had been a mutual fund corporation throughout that and all previous taxation years ending after 1971 throughout which it was an investment corporation, and (

b) its capital gains redemption for that and all previous taxation years ending after 1971, throughout which it would but for the assumption made by clause (

a) not have been a mutual fund corporation, were nil. 24

Section 30 presently reads in part:

(2) In the application of subparagraph 131(2)(a)(

i) of the federal Act for the purposes of this Act, the reference to “18%” shall be read, (

a) in respect of a taxation year ending before April 1, 1987, as a reference to “5.5% ”, (

b) in respect of a taxation year part of which is before April 1, 1987 and part of which is after March 31, 1987 as a reference to the aggregate of (

i) the proportion of 5.5% that the number of days in the year before April 1, 1987 bears to the number of days in the year, and (ii) the proportion of 7.5% that the number of days in the year after March 31, 1987 bears to the number of days in the year, or (

c) in respect of a taxation year beginning after March 31, 1987 and ending before July 1, 1988, as a reference to “7.5%”.

(2.01) In the application of subparagraph 131(2)(a)(

i) of the federal Act for the purposes of this Act, (

a) in respect of a taxation year ending after June 30, 1988 and before 1990, the reference to “18⅔%" shall be read as a reference to 10%, 37 Explanatory Notes

(

b) in respect of a taxation year ending after December 31, 1989 and before April 1, 1991, the reference to “21%” shall be read as a reference to 11.25%, and (

c) in respect of a taxation year ending after March 31, 1991, the reference to any percentage in subparagraph 131(2)(a)(

i) shall be read as a reference to ¾ of the proportion that tax payable under

section 21 for the year is of the amount taxable in Alberta for the year.

(4) In the application of clause 131(6)(a)(i)(

A) and clause 131(6)(b)(ii)(

C) of the federal Act for the purposes of this Act, the reference to “50/9” shall be read, (

a) in respect of a taxation year ending before April 1, 1987, as a reference to “200/11 ”, (

b) in respect of a taxation year part of which is before April 1, 1987 and part of which is after March 31, 1987, as a reference to the aggregate of (i) 200/11 times the number of days in the year before April 1, 1987 divided by the number of days in the year, and (ii) 40/3 times the number of days in the year after March 31, 1987 divided by the number of days in the year, or (

c) in respect of a taxation year beginning after March 31, 1987 and ending before July 1, 1988, as a reference to “40/3".

(4.1) In the application of clauses 131(6)(a)(i)(

A) and 131(6)(b)(ii)(

C) of the federal Act for the purposes of this Act, (

a) in respect of a taxation year ending after June 30, 1988 and before 1990, the reference to “75/14" shall be read as a reference to 100/10, (

b) in respect of a taxation year ending after December 31, 1989 and before April 1, 1991, the reference to “100/21" shall be read as a reference to 80/9, and (

c) in respect of a taxation year ending after March 31, 1991 and before January 1, 1992, the reference to any fraction in clauses 131(6)(a)(i)(

A) and 131(6)(b)(ii)(

C) shall be read as a reference to the fraction obtained when 1 is divided by 3/4 of the proportion that tax payable under

section 21 for the year is of the amount taxable in Alberta for the year. 38 Explanatory Notes

(5) In the application of paragraph 131(6)(

d) of the federal Act for the purposes of this Act, subparagraph (

i) shall be read without reference to clause (

C) and the reference to “36%" in clauses (

A) and (

B) of that subparagraph shall be read, (

a) in respect of a taxation year ending before April I, 1987, as a reference to “11%”, (

b) in respect of a taxation year part of which is before April 1, 1987 and part of which is after March 31, 1987, as a reference to the aggregate of (

i) the proportion of 11% that the number of days in the year before April 1, 1987 bears to the number of days in the year, and (ii) the proportion of 15% that the number of days in the year after March 31, 1987 bears to the number of days in the year, or (

c) in respect of a taxation year beginning after March 31, 1987 and ending before July 1, 1988, as a reference to “15% ”.

