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2015 Legislative Session: 4th Session, 40th Parliament

FIRST READING

The following electronic version is for informational purposes only.

The printed version remains the official version.

HONOURABLE MICHAEL DE JONG

MINISTER OF FINANCE

BILL 26 – 2015

LIQUEFIED NATURAL GAS INCOME TAX AMENDMENT ACT, 2015

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of British Columbia, enacts as follows:

SECTION 1: [Liquefied Natural Gas Income Tax Act,

section 1]

(

a) adds

definitions;

(

b) amends the definition of "feedstock spur pipeline" to provide that it is a portion of a feedstock pipeline, makes related amendments to the

definitions of "feedstock pipeline" and "LNG facility inlet meter", and amends the definition of "proceeds of disposition" consequential to the addition by this Bill of

section 124.10 to the Act;

(

c) amends the definition of "capital investment property" to include specified property that is used in the construction, administration, maintenance and operations of an LNG plant and to include a feedstock spur pipeline;

(

d) amends the definition of "financing charge" to exclude amounts paid or payable to obtain a bond;

(

e) amends the definition of "liquefaction activities" to clarify activities relating to acquiring, owning or disposing of liquefied natural gas, natural gas liquids or natural gas that is at an LNG facility or any rights to such transactions, and to clarify a specific activity relating to the construction, administration and maintenance of an LNG plant by a person who carries out one or more other specified liquefaction activities.

Section 1 of the Liquefied Natural Gas Income Tax Act, S.B.C. 2014, c. 34, is amended

(

a) by adding the following

definitions:

"applicable percentage" ,

(

a) in relation to a taxation year that begins on or after January 1, 2017 and before January 1, 2037, means 3.5%, and

(

b) in relation to a taxation year that begins on or after January 1, 2037, means 5%;

"assessable amount" , in relation to an assessment of a taxpayer for a taxation year, means

(

a) any tax payable under this Act by the taxpayer for the taxation year,

(

b) any penalties payable under this Act by the taxpayer in relation to the taxation year, and

(

c) any interest payable under this Act by the taxpayer in relation to tax or penalties referred to in paragraphs (

a) and (b);

"balance-due date" , in relation to a taxpayer for a taxation year, means the day the taxpayer must pay the amount remaining unpaid of the tax payable under this Act for the taxation year;

"band" has the same meaning as in

section 2 of the Indian Act ;

"commercial debt obligation" , in relation to a taxpayer or partnership that is a debtor, means a debt obligation issued by the debtor the proceeds of which are used by the debtor for the purpose of gaining or producing income from an LNG source, but does not include

(

a) that portion of the debt obligation the proceeds of which are not used by the debtor for the purpose of gaining or producing income from an LNG source, or

(

b) that portion of the debt obligation the proceeds of which are used by the debtor, or that portion of the debt obligation reasonably considered to have been issued by the debtor to obtain proceeds in order for the debtor, to pay an amount that is a financing charge described in paragraph (a), (

b) or (

c) of the definition of "financing charge" in this section;

"commissioner" means

(

a) subject to paragraph (b), the Commissioner of Income Tax appointed under the Income Tax Act , or

(

b) another person designated under

section 124.70 by the minister to administer this Act;

"determinable amount" , in relation to a taxpayer for a taxation year in respect of an LNG source, means any of the following:

(

a) the taxpayer's net operating income for the taxation year from the LNG source;

(

b) the taxpayer's net operating loss for the taxation year from the LNG source;

(

c) the taxpayer's net income for the taxation year from the LNG source;

(

d) the balance of the taxpayer's capital investment account for the LNG source at the end of the taxation year;

(

e) the amount of tax, if any, deemed by

section 123 [deemed payment – closure tax credit] to be paid on account of the taxpayer's tax payable under this Act for the taxation year in respect of the LNG source;

"determinable partnership amount" , in relation to a partnership for a fiscal period in respect of an LNG source, means any of the following:

(

a) the amounts referred to in

section 107 (1) (

a) to (c) [income and loss of partnership] in respect of the partnership for the fiscal period in respect of the LNG source;

(

b) the balance of the partnership's capital investment account for the LNG source at the end of the fiscal period;

(

c) the balance of the partnership's adjusted capital investment account for the LNG source at the end of the fiscal period;

(

d) the partnership's eligible expenditures in respect of the applicable LNG facility;

(

e) any other amount, in respect of the partnership for the fiscal period, that the commissioner considers relevant in computing an amount referred to in

section 98 (

a) to (

f) for a member of the partnership in respect of the LNG source;

"determination" , in relation to a determination under

Part 8.3, includes a redetermination;

"feedstock spur pipeline inlet" means a location, designated by regulation, on a feedstock pipeline;

"forgiven amount" means a forgiven amount as defined in

section 124.12 [debt forgiveness rules] ;

"Indian" has the same meaning as in

section 2 of the Indian Act ;

" Indian Act " means the Indian Act (Canada);

"information return" means an information return that is provided for in the regulations and required to be filed under

section 124.407 [demand for information return] or the regulations;

"instalment base" , in relation to a taxpayer, means the taxpayer's instalment base determined under

section 124.351 for a taxation year in respect of an LNG source;

"instalment-due date" , in relation to a taxpayer for a taxation year, means each of the following:

(

a) the day that is 3 months after the end of the taxpayer's preceding taxation year;

(

b) the day that is 6 months after the end of the taxpayer's preceding taxation year;

