1975 Bill 25 (Second Session) First Session, 18th Legislature, 24 Elizabeth II THE LEGISLATIVE ASSEMBLY OF ALBERTA BILL 2S THE ALBERTA INCOME TAX AMENDMENT ACT, 1975 THE PROVINCIAL TREASURER First Reading Second Reading Third Reading ............................. . Printed by the Queen's Printer for the Province of Alberta, EDMONTON

Bill 25 BILL 2S 1975 (Second Session) THE ALBERTA INCOME TAX AMENDMENT ACT, 1975 (Assented to , 1975) HER MAJESTY, by and with the advice and consent of the Legislative Assembly of Alberta, enacts as follows: 1. The Alberta Income Tax Act is hereby amended. 2.

(1) Section 4 is amended (

a) as to subsection (3), by striking out clause (

b) and by substituting the following: (b) 36 per cent in respect of the 1972, 1973 and 1974 taxation years; (c) 26 per cent in respect of the 1975 and subse­ quent taxation years. (

b) as to subsection (6), clause (

a) by striking out the word "or" at the end of the clause and by substitut­ ing the word "and", and (

c) as to subsection (6), by striking out clause (

b) and by substituting the following clause: (

b) that proportion of the tax otherwise payable under this Act for that taxation year. that (

i) the aggregate of the taxpayer's incomes from sources in that country is of (

A) for that year, if

section 114 of the federal Act is not applicable, or (

B) if

section 114 of the federal Act is ap­ plicable, for the period or periods in the year referred to in paragraph (

a) of that

section on the assumption that (

c) no businesses were carried on by him in that country, and (

D) no amount was deducted under

section 91, subsection (5) of the federal Act in computing his income for the year,

Explanatory Notes 1. This Bill will amend

chapter 182 of the Revised Statutes of Alberta 1970.

Section 4, subsections (3) and (6) presently read:

(3) For the purposes of this section, the percentage of the tax payable under the federal Act to be used for computing the tax payable under this

section is (a) 33 per cent in respect of the 1970 and the 1971 taxation years; (b) 36 per cent in respect of the 1972 and subsequent taxation years.

(6) Where an individual resided in Alberta .on the last day of a taxation year and had income for the year that included income earned in a country other than Canada in respect of which any non­ business-income tax was paid by him to the government of a country other than Canada, he may deduct from the tax payable by him under this Act for that taxation year an amount equal to the lesser 'Of (

a) the amount, if any, by which any non-business-income tax paid by him for the year to the government of such other country exceeds the amount claimed under the federal Act as a deduction for that taxation year by virtue of

section 126, subsection (1) of that Act, or (

b) that proportion of the tax otherwise payable under this Act for that taxation year that (

i) the aggregate of the taxpayer's income from sources in that country (

A) for that year, if

section 114 of the federal A ct is not applicable, or (

B) if

section 114 'Of the federaJ Act is applicable, for the period or periods in the year referred to in paragraph (

a) thereof, on the assumption that no business were carried on by him is of (ll) the taxpayer's income (

A) for the year, if sectiQn 114 of the federal Act is not applicable, or (

B) if sectiQn 114 'Of the federal Act is applicable, for the period or periods in the year referred to in paragraph (

a) thereof, minus any amounts deductible under

section 111, subsection (1), paragraph (

b) or

section 112, or 113 of the federal Act for the year 'Or such period or periods, as the case may be. The amendments to subsection (6) are made necessary because of the amendments to

section 12'6 of the federal Act relating to foreign tax deduotions and made by clauses '8.3 (1) and (2) of Bill C-49 enacted by the Parliament of Canada last March.

