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1997 Legislative Session: 2nd Session, 36th Parliament

THIRD READING

The following electronic version is for informational

purposes only.

The printed version remains the official version.

Certified correct as passed Third Reading on the 6th day of May, 1997

Ian D. Izard, Law Clerk

HONOURABLE ANDREW PETTER

MINISTER OF FINANCE AND

CORPORATE RELATIONS AND

MINISTER RESPONSIBLE FOR

INTERGOVERNMENTAL RELATIONS

BILL 3 – 1997

CORPORATION CAPITAL TAX

AMENDMENT ACT, 1997

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

of British Columbia, enacts as follows:

Section 1 (1) of the Corporation Capital Tax Act, R.S.B.C. 1996,

c. 73, is amended

(

a) in the definition of "current accounts payable" by striking

out "corporation, partnership or joint venture" wherever it appears

and substituting "corporation or partnership" ,

(

b) in the definition of "deferred credit" by striking out "corporation,

partnership or joint venture" wherever it appears and substituting "corporation

or partnership" ,

(

c) by repealing the

definitions of "loans and advances made

by the partnership or joint venture to corporations" and "loans

and advances to other corporations" and substituting the following

definition:

"loans and advances to corporations" , in relation

to a corporation or a partnership, as the case may be, includes

(

a) accounts receivable, owed to the corporation or partnership

by other corporations, that became receivable by the corporation or partnership

more than 120 days before the end of its taxation year,

(

b) holdbacks receivable, owed to the corporation or

partnership by other corporations, that became receivable by the corporation

or partnership more than 120 days before the end of its taxation year, and

(

c) bonds, debentures, mortgages and similar obligations

of other corporations acquired by the corporation or partnership more than 120

days before the end of its taxation year,

but does not include

(

d) any loan or advance made or acquired by the corporation

or partnership within 120 days before the end of its taxation year, unless,

in the case of a loan or advance made or acquired by a corporation,

(

i) the loan or advance is owed to the corporation by

an associated corporation,

(ii) each corporation has a permanent establishment in

British Columbia, and

(iii) the taxation year of each corporation ends on the

same date,

(

e) any amount provided to or for the benefit of a savings

institution as a result of which the savings institution is or becomes indebted

to the corporation or partnership, including

(

i) a deposit by the corporation or partnership with the

savings institution, and

(ii) a loan or advance evidenced by bank paper or similar

paper in use by a savings institution other than a bank, including certificates

of deposit, bearer deposit notes, swap deposits and banker's acceptances,

(

f) any debt owed to the corporation or partnership by

a corporation described in paragraph 149 (1) (

c) or (

d) of the Income Tax

Act (Canada) that is exempt from tax under

section 4 of this Act, or

(

g) any loan or advance made or acquired by the corporation

or partnership as part of a series of loans and repayments intended to unduly

or artificially reduce the adjusted paid up capital of any corporation; ,

(

d) by adding the following definition:

"savings institution" means

(

a) a bank,

(

b) a credit union,

(

c) an insurance company,

(

d) a trust company, and

(

e) a financial institution that accepts deposits from

the public in the normal course of its business; , and

(

e) in the definition of "trade accounts payable" by striking

out "corporation, partnership or joint venture" wherever it appears and substituting

"corporation or partnership".

Section 1 (3) is repealed and the following substituted:

(3) For the purposes of this Act, a corporation has an

interest in any partnership in which it, or a partnership in which it has an

interest, is a partner.

Section 1 is amended by adding the following subsections:

(5) Except as otherwise provided in this Act, for the

purposes of determining the carrying value of the assets of a corporation, or

of a partnership in which a corporation has an interest, or any other amount

relevant to the computation of a corporation's adjusted paid up capital for

a taxation year, the amounts that must be used are the amounts reflected in

the financial statements of the corporation for the taxation year that have

been

(

a) prepared in accordance with generally accepted accounting

principles, and

(

b) presented to the shareholders of the corporation or

the members of the partnership, as the case may be.

(6) Despite subsection (5), the equity and consolidation

methods of accounting, other than the proportionate consolidation method for

joint ventures, must not be used for the purposes referred to in that subsection.

(7) If the financial statements referred to in subsection

(5) were not prepared, the amounts that would have been reflected in those financial

statements if they had been prepared must be used for the purposes referred

to in that subsection.

