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1998/99 Legislative Session: 3rd Session, 36th Parliament

FIRST READING

The following electronic version is for informational purposes only.

The printed version remains the official version.

HONOURABLE JOY K. MacPHAIL

MINISTER OF FINANCE AND

CORPORATE RELATIONS

BILL 41 – 1998

INCOME TAX AMENDMENT ACT (No. 3), 1998

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province

of British Columbia, enacts as follows:

1 The Income Tax Act, R.S.B.C. 1996, c. 215, is amended by adding the following section:

Mining exploration tax credit

25.1

(1) In this section:

"assistance" in relation to a taxpayer means an amount, other than an amount

deemed to have been paid under this section, that would be included under

section 12 (1) (

x) of the federal Act in computing the income of the taxpayer for

any taxation year if that

section were read without reference to subparagraphs (

v) to (vii) of that

section 12 (1) (x);

"eligible taxpayer" means

(

a) an individual subject to tax under

section 2 (1) (a), or

(

b) a corporation that is subject to tax under

section 2 (2), other than a

corporation that

(

i) is exempt from tax under

section 27,

(ii) is controlled directly or indirectly in any manner whatever by one or

more persons all or part of whose taxable income is exempt from tax

under

section 27 of this Act or under

Part 1 of the federal Act,

(iii) is prescribed, under the federal Act, to be a labour-sponsored venture

capital corporation for the purpose of

section 127.4 of that Act,

(iv) has registered an employee share ownership plan under

section 2 of the Employee Investment Act ,

(

v) is an employee venture capital corporation registered

under

section 8 of the Employee Investment Act , or

(vi) is a small business venture capital corporation registered

under

section 3 of the Small Business Venture Capital Act ;

"excluded expense" of a taxpayer for a taxation year means

(

a) a Canadian development expense within the meaning of

section 66.2 (5) of

the federal Act,

(

b) an expense that may reasonably be considered to be related to a mine that

has come into production in reasonable commercial quantities or to a

potential or actual extension of such a mine,

(

c) a Canadian exploration and development overhead expense within the

meaning of the federal regulations,

(

d) an outlay or expense described in paragraph (

j) or (

l) of the definition of

"Canadian exploration expense" in

section 66.1 (6) of the federal Act,

(

e) a cost of, or for the use of, seismic data referred to in

section 66 (12.6) (b.1)

of the federal Act,

(

f) an expense incurred in drilling or completing an oil or gas well, in building

a temporary access road to an oil or gas well or in preparing a site in respect

of an oil or gas well,

(

g) the taxpayer's share of any outlay or expense incurred by a partnership, or

(

h) any other outlay or expense prescribed under subsection (8);

"mineral resource" means a mineral resource within the meaning of

section 248 (1)

of the federal Act;

"qualified mining exploration expense" of a taxpayer means any expense incurred

by the taxpayer after July 31, 1998 and before August 1, 2003 for the purpose of

determining the existence, location, extent or quality of a mineral resource in

British Columbia, including any expense incurred during that period in the

course of

(

a) prospecting,

(

b) carrying out geological, geophysical or geochemical surveys,

(

c) drilling by rotary, diamond, percussion or other methods, or

(

d) trenching, digging test pits and preliminary sampling,

but does not include an excluded expense.

(2) Subject to subsection (3), an eligible taxpayer who has incurred qualified mining

exploration expenses in a taxation year may claim a mining exploration tax credit

under this

section for the taxation year.

(3) An eligible taxpayer who has made a deduction in accordance with

section 17 for

a taxation year must not claim a tax credit under this

section for the same taxation

year.

(4) The amount of the tax credit that may be claimed by an eligible taxpayer for a

taxation year under this

section is 20% of the amount by which

(

a) the total of the qualified mining exploration expenses incurred by the

taxpayer in the taxation year

exceeds

(

b) all amounts of assistance that can reasonably be considered to be in respect

of amounts included in the total referred to in paragraph (

a) and that, at the

time of filing of the taxpayer's return of income for the taxation year,

(

i) the taxpayer has received or is entitled to receive or can reasonably

be expected to receive,

(ii) have not been repaid under a legal obligation to do so, and

(iii) have not otherwise reduced the total referred to in paragraph (a);

(5) A taxpayer that has claimed and is eligible for a mining exploration tax credit

under this

section for a taxation year is deemed to have paid, at the time referred

to in

section 156.1 (4) or 157 (1) (

b) of the federal Act, as the applicable

section

relates to the taxation year for the taxpayer, the amount of the tax credit on

account of the taxpayer's tax payable under this Act.

(6) A taxpayer who wishes to claim a mining exploration tax credit under this

section

for a taxation year must file, with the taxpayer's return of income under

section

29 for the taxation year, an application for the tax credit in the form, and

containing the information and records required by the Commissioner of Income

Tax.

(7) A taxpayer is not entitled to a mining exploration tax credit in respect of a

taxation year unless, within 36 months after the end of the taxation year, the

taxpayer files the information and records required under subsection (6) with

respect to the tax credit.