(

c) the day that is 9 months after the end of the taxpayer's preceding taxation year;

(

d) the day that is 12 months after the end of the taxpayer's preceding taxation year;

"normal reassessment period" means the period referred to in

section 124.311 (1) (

b) for a taxpayer for a taxation year in respect of an LNG source;

"normal redetermination period" means the period referred to in

section 124.342 (1) (

b) for a partnership for a fiscal period in respect of an LNG source;

"notional tax benefit" means a taxpayer's notional tax benefit for a taxation year in respect of an LNG source as determined under

section 124.371;

"partnership return" means a partnership return required to be filed under

section 124.331 [partnership returns – general rule] or 124.332 [partnership return required on demand] ;

"registered" , when used in relation to a person or partnership, means registered under

section 124.21 in respect of an LNG source;

"return" means an information return, a partnership return or a tax return;

"tax benefit" means

(

a) a reduction, avoidance or deferral of tax, or of another amount, payable under this Act, or

(

b) an increase in a refund of tax, or of another amount, under this Act;

"tax return" means a tax return required to be filed under any of the following sections:

(

a) section 124.300 [tax returns – general rule] ;

(

b) section 124.301 [tax return required to be filed by person dealing with property or business of taxpayer] ;

(

c) section 124.302 [tax return required on demand] ;

"taxpayer information" means information of any kind and in any form relating to one or more taxpayers

(

a) that is obtained for the purposes of this Act by or on behalf of the minister, or

(

b) that is prepared from information referred to in paragraph (a),

but does not include information that does not directly or indirectly reveal the identity of the taxpayer to whom the information relates; ,

(

b) by repealing the

definitions of "feedstock pipeline" , "feedstock spur pipeline" , "LNG facility inlet meter" and "proceeds of disposition" and substituting the following:

"feedstock pipeline" means that portion of a natural gas pipeline from and including a feedstock pipeline inlet on the natural gas pipeline to an LNG facility inlet meter;

"feedstock spur pipeline" means that portion of a feedstock pipeline from and including the feedstock spur pipeline inlet to an LNG facility inlet meter;

"LNG facility inlet meter" , in relation to an LNG facility, means a meter at which the volume of natural gas is first measured after the natural gas is delivered to the LNG plant that is part of the LNG facility;

"proceeds of disposition" has the same meaning as in

section 13 (21) of the federal Act, except that the definition in that

section is to be read as if the reference in paragraph (

h) of that definition to "section 79" were read as a reference to "section 124.10 of this Act"; ,

(

c) in the definition of "capital investment property" by adding the following paragraphs:

(a.1) tangible personal property used on, and improvements to, the land described in

section 7 (1) (b) [LNG facility] to carry out activities described in paragraph (

g) of the definition of "liquefaction activities";

(a.2) a feedstock spur pipeline; ,

(

d) in the definition of "financing charge" by repealing paragraph (

d) and substituting the following:

(

d) an amount paid by the taxpayer in satisfaction of the principal amount of a bond, debenture, bill of exchange, note, mortgage or similar obligation issued by the taxpayer,

but does not include an amount paid or payable by the taxpayer in order to obtain a bond that is deposited under

section 124.600 [collection bond] ; , and

(

e) in the definition of "liquefaction activities" by repealing paragraphs (

a) and (

g) and substituting the following:

(

a) acquiring, owning or disposing of liquefied natural gas, natural gas liquids or natural gas that is at an LNG facility, other than the following:

(

i) acquiring, owning or disposing of natural gas before the natural gas passes through an LNG facility inlet meter for the LNG facility;

(ii) disposing of natural gas when the natural gas passes through an LNG facility inlet meter for the LNG facility;

(iii) acquiring liquefied natural gas, natural gas liquids or natural gas when the liquefied natural gas, natural gas liquids or natural gas leaves the LNG plant that is part of the LNG facility;

(iv) acquiring, owning or disposing of liquefied natural gas, natural gas liquids or natural gas after the liquefied natural gas, natural gas liquids or natural gas leaves the LNG plant that is part of the LNG facility;

(a.1) acquiring, owning or disposing of a right to acquire, own or dispose of liquefied natural gas, natural gas liquids or natural gas that is at an LNG facility, other than the following:

(

i) acquiring, owning or disposing of a right to acquire, own or dispose of natural gas before the natural gas passes through an LNG facility inlet meter for the LNG facility;

(ii) disposing of a right to dispose of natural gas when the natural gas passes through an LNG facility inlet meter for the LNG facility;

(iii) acquiring a right to acquire liquefied natural gas, natural gas liquids or natural gas when the liquefied natural gas, natural gas liquids or natural gas leaves the LNG plant that is part of the LNG facility;

(iv) acquiring, owning or disposing of a right to acquire, own or dispose of liquefied natural gas, natural gas liquids or natural gas after the liquefied natural gas, natural gas liquids or natural gas leaves the LNG plant that is part of the LNG facility;

(

g) in relation to a person who carries out one or more of the activities described in paragraphs (

a) to (

f) of this definition, constructing, administering or maintaining an LNG plant, or carrying out other activities that support the operations of the LNG plant; .

SECTION 2: [Liquefied Natural Gas Income Tax Act,

section 2]

(

a) provides that a definition in the Income Tax Act (Canada) does not apply for the purposes of the Act;

(

b) limits the application to the Act of the definition of "prescribed" in the Income Tax Act (Canada);

(

c) clarifies a reference to a tax return.