(ii) the taxpayer's income (

A) for the year, if

section 114 'Of the federal Act is not applicable, or (

B) if

section 114 of the federal Act is applicable, for the period or periods in the year referred to in paragraph (

a) of that section, minus any amounts deductible under

section 111, subsection (1), paragraph (

b) or

section 112 of the federal Act for the year or such period or periods, as the case may be. (2) Subsection (1), clauses (

b) and (

c) apply to the 1974 and subsequent taxation years. 3. The following

section is added after

section 4: 4.1 The tax payable by an individual and computed under

section 4 for the 1975 or any subsequent taxation year shall be reduced by an amount equal to the lesser of (

a) the tax computed under

section 4 for the taxation year, and (b) $80 minus 2 per cent of the individual's taxable income for that year. 4.

(1) Section 5, subsection (3) is amended (

a) as to clause (a), by striking out the word "or" at at the end of the clause and by substituting the word "and", (

b) by striking out clause (

b) and by substituting the following: (

b) that proportion of the amount by which such part of any non-business-income tax paid by the corporation for the year to the government of a country other than Canada (except any such tax or part thereof that may reasonably be regarded as having been paid in respect of income from a share ·of the capital stock of a foreign affiliate of the corporation) exceeds the amount of the deduction claimed by the corporation under

section 126, subsection (1) of the federal Act that (

i) the taxable income earned in the year in Alberta by the corporation as determined in accordance with regulations made under

section 124, subsection (4), paragraph (

a) of the federal Act is of (ii) the aggregate of the taxable income earned in the year in each province by the corpor- 2

3. Selective tax reduction for individuals having a taxable in­ come of less than $4000. 4.

Section 5 (3) presently reads: (3) vVhere the income for a taxation yt.'ar of a corporation that maintained a permanent establishment in Alberta at any time in the taxation year includes income describd in

section 126, sUbseotion (1), paragraph (b), subparagraph (

i) of the federal Act from sources in a country other than Canada (in this

section referred to as "foreigll investment income") and where the corporation has claimed a deduction under

section 126, subsection (1) of the federal Act in respect of the foreign investment income, the corporation may deduct from the tax for the year otherwise payable under this Act an amount equal to the lesser of (a) 11 per cent of the product of (

i) the foreign investment income of the corporation for the year from sources in the country, and (ij) that proportion of the taxable inc,me earned in the year by the cor­ poration that is determined to have been earned in the year in Alberta in accordance with regulations made under

section 124. sub­ section (4), paragraph (

a) of the federal Act. or (

b) that proportion of the amount of the deduction from the tax for the year otherwise payable by the corporation under

Part I of the federal Act that would be permitted under

section 126, subsection (1) of that Act if the reference to

section 124, subsection (2) set out in

section 126, subsection (7), paragraph (d), subparagraph (

i) of that Act were read as

section 124 of that Act minus the amount of the deduction claimed by the cor­ poration under

section 126, subsection (1) of the said Act, that (

i) the taxable income earned in the year in Alberta by the corporation as determined in accordance with regulations made under

section 124. subsection (4), paragraph (

a) of the federal Act is of (ij) the aggregate of the taxable income earned in the year in each prov­ ince by the corporation as determined in accordance with regulations made under

section 124, subsection (4), paragraph (

a) of the federal Act. The amendment corrects a technical defect in the present foreign tax credit mechanism under the Alberta Act to reflect the 11 per cent Alberta rate rather than the 1·0 per cent federal abatement. 2

ation as determined in accordance with regulations made under

section 124, sub­ section (4), paragraph (

a) of the federal Act.

(2) This

section applies to the 197.4- and subsequent tax­ ation years. 5. The following heading and sections are added after

section 8.3: Royalty Tax Rebates and Credits 8.4

(1) In this section, (a) "attributed Canadian royalty income" of a taxpayer for a taxation year means the aggregate of (

i) the amounts required to be included in com­ puting the taxpayer's income for the year by virtue of

section 12, subsection (1), para­ graph (0) of the federal Act, (ii) the amounts in respect of which no deduction is allowed in computing the taxpayer's income for the year by virtue of

section 18, subsection (1), parag]}aph (

m) of the federal Act, (iii) the amount, if any, by which the fair market value of petroleum, natural gas or related hydrocarbons (except coal) disposed of by him and to which