(5.1) In the application of the definition of “refundable capital gains tax on hand” in subsection 131(6) of the federal Act for the purposes of this Act, (

a) in respect of a taxation year ending after March 31, 1991 and before December 1, 1991, the reference to the percentage in clauses (

A) and (

B) in subparagraph (

i) shall be read as a reference to the proportion that tax payable under

section 21 for the year is of the amount taxable in Alberta for the year, (

b) in respect of a taxation year ending after June 30, 1988 and before December 1, 1991, clause (

C) of subparagraph (

i) shall be read as if “this Part for the year determined without reference to

section 123.2” were struck out and “this Act for the year” were substituted, and (

c) in respect of a taxation year ending after November 30, 1991 (

i) the reference to the percentage in clauses (

a) and (

b) in A of the definition shall be read as a reference to the proportion that tax payable under

section 21 for the year is of the amount taxable in Alberta for the year, and (ii) clause (

c) in A of the definition shall be read as if “this Part for the year determined without reference to

section 123.2” were struck out and “this Act for the year” were substituted. 39 Explanatory Notes

25(1)

Section 30.01 is repealed and the following is substituted: Amounts designated by mutual fund trust 30.01 When a corporation is or becomes a beneficiary under a mutual fund trust, sections 132.1 and 132.11 of the federal Act apply for the purposes of determining the income of the corporation under this Act.

(2) This

section applies to the 1998 taxation year and subsequent taxation years. 26

Section 34 is amended (

a) in subsection (1) by striking out “, 141”; (

b) by adding the following after subsection (3):

(4) Sections 139.1, 139.2 and 141 of the federal Act apply for the purposes of this Act.

(5) Sections 139.1 and 139.2 of the federal Act apply to transactions that occur after December 15, 1998.

(6) Section 141 of the federal Act, as re-enacted by

section 40 of

chapter 19, Statutes of Canada 2000, applies after December 15, 1998. 27 The following is added after

section 34.01: Cost of tax shelter investments 34.02(1) Subject to subsections (2), (3), (4) and (5),

section 143.2, except subsection (15), and subsection 237.1(1) of the federal Act apply in computing the income of a corporation under this Act.

(2) Where the Minister of National Revenue has initiated a federal assessment action for a taxation year of a corporation applying subsection 143.2(13) of the federal Act, the amount deemed to be a limited-recourse amount in relation to an expenditure pursuant to subsection 143.2(13) of the federal Act is deemed to be the limited-recourse amount relating to the expenditure under this Act.

(3) Where the Minister of National Revenue has initiated a federal assessment action for a taxation year of a corporation applying subsection 143.2(14) of the federal Act, the corporation and such other taxpayers as the Minister of National Revenue has determined are not dealing at arm’s 40

Section 30.01 presently reads: 30.01

Section 132.1 of the federal Act applies for the purposes of determining the income of a corporation under this Act. 26

Section 34 presently reads: 34(1) Subject to subsections (2) and (3), the rules provided in sections 138, 138.1, 140, 141 and 141.1 of the federal Act apply in computing the taxable income of insurance corporations for the purposes of this Act.

(3) The rules provided in

section 139 with respect to the conversion of provincially incorporated life insurance corporations into a mutual corporation apply for the purposes of this Act. 27 Cost of tax shelter investments. 40 Explanatory Notes

length for the purposes of

section 143.2 of the federal Act are deemed not to be dealing with each other at arm’s length for the purposes of this section.

(4) No amount may be deducted or claimed by a corporation for the purposes of this Act in respect of a tax shelter unless the corporation has filed with the Minister of National Revenue the prescribed form containing prescribed information, including the identification number for the tax shelter, pursuant to the requirements of

section 237.1 of the federal Act.