Section 2 is amended

(

a) in subsection (2) by renumbering paragraph (

a) as paragraph (a.1) and by adding the following paragraph:

(

a) the definition of "balance-due day" in

section 248 (1) of the federal Act; ,

(

b) by adding the following subsection:

(2.1) The definition of "prescribed" in

section 248 (1) of the federal Act applies for the purposes of this Act, but only in relation to provisions of the federal Act that apply for the purposes of this Act. , and

(

c) by repealing subsection (4) (d) (

i) and substituting the following:

(

i) the reference to "return of income under

Part I" were read as a reference to "tax return under

section 124.300 of this Act", and .

SECTION 3: [Liquefied Natural Gas Income Tax Act,

section 3] provides for exceptions to

an

interpretation rule in subsection (1) (

f) of the section.

Section 3 (2) is repealed and the following substituted:

(2) Subsection (1) (

f) does not apply to sections 159 (2), 231.1 (3), 231.2, 231.7 (1) and 248 (17.2) of the federal Act, as those sections apply for the purposes of this Act.

SECTION 4: [Liquefied Natural Gas Income Tax Act,

section 7] is consequential to the

inclusion of the tangible personal property and improvements described in

paragraph (

c) of the definition of "capital investment property" in

section 1 of

the Act.

Section 7 (1) (

c) is repealed.

SECTION 5: [Liquefied Natural Gas Income Tax Act,

section 8]

(

a) is consequential to the amendments made by this Bill to the

definitions resulting in the exclusion of a feedstock spur pipeline from forming part of an LNG plant;

(

b) provides that the inclusion of certain tangible personal property and improvements as part of an LNG plant is subject to the regulations.

Section 8 is amended

(

a) by repealing subsections (1) (a) (

i) and (2) (b), and

(

b) in subsection (1) (c) (iv) by adding " subject to the regulations, " before " transmitting ".

SECTION 6: [Liquefied Natural Gas Income Tax Act,

section 9] provides that a person

who is a member of a partnership has no taxation year that begins before the

end of the partnership's first fiscal period if the person is engaged in, or has

income derived from, liquefaction activities only through the partnership.

Section 9 is amended

(

a) in subsection (1) by striking out " subsections (2) to (4), " and substituting " subsections (2) to (5), ", and

(

b) by adding the following subsection:

(5) If a person is a member of a partnership that engages in, or has income derived from, liquefaction activities and the person does not otherwise engage in, or have income derived from, liquefaction activities, the person has no taxation year that begins before the taxation year in which the partnership's first fiscal period ends.

SECTION 7: [Liquefied Natural Gas Income Tax Act,

section 10]

excludes unnecessary transition rules under

section 249.1 of the Income Tax Act (Canada) from applying for the purposes of the Act;

provides that there is no fiscal period that begins before January 1, 2017 or for a period in which there is no engagement in, and no income derived from, liquefaction activities.

Section 10 is amended

(

a) in subsection (1) by striking out " subsections (3) and (4), " and substituting " subsections (3) to (5), ",

(

b) in subsection (2) by striking out " subsections (4), (5) and (6) " and substituting " subsections (4) to (6) and (8) to (11) ", and

(

c) by adding the following subsection:

(5) There is no fiscal period of a business or property of a person or partnership

(

a) that begins before January 1, 2017, or

(

b) for a period that would otherwise be a fiscal period of the business or property of the person or partnership under subsection (1), if the person or partnership has not engaged in, and has no income derived from, liquefaction activities before the end of that period.

SECTION 8: [Liquefied Natural Gas Income Tax Act,

section 10.1] applies a provision of

the Income Tax Act (Canada) that provides for interpretive rules relating to

taxation years and fiscal periods.

8 The following

section is added:

Application of federal provision –

taxation years and fiscal periods

10.1

Section 249 (2) [references to certain taxation years and fiscal periods] of the federal Act applies for the purposes of this Act.

SECTION 9: [Liquefied Natural Gas Income Tax Act,

section 12] clarifies references to a

provision in another provision of the Income Tax Act (Canada) that applies for

the purposes of the Act.

Section 12 (2) is repealed and the following substituted:

(2) In applying

section 248 (16) and (16.1) of the federal Act for the purposes of this Act,

(

a) that

section is to be read as if the references to "and subsection 6 (8)" were excluded, and

(

b) for greater certainty, the references in that

section to "subsection 152 (3.1)" are to be read as references to that provision as it applies for the purposes of the federal Act.

SECTION 10: [Liquefied Natural Gas Income Tax Act,

section 13] clarifies a reference to

the definition of "disposition" in

section 1 of the Act.

Section 13 is amended by adding the following subsection:

(5) In applying

section 248 (25.2) of the federal Act for the purposes of this Act, that

section is to be read as if the reference to "paragraph (

k) of the definition "disposition" in subsection (1)" were read as a reference to "paragraph (

f) of the definition of "disposition" in

section 1 of this Act".

SECTION 11: [Liquefied Natural Gas Income Tax Act,

section 16] applies provisions of the

Income Tax Act (Canada) that provide for interpretive rules relating to debt

obligations.