section 69, subsection (6) of the federal Act applies exceeds the proceeds, if any, of dispositions referred to in that sub­ section, and (iv) any amounts by which the cost of acquisitions referred to in

section 69, subsection (7) of the federal Act and incurred in the year exceeds the fair market value of the property so acquired, where those amounts relate to the production from oil or gas wells or bituminous sands or oil sands, but does not include any Canadian development expense (as defined in

section 66.2, subsection (5), paragraph (

a) of the federal Act) ; (b) "federal basic tax rate" of a taxpayer for a taxation year means the proportion that his tax payable under the federal Act for the year is of his taxable income for the year, expressed as a percentage; (c) "royalty tax rebate" means a rebate to which a taxpayer is entitled under this section; (

d) the expression "tax otherwise payable under this Act", or any similar expression, means the tax pay- 3

5. 8.4 Royalty tax rebates to be applied against income tax payable under The Alberta Income Tax Act. Amendments of the federal Act recently enacted by the federal Parliament (Bill C-49) resulted in the inclusion in a taxpayer's income of the amount of royalties, rentals, etc., receivable by the Crown or a Crown agency under, among other things, petroleum and natural gas and oil sands leases.

Section 8.4 is aimed at offsetting the effect of the federal legislation in respect of the income so attributed, by rebating a proportionate amount against Alberta income tax payable. 3

able under this Act without reference to this

section and

section 8.5; (e) "tax payable under the federal Act" has the mean­ ing assigned thereto by

section 4, subsection (4), clause (d).

(2) An individual is entitled, subject to this

section and the regulations, to a royalty tax rebate in respect of a taxa­ tion year in an amount equal to the lesser of (

a) the product obtained when (

i) the proportion of his attributed Canadian royalty income for the year that (

A) his income earned in Alberta in the year as determined in accordance with

Part XXVI of the federal regulations is of (

B) his income for the year, is multiplied by (ii) for the 1974 taxation year, 36 per cent of his federal basic tax rate for that year, or (iii) for the 1975 and subsequent taxation years, 26 per cent of his federal basic tax rate for the year, and (

b) his tax otherwise payable under this Act for the year.

(3) A corporation is entitled, subject to this

section and the regulations, to a royalty tax rebate in respect of a taxa­ tion year in an amount equal to the lesser of (a) 11 per cent of that proportion of its attributed Canadian royalty income for the year that (

i) its taxable income earned in Alberta as deter­ mined in accordance with

Part IV of the fed­ eral regulations is of (ii) its taxable income for that year, and (

b) its tax otherwise payable under this Act for the year.

(4) A taxpayer may, at the time he applies for a royalty tax rebate for a taxation year, deduct his royalty tax rehate for the year from his tax otherwise payable under this Act for the year.

(5) Where there is no tax otherwise payable under this Act by a taxpayer for a taxation year, the taxpayer is en­ titled to carry forward his attributed Canadian royalty income for the year to the next succeeding taxation year 4

and to use that income in the calculation of his royalty tax rebate for the next succeeding year, as though it were at­ tributed Canadian royalty income in the next succeeding year.

(6) Where there is tax 'Otherwise payable under this Act by a taxpayer for a taxation year, the taxpayer is entitled to carry forward and use in the calculation of his royalty tax rebate for the next succeeding year, as though it were attributed Canadian royalty 'income in the next succeed­ ing year, (

a) in the case of an individual, the quotient obtained when (

i) the amount, if any, by which the product determined for him for the year under sub­ section (2), clause (

a) exceeds his tax other­ wise payable under this Act for the year, is divided by (ii) in the case of the 1974 taxation year, the pro­ duct of (A) 36 per cent of his federal basic tax rate, and (

B) the quotient obtained when his income earned in Alberta in the 1974 taxation year (as determined in accordance with

Part XXVI of the federal regulations) is divid­ ed by his income for that taxation year, or (iii) in the case of the 1975 and subsequent taxation years, the product of (A) 26 per cent of his basic federal tax rate, and (