(5) No amount may be deducted or claimed by a corporation for the purposes of this Act for any taxation year in respect of a tax shelter of the corporation if the corporation is liable to a penalty under subsection 237.1(7.4) or 162(9) of the federal Act in respect of the tax shelter or interest on the penalty and (

a) the penalty or interest has not been paid, or (

b) the penalty and interest have been paid, but an amount on account of the penalty or interest has been repaid under subsection 164(1.1) of the federal Act or applied under subsection 164(2) of the federal Act.

(6) Subject to subsections (7) to (11), subsections (1) to (3) apply to property acquired and to outlays and expenses made or incurred by a taxpayer after November 1994. (7) Subsections (1) to (3) do not apply where (

a) the property was acquired, or the outlay or expense was made or incurred, before 1995 pursuant to an agreement in writing made by the taxpayer before December 1994, or (

b) the property is (

i) a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) of the federal Act, as it applies for the purposes of this Act, where (

A) the principal photography of the production began before 1995 or, in the case of a production that is a television series, one episode of the series began before 1995, and 41

41 Explanatory Notes

(

B) the principal photography of the production was completed before March 2, 1995, or (ii) an interest in a partnership (all or substantially all of the property of which is a film production referred to in subclause (i)) acquired before 1995 by a taxpayer that is a partnership, and the following conditions are met: (

c) in the case of an interest that is a tax shelter for which

section 237.1 of the federal Act requires an identification number to be obtained from the Minister of National Revenue under the federal Act, the identification number was obtained before December 1994; (

d) there is no agreement or other arrangement under which the taxpayer’s obligations with respect to the interest can be changed, reduced or waived if there is a change to this Act or the federal Act or if there is an adverse assessment under this Act or the federal Act. (8) Subsections (1) to (3) do not apply to revenue guarantees prescribed for the purpose of subparagraph 96(2.2)(d)(ii) of the federal Act, as it applies for the purposes of this Act, that were granted before 1996.

(9) Subparagraph 143.2(6)(b)(ii) of the federal Act as it applies for the purposes of this Act does not apply (

a) to property acquired, or outlays or expenses made or incurred, by a taxpayer before April 27, 1995, or (

b) to property acquired, or outlays or expenses made or incurred, by a taxpayer before 1996 pursuant to a particular agreement in writing made by the taxpayer before April 27, 1995 where the following conditions are met: (

i) in the case of a property that is a tax shelter for which

section 237.1 of the federal Act requires an identification number to be obtained from the Minister of National Revenue under the federal Act, the identification number was obtained before April 27, 1995, and 42

42 Explanatory Notes

(ii) there is no agreement or other arrangement under which the taxpayer’s obligations under the particular agreement can be changed, reduced or waived if there is a change to this Act or the federal Act or if there is an adverse assessment under this Act or the federal Act.

(10) Paragraph 143.2(7)(

a) of the federal Act, as it applies for the purposes of this Act, is to be read without reference to “not exceeding 10 years” where (

a) the indebtedness arises (

i) pursuant to the terms of an agreement in writing made by the taxpayer before April 27, 1995, (ii) before 1996, in respect of the acquisition of a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) of the federal Act, as it applies for the purposes of this Act, or an interest in a partnership all or substantially all of the property of which is either a film production prescribed for the purpose of that subparagraph or an interest in one or more partnerships all or substantially all of the property of each of which is such a film production, where (

A) the principal photography of the production began before 1996 or, in the case of a production that is a television series, the principal photography of one episode of the series began before 1996, and (

B) the principal photography of the production was completed before March 1996, or (iii) before July 1995 (

A) pursuant to the terms of a document that is a prospectus, preliminary prospectus or registration statement filed before April 27, 1995 with a public authority in Canada pursuant to and in accordance with the securities legislation of Canada or of any province and, where required by law, accepted for filing by the public authority, and the funds so raised were expended 43

43 Explanatory Notes

before 1996 on expenditures contemplated by the document, or (

B) pursuant to the terms of an offering memorandum distributed as part of an offering of securities where (