Section 2 is amended

(

a) in subsection (1) by repealing the definition of "corporation"

and substituting the following:

"corporation" includes a partnership; ,

(

b) by repealing subsection (7) and substituting the following:

(7) A corporation

(

a) that otherwise has a permanent establishment in Canada,

(

b) to which

section 14 applies

is deemed to have a permanent establishment on land it

owns, or has a right or interest in, in Canada. , and

(

c) by repealing subsection (12) and substituting the following:

(12) If a partnership has a permanent establishment at

a place, a corporation that has an interest in the partnership is deemed to

have a permanent establishment at that place.

Section 6 is amended

(

a) by repealing subsection (1),

(

b) in subsection (2) by striking out "coincides with"

and substituting "is the same as" , and

(

c) by adding the following subsection:

(2.1) The taxation year of a partnership is the same as

its fiscal period under the Income Tax Act (Canada).

Section 7 (1) (

d) is repealed and the following substituted:

(

d) proportionate share, as computed under

section 16

(2), of the partnership amounts referred to in

section 16 (1) (c), if any, that

are applicable to each of the partnerships in which the bank, trust company

or credit union has an interest.

Section 8 (

e) is repealed and the following substituted:

(

e) proportionate share, as computed under

section 16

(2), of the partnership amounts referred to in

section 16 (1) (

a) and (c), if

any, that are applicable to each of the partnerships in which the corporation

has an interest.

Section 9 (

d) is repealed and the following substituted:

(

d) proportionate share, as computed under

section 16

(2), of the partnership amounts referred to in

section 16 (1) (

b) and (c), if

any, that are applicable to each of the partnerships in which the corporation

has an interest.

Section 10 (

c) and (

d) is repealed and the following substituted:

(

c) in the case of a corporation that is solely engaged

in exploration for a mineral resource, petroleum or natural gas, the amount,

if any, by which the aggregate of the exploration costs incurred by the corporation

that are

(

i) included in the cost of capital assets disclosed on

the corporation's balance sheet at the end of that taxation year, and

(ii) not deducted under

section 13 at the end of that

taxation year,

exceeds the aggregate of the amounts of amortization,

depreciation and other charges taken into account in computing the corporation's

income or loss for the taxation year or any preceding taxation year in accordance

with generally accepted accounting principles in respect of those exploration

costs, and

(

d) the aggregate of all amounts, each of which is the

corporation's proportionate share, as computed under

section 16 (2), of the

exploration costs incurred by a partnership in which the corporation has an

interest that would be deductible under paragraph (

c) of this

section if the

partnership were a corporation.

Section 11 (1) is amended

(

a) by striking out ", prepared using generally accepted accounting

principles other than the equity method of accounting," ,

(

b) by repealing paragraph (

b) and substituting the following:

(

b) if the corporation has an interest in a partnership,

the proportionate share, as computed under

section 16 (2), of the aggregate

of the carrying values of the partnership assets on the partnership's balance

sheet, , and

(

c) in paragraph (

c) by striking out "or joint venture" .

Section 11 (2) is amended

(

a) in paragraph (

c) by striking out "other" ,

(

b) by adding the following paragraph:

(f.1) the corporation's loans and advances to partnerships

in which the corporation does not have an interest, but only if

(

i) all the members of the partnership, throughout the

corporation's taxation year, are corporations, and

(ii) the loans and advances would qualify under paragraph

(

c) if made to each member of the partnership; , and

(

c) by repealing paragraph (

g) and substituting the following:

(

g) the aggregate of all amounts, each of which is the

corporation's proportionate share, as computed under

section 16 (2), of the

carrying value of investments of a partnership in which the corporation has

an interest that would be investments of a corporation under paragraphs (

a) to (

f) of this subsection if that partnership were a corporation.

Section 13 is amended

(

a) in subsection (1) by repealing the

definitions of "B.C. development

expenditure" , "B.C. exploration expenditure" , "B.C. research expenditure"

and "eligible expenditure" and substituting the following:

"B.C. exploration and development expenditure" ,

with respect to a corporation for a taxation year, means an expenditure that

(

a) made by the corporation in the taxation year with

respect to the exploration for, or development of, oil, gas or mining properties

located in British Columbia,

(

b) not incurred to purchase, lease or acquire property,

and

(

c) included in the cost of capital assets disclosed on

the corporation's balance sheet at the end of the taxation year;

"B.C. research expenditure" , with respect to a

corporation for a taxation year, means an expenditure

(

a) made by the corporation in the taxation year in respect

of research and development activities carried on in British Columbia, and

(

b) included in deferred development costs disclosed on

the corporation's balance sheet at the end of the taxation year;