B) the quotient obtained when his income earned in Alberta in the taxation year (as determined in accordance with

Part XXVI of the federal regulations) is divided by his income for that taxation year; (

b) in the case of a corporation, the quotient obtained when (

i) the amount, if any, by which the amount de­ termined for it for the year under subsection (3), clause (

a) exceeds its tax otherwise pay­ able under this Act for the year, is divided by (ii) 11 per cent of the quotient obtained when its taxable income earned in Alberta for the year (as determined in accordance with

Part IV of the federal regulations) is divided by its tax­ able income for the year. S

(7) Notwithstanding subsections (5) and (6), a tax­ payer is not entitled to carry forward his attributed Cana­ dian royalty income for a taxation year under those sub­ sections unless (

a) in the case of a corporation, the corporation had a permanent establishment in Alberta at some time during that year, or (

b) in the case of an individual, the individual either had a permanent establishment in Alberta at some time during that year or was resident in Alberta on the last day of that year.

(8) A taxpayer is not entitled to a royalty tax rebate in respect of a taxation year unless application is made therefor by the taxpayer to the Provincial Treasurer in the manner and at the time prescribed by the Provincial Treasurer.

(9) The Provincial Treasurer may prescribe forms for the purposes of this section. 8.5

(1) In this

section (a) "associated corporations" means corporations that 0) are deemed to be associated with each other by virtue of a direction made under

section 247, subsection (2) of the federal Act, or (ii) are associated wi th each other by virtue of

section 256 of the federal Act; (b) "attributed Alberta royalty income" of a taxpayer for a taxation ye1ar n1eans the aggregate of all amounts each of which is (

i) an amount required to be included in cOlTIputing the taxpayer's income for the year by virtue of

section 12, subsection (1), paragraph (0 )of the federal Act, or (ii) an amount in respect of which no deduction is allowed in computing the taxpayer's income for the year by virtue of

section 18, subsect;.on (1), paragraph (

m) of the federal Act, and each of which is a' royalty receivable by the Crown in right of Alberta under a lease, licence, reservation or permit granting petroleum rights, natural gas rights or petroleum and natural gas rights; (c) "royalty tax credit" means a credit to which a tax­ payer is entitled under this section.

(2) Where (

a) an individual's income includes income from a business the fiscal period of which does not coinc:de with the calendar year, and 6

8.5 The proposed

section 8.5 will implement point (3) of the Alberta Petroleum Exploration Plan - December 1974 entitled "A Tax Credit Plan for Smaller Explorers".

Section 8.5 provides for the granting of credits against Alberta income tax of a portion of the amounts payable to the Government of Alberta as oil and gas royalties which are, under the Federal Government's budgets of May 6, 19'714 and November 18, 19'714, attributed to the Itaxpayer as income. 6

(

b) the income from that business consists of or includes income from oil or gas wells, then for the purposes of this section, a reference to a tax­ atioti. year shall, with respect to that individual, be read as a reference to a fiscal period of that business.

(3) Subject to this

section and the regulations, an in­ dividual who has attributed Alberta royalty income in a taxation year is entitled to a royalty tax credit for that taxation year in an amount equal to the lesser of (a) 25 per cent of the individual's attributed Alberta royalty income for the year, and (

b) the lesser of (i) $25,000, and (ii) that proportion of $25,000 that the number of days in the taxation year after May 6, 1974 bears to 365.

(4) Subject to this

section and the regulations, a corpor­ ation that has attributed Alberta royalty income in a tax­ ation year is entitled to a royalty tax credit for the taxation year in an amount equal to (a) 30 per cent of the corporation's attributed Alberta royalty income, in the case of the 1974 taxation year, (b) 28 per cent of the corporation's attributed Alberta royalty income, in the case of the 1975 taxation year, and (c) 25 per cent of the corporation's attributed Alberta royalty income, in the case of the 1976 taxation year and each subsequent taxation year, but not exceeding the rnaximum allowable credit for the taxation year.