I) the memorandum contained a complete or substantially complete description of the securities contemplated in the offering as well as the terms and conditions of the offering, (II) the memorandum was distributed before April 27, 1995, (III) solicitations in respect of the sale of the securities contemplated by the memorandum were made before April 27, 1995, (IV) the sale of the securities was substantially in accordance with the memorandum, and (

V) the funds were expended before 1996 in accordance with the memorandum, and (

b) the following conditions are met: (

i) in the case of an interest to which clause (a)(

i) or (iii) applies that is a tax shelter for which

section 237.1 of the federal Act requires an identification number to be obtained from the Minister of National Revenue under the federal Act, the identification number was obtained before April 27, 1995; (ii) there is no agreement or other arrangement under which the taxpayer’s obligations with respect to the interest can be changed, reduced or waived if there is a change to this Act or the federal Act or if there is an adverse assessment under this Act or the federal Act. 44

44 Explanatory Notes

(11) Subsection 143.2(8) of the federal Act, as it applies for the purposes of this Act, does not apply to a taxpayer in respect of an indebtedness (

a) where the indebtedness (

i) arose, and (ii) is related to property acquired, or outlays or expenses made or incurred, by the taxpayer before April 27, 1995, or (

b) where the indebtedness (

i) arose, and (ii) is related to property acquired, or outlays or expenses made or incurred, by the taxpayer, before 1996 pursuant to a particular agreement in writing made by the taxpayer before April 27, 1995 and there is no agreement or other arrangement under which the taxpayer’s obligations under the particular agreement can be changed, reduced or waived if there is a change to this Act or the federal Act or if there is an adverse assessment under this Act or the federal Act. (12) Subsections (4) and (5) apply after December 1, 1994. 28(1)

Section 35 is amended (

a) by repealing subsection (3) and substituting the following:

(3) Where, at any time (in this subsection referred to as “that time”), a corporation becomes or ceases to be exempt from tax under this Act on its taxable income otherwise than by reason of paragraph 149(1)(

t) of the federal Act, as it applies for the purposes of this Act, the following rules apply: (

a) the taxation year of the corporation that would otherwise have included that time is deemed to have ended immediately before that time, a new taxation year of the corporation is deemed to have begun at that time and, for the purpose of determining the 45

Section 35 presently reads in part:

(3) If at any time, in this subsection referred to as “that time”, a corporation becomes or ceases to be exempt from tax under this Act on its taxable income other than as a result of its becoming or ceasing to be a corporation referred to in paragraph 149(1)(

t) of the federal Act, the following rules apply: (

a) the taxation year of the corporation that would otherwise have included that time shall be deemed to have ended immediately before that time and a new taxation year of the corporation shall be deemed to have commenced at that time; (a.1) for the purpose of computing the corporation’s income for its first taxation year ending after that time, the corporation shall be deemed to have claimed or deducted, under sections 20, 138 and 140 of the federal Act as they apply for the purposes of this Act, in 45 Explanatory Notes

corporation’s fiscal period after that time, the corporation is deemed not to have established a fiscal period before that time; (

b) for the purpose of computing the corporation’s income for its first taxation year ending after that time, the corporation is deemed to have claimed or deducted, under sections 20, 138 and 140 of the federal Act, as they apply for the purposes of this Act, in computing its income for its taxation year ending immediately before that time, the greatest amount that could have been claimed or deducted for that year as a reserve under those sections; (

c) the corporation is deemed to have disposed, at the time (in this subsection referred to as the “disposition time”) that is immediately before the time that is immediately before that time, of each property that was owned by it immediately before that time for an amount equal to its fair market value at that time and to have reacquired the property at that time at a cost equal to that fair market value; (

d) for the purposes of applying

section 23 of this Act and sections 37, 65 to 66.4, 66.7 and 111 of the federal Act, as they apply for the purposes of this Act, to the corporation, the corporation is deemed to be a new corporation the first taxation year of which began at that time; (