Section 16 is amended

(

a) in subsection (1) by adding the following:

section 248 (26) [debt obligations] ;

section 248 (27) [parts of debt obligations] ; , and

(

b) by adding the following subsection:

(4) In applying

section 248 (26) of the federal Act for the purposes of this Act, paragraph (

b) of that

section is to be read as if the reference to "income" were read as a reference to "income from a business or property".

SECTION 12: [Liquefied Natural Gas Income Tax Act,

section 22] exempts a trust from tax

when all of the beneficiaries of the trust each individually meet specified conditions.

Section 22 (2) is repealed and the following substituted:

(2) No tax is payable under this Act on the net income or net operating income of a trust for the period when all of the beneficiaries of the trust are each

(

a) exempt from paying tax under

Part I of the federal Act in accordance with

section 149 (1) (c), (d.5) or (d.6) of the federal Act, or

(

b) if the net income or net operating income of the trust for the period were the net income or net operating income of the beneficiary,

(

i) an Indian who would have been exempt from taxation under

section 87 of the Indian Act or under a provision of a final agreement equivalent to that

section in respect of the net income or net operating income, or

(ii) a band that would have been exempt from taxation under

section 87 of the Indian Act in respect of the net income or net operating income.

SECTION 13: [Liquefied Natural Gas Income Tax Act, sections 22.1 and 22.2]

section 22.1, applies a proportion test to determine a taxpayer's net income or net operating income if a taxpayer is exempt from tax for a period that is part of a taxation year;

section 22.2, establishes rules that apply when a corporation or a trust becomes or ceases to be exempt under

section 22 (1) to (3) of the Act from tax on its net income or net operating income.

Part 2 is amended by adding the following sections:

Apportionment rule if exempt for part of taxation year

22.1

(1) Subject to

section 22.2, this

section applies to a taxpayer for a taxation year if under

section 22 (1) to (3) no tax is payable under this Act on the net income or net operating income of the taxpayer for a period that is a part of the taxation year.

(2) If this

section applies to a taxpayer for a taxation year, the taxpayer's net income or net operating income for the taxation year from an LNG source is, for the purposes of sections 18 [tax on net income] and 21 [tax on net operating income] , deemed to be the proportion of the net income or net operating income for the taxation year from the LNG source, as determined under this Act without reference to this section, that the number of days in the taxation year that are not in the period referred to in subsection (1) of this

section is of the number of days in the taxation year.

Rules if corporation or trust becomes or ceases to be exempt

22.2

(1) This

section applies in relation to a person that is a corporation or a trust if, at any time, the person becomes or ceases to be exempt under

section 22 (1) to (3) from tax on the person's net income or net operating income.

(2) If this

section applies in relation to a person, the following rules apply:

(

a) the taxation year of the person that would, but for this paragraph, have included the time referred to in subsection (1) is deemed to end immediately before that time, a new taxation year of the person is deemed to begin at that time and, for the purpose of determining the person's fiscal period after that time, the person is deemed not to have established a fiscal period before that time;

(

b) for the purpose of computing the person's income from a business or property for the person's first taxation year that ends after that time, the person is deemed to have deducted under

section 20 [deductions permitted in computing income from business or property] of the federal Act, as that

section applies for the purposes of this Act, and under

section 38 [deduction of repaid financial incentives] of this Act in computing the person's income from a business or property for the person's taxation year that ended immediately before that time, the greatest amount that could have been claimed or deducted by the person for that taxation year as a reserve under those sections;

(

c) the person is deemed

(

i) to have disposed, at the time that is immediately before the time that is immediately before that time, of each property held by the person immediately before that time for proceeds of disposition equal to the fair market value of the property at that time, and

(ii) to have reacquired the property at that time at a cost, or in the case of capital investment property, at a capital cost, equal to that fair market value;

(

d) for the purpose of applying the following provisions to the person, the person is deemed to be a new corporation or trust, as the case may be, the first taxation year of which began at that time:

(

i) section 20 [tax pool balance] ;

(ii)

section 58 [net operating loss account balance] ;

(iii)

Part 8 [Closure Tax Credit] .

SECTION 14: [Liquefied Natural Gas Income Tax Act,

section 26] clarifies that a gain or

loss from the disposition of capital investment property is excluded from

income or loss from a business or property.

Section 26 (3) is repealed and the following substituted:

(3) For the purposes of this Act, income or loss from a business or property does not include any gain or loss from the disposition of capital investment property.

SECTION 15: [Liquefied Natural Gas Income Tax Act,

section 28] is consequential to the

amendments made by this Bill to sections 78 and 79 of the Act.

Section 28 (5) is amended by striking out " in a transaction with a person with whom the taxpayer does not deal at arm's length ".

SECTION 16: [Liquefied Natural Gas Income Tax Act,

section 31] requires a taxpayer to

include in computing income from a business or property the remaining portion

of a forgiven amount not otherwise deducted under the Act in respect of a

commercial debt obligation issued by a debtor and settled in a taxation year.

Section 31 is amended by adding the following paragraph:

(

f) an amount that is, under

section 124.12 (5) [debt forgiveness rules] , income of the taxpayer for the taxation year from the business or property.

SECTION 17: [Liquefied Natural Gas Income Tax Act,

section 39] provides for an election

in the form required by the commissioner.

Section 39 is amended by adding the following paragraph:

(a.1) that

section is to be read as if the reference to "prescribed form" were read as a reference to "the form required by the commissioner"; .