(8) The Lieutenant Governor in Council may make regulations prescribing outlays or

expenses as excluded expenses for the purposes of this section.

Section 42 (2) (

c) is repealed and the following substituted:

(

c) in the case of an individual or a corporation, to the determination of

(

i) the tax payable for a taxation year based on the application of

section 19, or

(ii) the amount of the tax credit for a taxation year that, under

section 25.1 (4), the taxpayer is deemed to have paid on account of

the tax payable by that taxpayer for that taxation year under this Act, .

Section 79 is amended

(

a) in subsection (1) by adding the following

definitions:

"accredited BC labour expenditure" of an accredited production corporation for a

taxation year in relation to an accredited production means the amount that

would be the corporation's BC labour expenditure for the taxation year in

relation to the production, to the extent that the amounts referred to in the

definition of "BC labour expenditure" did not and do not form part of the

accredited BC labour expenditure of any other corporation, if

(

a) the references to March 31, 1998 in that definition were read as references

to May 31, 1998, and

(

b) the only amounts that could be included in determining the corporation's

BC labour expenditure for the taxation year in relation to the production

were in respect of services rendered in British Columbia;

"accredited production" means a film or video production, other than an excluded

production, for which the total expenditures included in the cost of producing the

production, incurred in the 24 month period beginning when principal

photography begins, other than any amounts determined by reference to profits

or revenues, are

(

a) greater than $100 000, in the case of a production that is an episode, or a

pilot for an episode, with a running time of less than 30 minutes,

(

b) greater than $200 000, in the case of a production that is an episode, or a

pilot for an episode, with a running time of 30 minutes or more, or

(

c) greater than $1 million, in any other case;

"accredited production corporation" , in relation to an accredited production for a

taxation year, means

(

a) a corporation

(

i) that is a BC-based corporation during the taxation year,

(ii) the activities of which throughout the taxation year are primarily the

carrying on of

(

A) a film or video production business, or

(

B) a film or video production services business, and

(iii) that owns the copyright in the production throughout the period

during which the production is produced in British Columbia, or

(

b) if there is no accredited production corporation within the meaning of

paragraph (

a) in relation to the production, a corporation that

(

i) meets the criteria established by paragraph (a) (

i) and (ii), and

(ii) has contracted directly with the owner of the copyright in the

production to render production services in respect of the production,

but does not include a corporation described in any of paragraphs (

a) to (

f) of the

definition of "eligible production corporation";

"accredited qualified BC labour expenditure" of an accredited production

corporation for a taxation year in relation to an accredited production means the

amount, if any, by which

(

a) the total of the corporation's accredited BC labour expenditure for the

taxation year or each of the preceding taxation years in relation to the

production

exceeds

(

b) the total of the following:

(

i) all amounts of assistance that can reasonably be considered to be in

respect of amounts included in the total referred to in paragraph (

a) in respect of the production and that, at the time of filing of the corporation's

return of income for the taxation year,

(

A) the corporation or any other person or partnership has received

or is entitled to receive or can reasonably be expected to receive,

(

B) has not been repaid under a legal obligation to do so, and

(

C) has not otherwise reduced the total referred to in paragraph (a);

(ii) all amounts that are the accredited qualified BC labour expenditure

of the corporation in respect of the production for each of the

preceding taxation years before the end of which principal

photography of the production began;

(iii) all amounts included in the total referred to in paragraph (

a) for

which reimbursement is to be or has been provided to the corporation,

as a parent within the meaning of paragraph (

c) of the definition of

"BC labour expenditure", in respect of the accredited production

under an agreement referred to in that paragraph;

"episode" means an episode of a film or video production intended for television

broadcast as a series; , and

(

b) by repealing subsection (2) and substituting the following:

(2) If a film or video production is intended for television broadcast as a series,

(

a) for the purposes of a tax credit under

section 80, 81 or 82, all the episodes

constituting one cycle of the series are to be considered a single production,

and

(

b) for the purposes of a tax credit under

section 82.1, each episode is to be

considered a separate production.

4 The following

section is added:

Production services tax credit

82.1

(1) Subject to subsections (3) and (4), a corporation is eligible for a production

services tax credit for a taxation year in respect of an accredited production if

(

a) principal photography for the production begins

(

i) before the end of the taxation year,

(ii) after May 31, 1998, and

(iii) before June 1, 2003,

(

b) the corporation is an accredited production corporation in respect of the

production for the taxation year,

(

c) the corporation has obtained an accreditation certificate issued under

section 87.1 in respect of the production, and

(

d) the corporation applies for the tax credit in accordance with

section 85.

(2) The amount of the tax credit that may be claimed by an accredited production

corporation under this

section is 11% of the accredited qualified BC labour

expenditure of the corporation for the taxation year in respect of the accredited

production.