e) where, immediately before the disposition time, the corporation’s cumulative eligible capital in respect of a business exceeds the total of (i) 3/4 of the fair market value of the eligible capital property in respect of the business, and (ii) the amount otherwise deducted under paragraph 20(1)(

b) of the federal Act, as it applies for the purposes of this Act, in computing the corporation’s income from the business for the taxation year that ended immediately before that time, the excess shall be deducted under paragraph 20(1)(

b) of the federal Act, as it applies for the purposes of this Act, in computing the corporation’s 46

computing its income for its taxation year ending immediately before that time the greatest amount that could have been claimed or deducted for that year as a reserve under those sections; (

b) the corporation shall be deemed to have disposed, immediately before the time that is immediately before that time, of each property, other than, where, at that time, the corporation ceases to be exempt from tax under this Act on its taxable income, a Canadian resource property or a foreign resource property, that was owned by it immediately before that time for an amount equal to its fair market value at that time and to have reacquired the property at that time at a cost equal to that fair market value; (

c) if clause (

b) applies in respect of depreciable property of the corporation and the capital cost of it to the corporation immediately before the disposition exceeds the fair market value of it at that time, for the purposes of

section 8, (

i) the capital cost of the property to the corporation at that time shall be deemed to be the amount that was the corporation’s capital cost of the property immediately before the disposition, and (ii) the excess shall be deemed to have been allowed to the corporation in respect of the property in computing its income for taxation years ending before that time; (

d) notwithstanding

section 111 of the federal Act, no amount is deductible in computing the corporation’s taxable income for a taxation year ending after that time in respect of a non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss for a taxation year ending before that time to the extent that the loss could have been applied to reduce the corporation’s taxable income for taxation years ending before that time. (4) Subsection (3) does not apply to a corporation that ceases to be exempt from tax under this Act after November 12, 1981 by reason of control of the corporation being acquired by a person or persons pursuant to an agreement in writing entered into on or before that date. 46 Explanatory Notes

income from the business for the taxation year that ended immediately before that time. (

b) by repealing subsection (4). (2) Subsection (1)(

a) applies to a corporation that becomes or ceases to be exempt from tax on its taxable income after April 26, 1995. 29

Section 37.1(1) is amended by striking out the portion that precedes clause (

a) and substituting the following: Penalty for false statement 37.1(1) If a person acting on behalf of a corporation knowingly, or under circumstances amounting to gross negligence, has made or has participated in, assented to or acquiesced in the making of, a false statement or omission in a return, form, certificate, statement or answer (in this

section referred to as a return) filed or made in respect of a taxation year for the purposes of this Act, the corporation is liable to a penalty of the greater of $100 and 50% of the total of 47

Section 37.1(1) presently reads: 37.1(1) If a person acting on behalf of a corporation knowingly or under circumstances amounting to gross negligence in the carrying out of any duty or obligation imposed under this Act or in the claiming of any refundable tax credits under this Act makes or participates in, assents to or acquiesces in the making of a false statement or omission in a return, application, certificate, statement or answer, all in this

section referred to as a “return”, filed or made in respect of a taxation year as required under this Act or a regulation, the corporation is liable to a penalty of the greater of $100 or 50% of the aggregate of (

a) the amount, if any, by which (

i) the tax for the year that would be payable by the corporation under this Act, if the amount taxable in Alberta for the year were computed (

A) by adding to the taxable income reported by the corporation in its return for the year that portion of its understatement of income for the year that is reasonably attributable to the false statement or omission, (

B) by recalculating the Alberta allocation factor as it would be calculated under

section 19(1) if it were not for the false statement or omission, and (

C) by deducting from the royalty tax deduction reported by the corporation in its return for the year the portion, if any, of the corporation’s royalty tax deduction that is reasonably attributable to the false statement or omission exceeds (ii) the tax for the year that would be payable by the corporation under this Act if the corporation were assessed on the basis of the corporation’s amount taxable in Alberta as filed, 47 Explanatory Notes

30(1) The following is added after

section 37.1: Penalty for inadequate records 37.2(1) The Minister of Revenue may provide written notice, served personally or by mail, to a corporation demanding that all information necessary to substantiate the amount of royalty tax credit for a taxation year that the corporation has claimed entitlement to on any prescribed form filed pursuant to

section 26.1(14) (in this

section referred to as the “royalty tax credit claim”) be made available for examination by an officer of the Department of Revenue at the corporation’s normal place of business within 45 days after the date set out in the notice.