SECTION 18: [Liquefied Natural Gas Income Tax Act,

section 41]

(

a) modifies a reference to "return of income";

(

b) applies a provision of the Income Tax Act (Canada) that provides for the non-application of rules relating to amounts included in income if an individual becomes bankrupt in the calendar year in which a taxation year ends.

Section 41 is amended

(

a) by repealing subsection (1) and substituting the following:

(1) In applying

section 34.1 (1) and (2) of the federal Act for the purposes of this Act,

(

a) section 34.1 (1) and (2) of the federal Act is to be read as follows:

(

i) as if the formula were the following:

(ii) without reference to the description of "B", and

(

b) section 34.1 (2) (

c) of the federal Act is to be read as if the reference to "return of income" were read as a reference to "tax return". , and

(

b) in subsection (2) by striking out "

Section 34.1 (8) " and substituting "

Section 34.1 (8) (a) ".

SECTION 19: [Liquefied Natural Gas Income Tax Act,

section 42]

(

a) applies a provision of the Income Tax Act (Canada) that provides for the non-application of rules relating to amounts included in income if a corporation becomes bankrupt in a taxation year;

(

b) and (

c) modifies references to "return of income".

Section 42 is amended

(

a) in subsection (1) by striking out the following:

subsection (7) [no additional income – bankrupt] ; ,

(

b) by repealing subsection (2) (

f) and substituting the following:

(

f) the description of "F" in paragraph (

a) of that definition is to be read as if

(

i) the reference to "return of income" were read as a reference to "tax return", and

(ii) the reference to "(other than an amount included in the description of E)" were excluded; , and

(

c) by repealing subsection (3) (

c) and substituting the following:

(c) subsection (3) [new partner designation] of that

section is to be read

(

i) as if, in paragraph (

a) of that subsection, the reference to "return of income" were read as a reference to "tax return", and

(ii) as if, in the description of "A" in paragraph (

b) of that subsection, the reference to "(other than any amount for which a deduction is available under

section 112 or 113)" were excluded; .

SECTION 20: [Liquefied Natural Gas Income Tax Act,

section 43] provides for regulations

prescribing a rate of interest.

Section 43 is amended by adding the following subsection:

(1.1) In applying the definition of "income shortfall adjustment" in

section 34.3 (1) of the federal Act for the purposes of this Act, the description of "D" in that definition is to be read as if the reference to "the rate of interest prescribed under paragraph 4301 (

a) of the Income Tax Regulations" were read as a reference to "the prescribed rate of interest".

SECTION 21: [Liquefied Natural Gas Income Tax Act,

section 44] includes in a taxpayer's

net operating income for a taxation year the amount claimed as a reserve for

debt forgiveness for the preceding taxation year.

Section 44 is amended by adding the following paragraph:

(

d) if the taxpayer was not a bankrupt during the taxation year, any amount deducted under

section 45.2 [reserve for debt forgiveness] in computing the taxpayer's net operating income for the preceding taxation year from the LNG source.

SECTION 22: [Liquefied Natural Gas Income Tax Act,

section 45] provides for a deduction

in computing a taxpayer's net operating income in respect of amounts paid in

respect of an objection or appeal.

Section 45 (

a) is repealed and the following substituted:

(

a) an amount paid by the taxpayer in the taxation year in respect of fees or expenses incurred in preparing, instituting or prosecuting an objection or an appeal under this Act; .

SECTION 23: [Liquefied Natural Gas Income Tax Act, sections 45.1 and 45.2] provides for

deductions in computing a taxpayer's net operating income for a taxation year

in which, due to the settlement of a commercial debt obligation, the taxpayer

includes any remaining portion of the forgiven amount in respect of the obligation

in computing the taxpayer's income from a business or property.

23 The following sections are added to Division 4 of

Part 3:

Application of

section 61.3 of federal Act – deduction

for insolvency with respect to corporations

45.1

(1) Section 61.3 (1) and (3) of the federal Act applies for the purposes of this Act.

(2) In applying

section 61.3 (1) of the federal Act for the purposes of this Act, the following rules apply:

(

a) that

section is to be read as if the reference to "the income for a taxation year of a corporation resident in Canada throughout the year that is not exempt from tax under this Part on its taxable income" were read as a reference to "a corporation's net operating income for a taxation year from an LNG source";

(

b) that

section is to be read as if paragraph (

a) of that

section were read as follows:

(

a) the total of all amounts each of which is an amount that was included under

section 31 (f) [other income inclusions] in computing the corporation's income for the taxation year from a business or property, and ;

(

c) the formula in paragraph (

b) of that

section is to be read as if the formula were as follows:

A – 20(B – C – E)

(

d) subparagraph (ii) of the description of "B" in paragraph (

b) of that

section is to be read as if the reference to "this Part or any of Parts I.3, II, VI and XIV" were read as a reference to "this Act, the Income Tax Act or

Part I or XIV of the federal Act";

(

e) the description of "C" in paragraph (

b) of that

section is to be read as if the reference to "this Part or any of Parts I.3, II, VI and XIV" were read as a reference to "this Act, the Income Tax Act or

Part I or XIV of the federal Act";

(

f) subparagraph (ii) of the description of "C" in paragraph (

b) of that

section is to be read

(

i) as if the reference in clause (

A) of that subparagraph to "the corporation is not an insurance corporation, a federal credit union or a bank to which clause (

B) or (

C) applies and" were excluded, and

(ii) without reference to clauses (

B) and (

C) of that subparagraph;

(

g) paragraph (

b) of that

section is to be read without reference to the description of "D";

(

h) the description of "E" in paragraph (

b) of that

section is to be read as if

(

i) the reference to "50%" were read as a reference to "5%",

(ii) the reference in subparagraph (

i) of that description to "income for the year" were read as a reference to "net operating income for the taxation year from the LNG source", and

(iii) the reference in subparagraph (

i) of that description to "section 61.4" were read as a reference to "section 45.2 of this Act".