(3) A corporation may not claim a tax credit in respect of an accredited production

(

a) under this section, if an amount is deemed to have been paid under

section 84 in relation to a tax credit under one or more of sections 80, 81

and 82 in respect of the production, or

(

b) under one or more of sections 80, 81 and 82, if an amount is deemed to have

been paid under this

section in respect of the production.

(4) Without limiting subsection (3), if an amount is deemed to have been paid under

section 84 in relation to a tax credit under one or more of sections 80, 81 and 82

in respect of any or all of the episodes of a cycle referred to in

section 79 (2) (a),

no tax credit may be claimed under this

section in respect of any episode of that

cycle.

Section 85 (1) is repealed and the following substituted:

(1) A corporation that wishes to claim a tax credit under this

Part in respect of a

taxation year must file the following with its return of income under

section 29

for that taxation year:

(

a) in the case of a claim for a tax credit under

section 80, 81 or 82,

(

i) the eligibility certificate issued to the corporation under

section 86

that is appropriate to

(

A) the tax credit, and

(

B) the film or video production in respect of which the claim is

made, and

(ii) if the tax credit is claimed in respect of the taxation year in which the

production is completed, the completion certificate issued to the

corporation in respect of the production under

section 87;

(

b) in the case of a claim for a tax credit under

section 82.1, the accreditation

certificate under

section 87.1 that is appropriate to the film or video

production in respect of which the claim is made;

(

c) in all cases, an application for the tax credit in the form, and containing the

information and records, required by the Commissioner of Income Tax.

Section 87 (1) is amended by striking out "a tax credit under this Part" and substituting "a

tax credit under

section 80, 81 or 82" .

7 The following

section is added:

Accreditation certificate

87.1

(1) A corporation may apply to the certifying authority for an accreditation

certificate in respect of a film or video production for the purposes of claiming a

tax credit referred to in

section 82.1.

(2) A corporation referred to in subsection (1) must, with its application,

(

a) pay an application fee to a person prescribed by the Lieutenant Governor in

Council, and

(

b) provide the information and records that the certifying authority requires in

respect of the production.

(3) On receiving an application under this section, the certifying authority must issue

to the applicant corporation an accreditation certificate in respect of a production

if the certifying authority is satisfied, on the basis of the information provided by

the corporation and any other information available to the certifying authority,

that the production is an accredited production.

Section 88 (1) (

a) is amended by striking out "section 86 or 87," and substituting "section

86, 87 or 87.1," .

Section 89 is repealed and the following substituted:

Notice of refusal or revocation

(1) If the certifying authority refuses to issue a certificate for which application is

made under

section 86, 87 or 87.1, the certifying authority must promptly give

notice of that refusal, together with reasons for the refusal, to the applicant corporation.

(2) If the certifying authority revokes a certificate issued under

section 86, 87 or 87.1,

the certifying authority must promptly give notice of that revocation, together

with reasons for the revocation, to the applicant corporation and the Provincial

minister.

(3) If the Provincial minister revokes a certificate issued under

section 86, 87 or 87.1,

that minister must promptly give notice of that revocation, together with reasons

for the revocation, to the applicant corporation and the certifying authority.

Section 90 is amended

(

a) by striking out "or" at the end of paragraph (c), and

(

b) by adding the following paragraph:

(c.1) an accreditation certificate issued under

section 87.1 in respect of the

production is revoked without another accreditation certificate having been

issued in replacement, or .

Commencement

(1) Sections 1 and 2 come into force on August 1, 1998.

(2) Sections 3 to 10 are deemed to have come into force on June 1, 1998 and are

retroactive to the extent necessary to give them effect on and after that date.

Explanatory Notes

SECTION 1: [Income Tax Act, enacts

section 25.1] establishes a new mining exploration

tax credit.

SECTION 2: [Income Tax Act, amends

section 42] provides for appeals respecting the

amount of the proposed mining exploration tax credit.

SECTION 3: [Income Tax Act, amends

section 79]

adds

definitions for the purposes of the proposed film production

services tax credit, and

provides a special rule for the proposed film production services tax

credit that each episode of a series is to be treated as a separate

production.

SECTION 4: [Income Tax Act, enacts

section 82.1] establishes a film production services

tax credit equal to 11% of the accredited qualified BC labour expenditure for a

production.

SECTION 5: [Income Tax Act, amends

section 85] requires a corporation claiming the

proposed production services tax credit to file an accreditation certificate with

its income tax return.

SECTION 6: [Income Tax Act, amends

section 87] limits the requirement for a completion

certificate to productions other than those for which the proposed production

services tax credit is claimed.

SECTION 7: [Income Tax Act, enacts

section 87.1] establishes the requirements for corporations

to obtain accreditation certificates required to apply for a production

services tax credit.

SECTION 8: [Income Tax Act, amends

section 88] allows the revocation of accreditation

certificates.

SECTION 9: [Income Tax Act, re-enacts

section 89] requires a corporation to be given

notice of the revocation or refusal of an accreditation certificate.

SECTION 10: [Income Tax Act, amends

section 90] requires repayment of production

services tax credits if the related accreditation certificate has been revoked.

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