(2) If (

a) information to substantiate all of the corporation’s royalty tax credit claim has not been made available by the corporation within the 45-day period, or 48

(

b) the amount, if any, by which (

i) the tax for the year that would be payable if the tax were computed by subtracting from the deductions from the tax otherwise payable by the corporation for the year the portion of any of the deductions that is reasonably attributable to the false statement or omission exceeds (ii) the tax for the year that would be payable by the corporation under this Act if the corporation’s tax payable for the year were assessed on the basis of the information provided in its return for the year, and (

c) the amount, if any, by which (

i) the refundable tax credits for the year that would be payable to the corporation if they were determined on the basis of information provided in the corporation’s return for the year exceed (ii) the refundable tax credits for the year that would be payable to the corporation if they were determined by deducting from the refundable tax credits claimed by the corporation in its return for the year the portion of them that is reasonably attributable to the false statement or omission. 30 Penalty for inadequate records. 48 Explanatory Notes

(

b) the information made available by the corporation within the 45-day period does not substantiate all of the corporation’s royalty tax credit claim, the corporation is liable to pay a penalty in an amount equal to 25% of the difference between (

c) the amount of the corporation’s royalty tax credit claim, and (

d) the amount of the royalty tax credit the corporation would have been entitled to for the taxation year under this Act based on the information made available by the corporation to the Minister of Revenue within the 45-day period.

(3) A penalty under subsection (2) applies even if it is determined subsequent to the expiration of the 45-day period, from additional information supplied by the corporation to the satisfaction of the Minister of Revenue or on appeal from a determination made by the Minister of Revenue, that the corporation is entitled to a royalty tax credit for the taxation year in excess of the amount that would have been payable to the corporation for the taxation year under this Act based on the information made available to the Minister of Revenue within the 45-day period.

(2) This

section applies to all claims filed after the coming into force of this section. 31

Section 39(3) is amended (

a) by striking out “or a part or an instalment of tax” and substituting “or a part of an instalment of tax”; (

b) in clause (a) (

i) by striking out the words before subclause (

i) and substituting the following: (

a) the tax payable by the corporation for the year is deemed to be the amount that it would be if the consequences of the deduction or exclusion of the following amounts were not taken into consideration; (ii) by striking out “or” at the end of subclause (ii) and substituting “and”; 49

Section 39(3) presently reads:

(3) For the purpose of computing interest under subsection (1) or (2) on tax or a part or an instalment of tax for a taxation year and for the purpose of

section 73.1, (

a) the tax payable by the corporation for the year shall be deemed to be the amount that it would have been if none of the following amounts, namely, (

i) any amount deducted under this Act by virtue of the application of

section 41 of the federal Act in respect of its listed-personal-property loss for a subsequent taxation year, (ii) any amount excluded from its income for the year under this Act by virtue of the application of

section 49 of the federal Act in respect of the exercise of an option in a subsequent taxation year, or 49 Explanatory Notes