(3) In applying

section 61.3 (3) of the federal Act for the purposes of this Act, that

section is to be read as if the reference to "and 61.3 (2)" and the reference to "or 61.3 (2)" were excluded.

Reserve for debt forgiveness

45.2 In computing a taxpayer's net operating income for a taxation year from an LNG source, the taxpayer may deduct as a reserve an amount not exceeding the least of the following:

(

a) the amount determined by the following formula:

amount = net amount – adjusted amount

where

net amount

the amount, if any, by which

(

i) the total of all amounts each of which is an amount that was included under

section 31 (f) [other income inclusions – debt forgiveness rules] in computing the taxpayer's income from a business or property for the taxation year or a previous taxation year

exceeds

(ii)

the total of all amounts deducted under

section 61.3 (1) [deduction for insolvency with respect to corporations] of the federal Act, as that

section applies for the purposes of this Act, in computing the taxpayer's net operating income from the LNG source for the taxation year or a previous taxation year;

adjusted amount

the amount, if any, by which the amount determined for the description of "net amount" in respect of the taxpayer for the taxation year exceeds the total of

(

i) the amount that would be determined for the description of "net amount" in respect of the taxpayer for the taxation year if that value did not take into account amounts included or deducted in computing the taxpayer's net operating income for a previous taxation year, and

(ii)

the amount, if any, included under

section 44 (

d) in computing the taxpayer's net operating income for the taxation year from the LNG source;

(

b) the total of the following:

(i) 80% of the amount that would be determined for the description of "net amount" in paragraph (

a) in respect of the taxpayer for the taxation year if that value did not take into account amounts included or deducted in computing the taxpayer's income from the business or property for a previous taxation year;

(ii) 60% of the amount that would be determined for the description of "net amount" in paragraph (

a) in respect of the taxpayer for the taxation year if that value did not take into account amounts included or deducted in computing the taxpayer's income from the business or property for the taxation year or a previous taxation year, other than the preceding taxation year;

(iii) 40% of the amount that would be determined for the description of "net amount" in paragraph (

a) in respect of the taxpayer for the taxation year if that value did not take into account amounts included or deducted in computing the taxpayer's income from the business or property for the taxation year or a previous taxation year, other than the second last preceding taxation year;

(iv) 20% of the amount that would be determined for the description of "net amount" in paragraph (

a) in respect of the taxpayer for the taxation year if that value did not take into account amounts included or deducted in computing the taxpayer's income from the business or property for the taxation year or a previous taxation year, other than the third last preceding taxation year;

(

c) if the taxpayer is a corporation that begins to wind up in the taxation year, zero.

SECTION 24: [Liquefied Natural Gas Income Tax Act,

section 46] provides for the deduction

of an entire forgiven amount in respect of a commercial debt obligation

issued by a taxpayer in computing the balance of the taxpayer's adjusted capital

investment account.

Section 46 (2) is amended by striking out " and " at the end of paragraph (b), by adding " , and " at the end of paragraph (

c) and by adding the following paragraph:

(

d) a forgiven amount in respect of a commercial debt obligation issued by the taxpayer, in its entirety and despite

section 124.12 (3), were deemed to be an amount included in the total of all amounts deducted under

section 61 (1) (f) [debt forgiveness deduction] as an amount deducted under

section 124.12 (4) in computing the balance of the taxpayer's capital investment account.

SECTION 25: [Liquefied Natural Gas Income Tax Act,

section 54] requires a deduction in

computing the net income of a taxpayer that is a trust in accordance with

section

117.2 of the Act, as added by this Bill.

Section 54 (3) is amended

(

a) by renumbering paragraph (

a) as paragraph (a.1), and

(

b) by adding the following paragraph:

(

a) any amount to be deducted in accordance with

section 117.2 [deduction in computing net income – distribution of property to beneficiary] for the taxation year in respect of the LNG source; .

SECTION 26: [Liquefied Natural Gas Income Tax Act,

section 56] is consequential to the

amendments made by this Bill to

section 54 of the Act.

Section 56 (1) (

b) is amended by striking out "

section 54 (3) " and substituting "

section 54 (3) (a.1) and (b) ".

SECTION 27: [Liquefied Natural Gas Income Tax Act,

section 58] is consequential to the

amendments made by this Bill to

section 54 of the Act.

Section 58 is amended by striking out "

section 54 (3) (a) " and substituting "

section 54 (3) (a.1) ".

SECTION 28: [Liquefied Natural Gas Income Tax Act,

section 61] provides for a deduction

from the balance of a taxpayer's capital investment account in relation to a forgiven

amount for a settled commercial debt obligation.

Section 61 (1) is amended by adding the following paragraph:

(

f) the total of all amounts each of which is an amount that is, under

section 124.12 (4) [debt forgiveness rules] , deemed to be deducted from the balance of the taxpayer's capital investment account for the LNG source before that time.