(5) For the purposes of subsection (4), where a cor­ poration has a taxation year (in this subsection referred to as "the particular taxation year") part of which is before and part of which is after the commencement of the 1975 or 1976 calendar year (in this subsection referred to as "the particular calendar year"), the percentage referred to in subsection (4) for the particular taxation year shall be the percentage equal to the aggregate of (

a) that proportion of the percentage so referred to for the particular taxation year that the number of days in that portion of the particular taxation year that is in the particular calendar year is of the number of days after May 6, 1974 in the particular taxation year, and ' (

b) that proportion of the percentage so referred to for the taxation year immediately preceding the partic­ ular taxation year that the number of days after 7

May 6, 1974 in that portion of the partlcu1ar tax­ ation year that is in the calendar year immediately preceding the particular calendar year is of the number of days after May 6, 1974 in the particular taxation year.

(6) For the purposes of this section, the maximum allowable credit for a corporation for a taxation year is the lesser of (a) $1,000,000, and (

b) that proportion of $1,000,000 that the number of days in the taxation year after May 6, 1974 bears to 365.

(7) Where each of two or more associated corporations are entitled to a royalty tax credit for the same taxation year and the aggregate amount of the royalty tax credits of those corporations for the taxation year exceeds the max1- mum allowable credit, the royalty tax credit for each of those corporations for that taxation year shall be that pro­ portion of the maximum allowable credit allocated to the corporation by an agreement made bewteen those corpora­ tions setting out the proportions in which the maximum allowable credit is to be divided among them.

(8) An agreement referred to in subsect 10n (7) shall be filed with the Provincial Treasurer but if no agreement is filed within 30 days after notice in writing b-y the Pro­ vincial Treasurer has been forwarded to any of the associa­ ted corporations that such Ian agreement· is required for the purposes of this section, the Provincial Treasurer shall, for the purpose of this section, allocate an amount to one or more of them for the taxation year, which amount or the aggregate of which amounts, as the case may be, shall be equal to the maximum allowable credit for the taxation year, and in any such case, notwithstanding subsection (7), the maximum allowable credit for the taxation year for each of the associated 'Corporations is the amount alloeated to it under this subsection. (9) Subsection (7) does not apply to a corporation (in ~his su~section called the "taxpayer corporation") for a year In relatIOn to another corporation with which it is associated in that taxation year if, throughout that year, (

a) the taxpayer corporation was controlled by the other corporation, (

b) the taxpayer 'Corporation was, for the purposes of the federal Act, resident in Canada and controlled in Canada, (

c) a class or classes of equity shares of the taxpayer corporation having full voting rights under all cir­ cumstances were listed on a pres'cribed stock ex­ change in Canada 'and the class or classes repre- S

(

d) sented in the aggregate not less than 50 per cent of that part of the paid-up capital of the taxpayer corporation that was represented by all its issued and outstanding equity shares, and no one person, either alone or in combination with any person related to him at any time within the year, owned equity shares representing in the ag­ gregate more than 90 per cent of that Dart of the paid-up capital of the taxpayer corporation that was represented by all of its issued and outstandin~s equity shares.

(10) In subsection (9), (a) "paid-up capital" and "equity share" have the meanings assigned to them respectively by

section 89, subsection (1) and

section 257, subsection (2) of the federal Act; (b) "prescribed stock exchange in Carr::tda" means a stock exchange in Canada that is prescribed for the purposes of any provision of the federal Act pursuant to the federal regulations.

(11) Where the attributed Alberta royalty income of a taxpayer for a taxation year js greater than an amount that is reasonably attributable to the taxnayer's income in that taxation year derived from the production of petroleum and natural gas subject to the payment of royalty to the Crown in right of Alberta, the Provincial Treasurer may reduce the royalty tax credit to which the taxuayer would otherwise be entitled to an amount which, in his ouinion, would have been the royalty tax credit if the taxpayer's attributed Alberta royalty income for the tax­ ation year were in :an amount that is reasonablv attributable to his income in that taxation year derived from the pro­ duction of petroleum and natural gas sub,iect to the pay­ ment .of royalty to the Crown in right of Alberta.