(iii) by striking out the words after subclause (iii) and substituting “and”; (

c) in clause (

b) by striking out “by virtue of the exclusion or deduction of an amount described in clause (

a) shall be deemed” and substituting “as a consequence of the deduction or exclusion of amounts described in clause (

a) is deemed”. 32(1) The following is added after

section 39.1: Offset of refund and arrears interest 39.2 In this section, (a) “accumulated overpayment amount” of a corporation for a period means the overpayment amount of the corporation for the period together with refund interest (including, for greater certainty, compound interest) that accrued with respect to the overpayment amount before the date specified under subsection (3)(

b) by the corporation in its application for the period; (b) “accumulated underpayment amount” of a corporation for a period means the underpayment amount of the corporation for the period together with arrears interest (including, for greater certainty, compound interest) that accrued with respect to the underpayment amount before the date specified under subsection (3)(

b) by the corporation in its application for the period; 50

(iii) any amount deducted under this Act by virtue of the application of

section 111 of the federal Act in respect of a loss for a subsequent taxation year, were so excluded or deducted for the year, as the case may be, and (

b) the amount by which the tax payable by the corporation for the year is reduced by virtue of the exclusion or deduction of an amount described in clause (

a) shall be deemed to have been paid by the corporation on account of tax payable for the year on the day that is the latest of (

i) the first day immediately following that subsequent taxation year, (ii) the day on which the corporation’s return under

section 36 for that subsequent taxation year was filed, (iii) if an amended return for the taxation year or a prescribed form amending its return for the year was filed under this Act by virtue of the application of subsection 49(4) of the federal Act or

section 44 of this Act, the day on which the amended return or prescribed form was filed, and (iv) if, as a consequence of a request, the Provincial Treasurer reassessed the corporation’s tax for the year to take into account the exclusion or deduction, the day on which the request was made. 32 Offset of refund and arrears interest. 50 Explanatory Notes

(c) “arrears interest” means interest computed under subsection (5)(

b) or

section 38.1(1)(b), 39(1) or (6) or 47(4.3)(

b) or (5)(b); (d) "overpayment amount” of a corporation for a period means the amount referred to in subsection (2)(a)(

i) that is refunded to the corporation or the amount referred to in subsection (2)(a)(ii) to which the corporation is entitled; (e) “refund interest” means interest computed under

section 47(4) or (4.31); (f) “underpayment amount” of a corporation for a period means the amount referred to in subsection (2)(

b) payable by the corporation on which arrears interest is computed.

(2) A corporation may apply in writing to the Minister of Revenue for the reallocation of an accumulated overpayment amount for a period that begins after 2000 on account of an accumulated underpayment amount for the period if, in respect of tax paid or payable by the corporation under this Act, (

a) refund interest for the period (

i) is computed on an amount refunded to the corporation, or (ii) would be computed on an amount to which the corporation is entitled, if that amount were refunded to the corporation, and (

b) arrears interest for the period is computed on an amount payable by the corporation.

(3) A corporation’s application referred to in subsection (2) for a period is deemed not to have been made unless (

a) it specifies the amount to be reallocated, which shall not exceed the lesser of the corporation’s accumulated overpayment amount for the period and its accumulated underpayment amount for the period, 51

51 Explanatory Notes

(

b) it specifies the effective date for the reallocation, which shall not be earlier than the latest of (

i) the date from which refund interest is computed on the corporation’s overpayment amount for the period, or would be so computed if the overpayment amount were refunded to the corporation, (ii) the date from which arrears interest is computed on the corporation’s underpayment amount for the period, and (iii) January 1, 2001, and (

c) it is made on or before the day that is 90 days after the latest of (

i) the day of mailing of the first notice of assessment giving rise to any portion of the corporation’s overpayment amount to which the application relates, (ii) the day of mailing of the first notice of assessment giving rise to any portion of the corporation’s underpayment amount to which the application relates, (iii) if the corporation has served a notice of objection to an assessment referred to in subclause (

i) or (ii), the day of mailing of the notification under

section 48(4) by the Minister of Revenue in respect of the notice of objection, (iv) if the corporation has appealed, or applied for leave to appeal, from an assessment referred to in subclause (

i) or (ii) to a court of competent jurisdiction, the day on which the court dismisses the application, the application or appeal is discontinued or final judgment is pronounced in the appeal, and (

v) the day of mailing of the first notice to the corporation indicating that the Minister of Revenue has determined any portion of the corporation’s overpayment amount to which the application relates, if the overpayment amount 52

52 Explanatory Notes

has not been determined as a result of a notice of assessment mailed before that day.