SECTION 29: [Liquefied Natural Gas Income Tax Act,

section 65] authorizes the commissioner

to approve the end of a period in relation to the requirements for establishing

that a property is a replacement property.

Section 65 (3) (d) (

i) is amended by striking out " minister " and substituting " commissioner ".

SECTION 30: [Liquefied Natural Gas Income Tax Act,

section 66] provides that the

section

does not apply in circumstances in which property is seized by the taxpayer as

a creditor in respect of a debt.

Section 66 is amended

(

a) in subsection (2) by striking out " subsections (3) and (4), " and substituting " subsections (3) to (5), ", and

(

b) by adding the following subsection:

(5) This

section does not apply to a taxpayer for a taxation year that ends at or after a particular time in respect of a disposition of capital investment property of the taxpayer if the capital investment property is seized within the meaning of

section 124.11 (2) at the particular time by the taxpayer in respect of a debt.

SECTION 31: [Liquefied Natural Gas Income Tax Act,

section 71] is consequential to the

addition by this Bill of assessment provisions to the Act.

Section 71 is amended

(

a) by renumbering the

section as

section 71 (1), and

(

b) by adding the following subsection:

(2) Section 67.5 (2) [reassessments] of the federal Act does not apply for the purposes of this Act.

SECTION 32: [Liquefied Natural Gas Income Tax Act,

section 77] is consequential to the

addition by this Bill of the definition of "tax benefit" to

section 1 of the Act.

Section 77 (1) is amended by repealing the definition of "tax benefit" .

SECTION 33: [Liquefied Natural Gas Income Tax Act,

section 78] provides for the application

of the

section in relation to a deemed disposition of liquefied natural gas,

natural gas liquids or natural gas when it leaves the LNG plant.

Section 78 is amended

(

a) in subsection (2) by striking out "

section 28 (3) to (5) " and substituting "

section 28 (3) or (4) ", and

(

b) by adding the following subsection:

(2.1) For the purposes of this section, a disposition under

section 28 (5) by a taxpayer is deemed to be a dealing between an activity of the taxpayer referred to in subsection (1) (

a) of this

section and an activity of the taxpayer referred to in subsection (1) (

b) of this section.

SECTION 34: [Liquefied Natural Gas Income Tax Act,

section 79]

(

a) is consequential to the amendments made by this Bill to sections 28 (5) and 78 of the Act;

(

b) is consequential to the addition by this Bill of

section 124.412 to the Act;

(

c) provides that certain adjustments may not be made unless the commissioner considers the adjustment to be appropriate in the circumstances.

Section 79 is amended

(

a) by repealing subsection (4),

(

b) in subsection (5) by adding " and

section 124.412 [anti-avoidance rule] " after " Division ", and

(

c) by adding the following subsection:

(6) An adjustment, other than an adjustment that results in or increases a transfer pricing capital adjustment or a transfer pricing income adjustment of a taxpayer for a taxation year, may not be made under subsection (5) unless, in the opinion of the commissioner, it would be appropriate in the circumstances that the adjustment be made.

SECTION 35: [Liquefied Natural Gas Income Tax Act,

section 80]

(

a) is consequential to the addition by this Bill of the definition of "applicable percentage" to

section 1 of the Act;

(

b) is consequential to the addition by this Bill of

section 124.412 to the Act.

Section 80 is amended

(

a) by repealing subsection (1), and

(

b) in subsection (2) (b) (

i) by adding the following clause:

(A.1)

section 124.412 [anti-avoidance rule] ; .

SECTION 36: [Liquefied Natural Gas Income Tax Act,

section 81] modifies a requirement

to provide records or documents to be further to a written demand from the

commissioner rather than a request from the minister.

Section 81 (

c) is repealed and the following substituted:

(

c) after the taxpayer or partnership is given a written demand by the commissioner, supplies the records or documents described in paragraphs (

a) and (

b) to the commissioner within the period specified in the demand.

SECTION 37: [Liquefied Natural Gas Income Tax Act,

section 83] includes within the

meaning of "qualifying expenditure" a qualifying partnership expenditure

incurred by a taxpayer.

Section 83 is amended in the definition of "qualifying expenditure" by striking out " or " at the end of paragraph (a), by adding " , or " at the end of paragraph (

b) and by adding the following paragraph:

(

c) a qualifying partnership expenditure incurred by the taxpayer under

section 114.1 (3); .

SECTION 38: [Liquefied Natural Gas Income Tax Act, sections 84 and 85] authorizes the

commissioner to require information and records in relation to the making of

elections by a taxpayer.

38 Sections 84 (1) (

a) and (

b) and 85 (1) (

a) and (

b) are amended by striking out " minister " and substituting " commissioner ".

SECTION 39: [Liquefied Natural Gas Income Tax Act,

section 84] excludes a qualifying

partnership expenditure from the limitation in the

section on a qualifying

expenditure being included within a deemed net operating loss under the section.

Section 84 (3) is amended by striking out " the qualifying expenditure would have been deductible " and substituting " the qualifying expenditure, other than a qualifying partnership expenditure incurred by the taxpayer under

section 114.1 (3), would have been deductible ".

SECTION 40: [Liquefied Natural Gas Income Tax Act,

section 90] provides for the application

of a rule that deems a new corporation to be the same corporation as, and

a continuation of, any predecessor corporations for the purposes of the specified

provisions.