"eligible expenditure" , with respect to a corporation

for a taxation year, means

(

a) a B.C. exploration and development expenditure of

the corporation for the taxation year,

(

b) a B.C. research expenditure of the corporation for

the taxation year, and

(

c) the cost of eligible property and eligible tourism

property incurred by the corporation in the taxation year; , and

(

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

(3) Subject to subsection (4), there may be deducted from

the B.C. paid up capital of a corporation that is not a bank, trust company

or credit union, at the end of its taxation year, the aggregate of

(

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

eligible expenditures of the corporation for the taxation year exceeds the aggregate

of the amounts of amortization, depreciation and other charges taken into account

in computing the corporation's income or loss for the taxation year in accordance

with generally accepted accounting principles in respect of those eligible expenditures,

(

b) the amount, if any, by which the aggregate of the

eligible expenditures of the corporation for the immediately preceding taxation

year exceeds the aggregate of

(

i) the eligible expenditures of the corporation for the

immediately preceding taxation year with respect to property that does not qualify

as eligible property or eligible tourism property of the corporation at the

end of the taxation year, and

(ii) the amounts of amortization, depreciation and other

charges taken into account in computing the corporation's income or loss for

the taxation year and the immediately preceding taxation year in accordance

with generally accepted accounting principles in respect of the eligible expenditures

referred to in this paragraph, and

(

c) all amounts, each of which is the corporation's proportionate

share, as computed under

section 16 (2) of the amounts that would be deductible

under paragraphs (

a) and (

b) by a partnership in which the corporation has an

interest if the partnership were a corporation.

Section 14 is amended

(

a) in subsection (1) in the definition of "Canadian assets" by

repealing paragraph (

b) and substituting the following:

(

b) the corporation's proportionate share, as computed

under

section 16 (2), of the assets of any partnership in which the corporation

has an interest that are used or held by the partnership for or in relation

to any business carried on by it through a permanent establishment in Canada

in the taxation year of the partnership; ,

(

b) in subsection (1) by repealing the definition of "corporation's

current accounts payable" and substituting the following:

"corporation's current accounts payable" includes,

for a corporation that has an interest in a partnership, the corporation's proportionate

share, as computed under

section 16 (2), of the current accounts payable of

the partnership as at the end of the taxation year of the partnership. ,

and

(

c) by adding the following subsection:

(4) For the purposes of this section, a corporation or

a partnership that has a permanent establishment on land that it owns, or that

it has a right or interest in, in Canada, at the end of a taxation year is deemed

(

a) to carry on business during the year through that

permanent establishment, and

(

b) to use or hold the land for or in relation to that

business.

Section 16 is repealed and the following substituted:

Partnerships

(1) A corporation that has an interest in a

partnership must include, in computing the corporation's adjusted paid up capital,

the corporation's proportionate share of the following partnership amounts:

(

a) in the case of a corporation to which

section 8 applies,

the subordinate indebtedness of the partnership;

(

b) liabilities of the partnership, whether secured or

unsecured, including any deferred credit but excluding

(

i) current accounts payable, and

(ii) amounts owing by the partnership to the corporation

or to other corporations that have an interest in the partnership;

(

c) the earnings or losses of the partnership accumulated

after the corporation acquired an interest in the partnership.

(2) For the purposes of this Act, a corporation's proportionate

share of partnership amounts must be computed on the same basis that the corporation's

share of the income or loss from the partnership is computed.

(3) The amounts in respect of a partnership, for which

a corporation must account for its proportionate share under this Act for a

taxation year, are the amounts determined

(

a) if the partnership has a taxation year end that falls

within the corporation's taxation year in respect of which the computation of

the corporation's adjusted paid up capital is made, as at the end of that taxation

year of the partnership, or

(

b) if there is no taxation year end of the partnership

that falls within that taxation year of the corporation, as at the taxation

year end of the partnership immediately preceding that taxation year of the

corporation.

Section 17 (5) is repealed.

16 Sections 32 (1) and 33 (3) is amended by striking out "60

days" wherever it appears and substituting "90 days" .

Commencement

(1) Subject to subsection (2), this Act is deemed

to have come into force on April 1, 1997 and is retroactive to the extent necessary

to give it effect on and after that date.

(2) Section 16 is deemed to have come into force on March

26, 1997 and is retroactive to the extent necessary to give it effect on and

after that day.

Copyright

© 1997: Queen's Printer, Victoria, British Columbia, Canada