(4) The amount to be reallocated that is specified under subsection (3)(

a) by a corporation is deemed to have been refunded to the corporation and paid on account of the accumulated underpayment amount on the date specified under subsection (3)(

b) by the corporation.

(5) If an application in respect of a period is made under subsection (2) by a corporation and a portion of the amount to be reallocated has been refunded to the corporation, the following rules apply; (

a) a particular amount equal to the total of (

i) the portion of the amount to be reallocated that was refunded to the corporation, and (ii) refund interest paid or credited to the corporation in respect of that portion is deemed to have become payable by the corporation on the day on which the portion was refunded; (

b) the corporation shall pay to the Minister of Revenue interest at the prescribed rate on the particular amount from the day referred to in clause (

a) to the date of payment.

(6) If a particular reallocation of an accumulated overpayment amount under subsection (4) results in a new accumulated overpayment amount of the corporation for a period, the new accumulated overpayment amount shall not be reallocated under this

section unless the corporation so applies in its application for the particular reallocation. (2) Subsection (1) applies after 2000. 33(1)

Section 41 is amended (

a) by repealing subsection (4) and substituting the following:

(4) The provisions of this Act relating to an assessment or reassessment and to assessing or reassessing tax apply to a determination or redetermination of an amount, except that 53

Section 41 presently reads in part:

(4) The provisions of this Part relating to an assessment or reassessment and to assessing or reassessing tax apply to a determination or redetermination under this Division, except that subsection (1) and

section 42(1) are not applicable to determinations made under subsection (1.11) or (2), and an original determination of a corporation’s non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss for a taxation year may be 53 Explanatory Notes

(a) subsection (1) and

section 42(1) do not apply to determinations made under subsections (1.11) and (2), (

b) an original determination of a corporation’s non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss for a taxation year may be made by the Minister of Revenue only at the request of the corporation, and (c)

section 47(4.4) does not apply to a determination or redetermination to which the corporation is bound by virtue of subsection (6). (

b) by adding the following after subsection (5):

(6) Where a corporation is a member of a partnership in a taxation year, for the purposes of calculating (

a) the income, taxable income or taxable income earned in Canada of, (

b) the tax or other amount payable by, (

c) any amount refundable to, or (

d) any amount deemed to have been paid or to have been an overpayment by the corporation as a member of the partnership for any taxation year under this Act, the corporation is bound by any determination or redetermination by the Minister of National Revenue pursuant to subsection 152(1.4) of the federal Act with respect to the income or loss of the partnership or any deduction or other amount, or any other matter, in respect of the partnership for the fiscal period referred to in subsection 152(1.4) of the federal Act or a decision of the Tax Court of Canada, the Federal Court of Canada or the Supreme Court of Canada rendered in any appeal undertaken by any member of the partnership from such determination or redetermination where such determination, redetermination or decision is final and all rights of objection and appeal have expired.

(7) Notwithstanding sections 43(1), (1.02), (2) and (3), the Minister of Revenue may, before the end of the day that is one year after the day that the Minister of National Revenue initiates a federal assessment action with respect to a corporation pursuant to paragraph 152(1.7)(

b) of the federal 54

made by the Provincial Treasurer only at the request of the corporation.

(5) If the Provincial Treasurer makes a determination of the amount of a corporation’s non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss for a taxation year under subsection (2) or makes a determination under subsection (1.11) with respect to a corporation, subject to the corporation's rights of objection and appeal in respect of a determination and to any r

Document details

Collection	Alberta — Bills
Citation	L25 S1 103
Type	bill
Volume / chapter	L25 S1 103
Language	en
Format	json
Source	PROVINCIAL
Identifier	316ce7b1c0447a7edfd41b4d8adddfb66f6f226e

Source file is stored in the law ingest library (json).