(12) Where a taxpayer is entitled to a royalty tax credit fora taxation year, the Provincial Treasurer (

a) may deduct the credit from any tax, interest or penalty otherwise owing by the taXD8-yer for that or any preceding- taxation year under this Act, the Canada Pension Plan. the Unemployment Insurance Act, 1971 (Canada), the income tax statute of an agreeing province or the federal Act, or (

b) if the credit exceeds any deduct;ons under clause (a), shall pay the amount of such excess to tlJe tax­ payer from the taxes, interest and penalties col­ lected under this Act. 9

(13) A taxpayer is not entitled to a royalty tax credit in respect of a taxation year unless application is made therefor by the taxpayer to the Provincial Treasurer in the manner and at the time prescribed by the Provincial Treasurer.

(14) The Provincial Treasurer may prescribe forms for the purpose of this section. 6.

(1) Section 15 is amended (

a) as to subsection (1), by striking out clause (

b) and by substituting the following: (

b) the remainder of the tax as estimated by it under

section 10 (

i) on or before the last day of the period, where an amount was deducted by virtue of

section 125 of the federal Act in com­ puting the tax payable under

Part I of that Act by the corporation for its im­ mediately preceding taxation year, or (ii) on or before the last day of the 14th month of the period, in any other case. (

b) by striking out subsection (2) and by substituting the following:

(2) Where a collection agreement is entered into, a corporation shall pay an amount computed with reference to (a) subsection (1), clause (a), subclause (i), if the corporation pays an amount computed under

section 157, subsection (1), paragraph (a), subparagraph (

i) of the federal Act, (b) subsection (1), clause (a), subclause (ii), if the corporation pays an amount under

section 157, subsection (1), paragraph (a), subpara­ graph (iii) of the federal Act, and (c) subsection (1), dause (a), subclause (iii), if the corporation pays an amount under

section 157, subsection (1), paragraph (a), sub­ paragraph (ii) of the federal Act. (2) Subsection (1), clause (

a) applies to the taxation years ending after November 18, 1974. 7. This Act comes into force on the day upon which it is assented to. 10

Section 15, subsections (1) and (2) presently read: 15.

(1) Every corporation shall, during the 15-month period ending three months after the close of each taxation year, pay Ito the Provincial Treasurer (

a) either (

i) on or before the last day of each of the first 12 months in that period, an amount equal to one-twelfth of its tax pay­ able for that year as estimated by it, or (ii) On or before the last day of each of the first two months in that period, an amount equal to one-twelfth of its tax pay­ able under this Act for the second taxation year preceding the year, and on or before the last day of each of the next following ten months in that period, an amount equal to one-tenth of the amount remaining after deducting the amount computed pursuant to this subclause in respect of the first two months in the period from its tax payable under this Act for the immediately preceding year, or (iii) on or before the last day of each of the first 12 months in that period, an amount equal to one-twelfth of its tax pay­ able under this Act for the immediate,ly pre.ceding year, and (

b) on or before the last day of the period, the remainder of the tax as estimated under se.ction 10.

(2) Where a collection agreement is entered into, a corporation shall pay an amount computed with reference to (

a) subsec,tion (1), clause (a), subclause (i), if the corporation pays an amount computed under seotion 157, subse.ction (1), para­ graph (a), subparagraph (

i) of the federal Act, and (b) subsection (1), clause (a), subclaus,e (ii), if the corporation pays an amount computed under

section 157, subsection (1), paragraph (a), subparagraph (ii) of the federal Act. The amendment to subsection (1), clause (

b) is made necessary by the amendments made recently by Parliament in clause 104(2) of Bill C-'49 with respect to corporation income tax instalhnent payments. The new subsection (2) reflects changes made in

section 157(1) (

a) of the federal Act and to

section 15(1) of the Alberta Act in 1974. 10 Title: 1975 (18th, 1st) Bill 25, The Alberta Income Tax Amendment Act, 1975