Section 90 is amended

(

a) in subsection (1) by adding the following:

section 45.2 [reserve for debt forgiveness] ;

section 124.12 (1) [debt forgiveness rules] , but only in relation to the definition of "forgiven amount" in that section;

section 124.315 [consequential reassessments and redeterminations – subsequent taxation years] . , and

(

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

section 61.3 [deduction for insolvency with respect to corporations] ;

section 143.4 [expenditure – limit for contingent amount] .

SECTION 41: [Liquefied Natural Gas Income Tax Act, sections 92.1 and 92.2]

section 92.1, applies a provision of the Income Tax Act (Canada) that provides for the application of the Act as if, in the case of an amalgamation, the new corporation had incurred or issued the debt or other obligation originally incurred or issued by the predecessor corporation;

section 92.2, deems an obligation between predecessor corporations to be settled if those corporations amalgamate.

41 The following sections are added:

Debt or obligation of predecessor corporation

92.1 (1)

Section 87 (7) of the federal Act applies for the purposes of this Act.

(2) In applying

section 87 (7) of the federal Act for the purposes of this Act, that

section is to be read as if

(

a) the reference to "after May 6, 1974" were excluded, and

(

b) everything after paragraph (

d) of that

section were excluded.

Deemed settlement of obligation on amalgamation

92.2 For the purposes of this Act, if an obligation of a debtor that is a predecessor corporation to pay an amount to a creditor that is a predecessor corporation is settled on an amalgamation of those corporations, the obligation is deemed to have been settled, immediately before the time that is immediately before the amalgamation, by a payment made by the debtor and received by the creditor of an amount equal to the lesser of

(

a) the amount that would have been the unpaid principal amount of the obligation owed to the creditor at that time, and

(

b) the amount that would have been the cost to the creditor of the obligation at that time.

SECTION 42: [Liquefied Natural Gas Income Tax Act,

section 93] is consequential to the

amendments made by this Bill to

section 54 of the Act.

Section 93 (

b) is amended by striking out "

section 54 (3) (a) " and substituting "

section 54 (3) (a.1) ".

SECTION 43: [Liquefied Natural Gas Income Tax Act,

section 96] provides for the filing of

a form with the commissioner rather than with the minister.

Section 96 is amended by striking out " minister " in both places and substituting " commissioner ".

SECTION 44: [Liquefied Natural Gas Income Tax Act,

section 98] provides that

Part 6 of

the Act applies to a taxpayer who is a member of a partnership for the purpose

of computing the specified amounts for which references are added to the section.

Section 98 is amended by adding the following paragraphs:

(e.1) for the purposes of

section 124.12 [debt forgiveness rules] , a forgiven amount at any time in respect of a commercial debt obligation issued by the taxpayer;

(e.2) the taxpayer's net operating loss for the taxpayer's first taxation year under

section 84 [amounts included in net operating loss account] ;

(e.3) the capital cost of capital investment property deemed under

section 85 [amounts included in capital investment account] to have been acquired by the taxpayer at the beginning of the taxpayer's first taxation year; .

SECTION 45: [Liquefied Natural Gas Income Tax Act,

section 101] for the purposes of sections

106.1, 114.1 and 114.2 of the Act, as added by this Bill, deems a taxpayer

who ceases to be a member of a partnership during a fiscal period of the

partnership to be a member of the partnership at the end of the fiscal period.

Section 101 is amended by adding the following paragraphs:

(c.1)

section 106.1 [forgiven amounts in respect of commercial debt obligation issued by partnership] ;

(f.1)

section 114.1 [qualifying partnership expenditures] ;

(f.2)

section 114.2 [amounts respecting qualifying partnership property] ; .

SECTION 46: [Liquefied Natural Gas Income Tax Act,

section 103] applies rules, relating

to agreements by members of a partnership to share amounts, to specified

amounts for which references are added to the section.

Section 103 is amended

(

a) in subsections (1) (

a) and (3) by striking out " , in relation to a fiscal period of the partnership, ",

(

b) in subsections (1) (

a) and (3) (

a) by striking out " the fiscal period " wherever it appears and substituting " a fiscal period ",

(

c) in subsections (1) (

a) and (3) (

a) by adding the following subparagraphs:

(v.1) a forgiven amount in respect of a commercial debt obligation issued by the partnership that is settled in a fiscal period;

(v.2) a qualifying expenditure, as defined in

section 114.1, incurred by the partnership;

(v.3) a total amount computed under

section 114.2 (4) (

a) or (b) (

i) or (ii) in respect of the partnership; , and

(

d) in subsections (2) and (4) by striking out " balance " and substituting " balance, amount ".

SECTION 47: [Liquefied Natural Gas Income Tax Act,

section 106.1] provides for the allocation

to a taxpayer who is a member of a partnership of an amount that is the

taxpayer's share of a forgiven amount in respect of a commercial debt obligation

that was issued by the partnership and settled.

47 Division 1 of

Part 6 is amended by adding the following section:

Forgiven amounts in respect of commercial debt obligation

issued by partnership

106.1

(1) This

section applies to a taxpayer in relation to a commercial debt obligation if

(

a) the taxpayer is a member of a partnership that engages in, or has income derived from, liquefaction activities in respect of an LNG source in a fiscal period of the partnership,

(

b) the commercial debt obligation was issued by the partnership, and

(

c) the commercial debt obligation is settled at any time in the fiscal period.

(2) If this

section applies to a taxpayer in relation to a commercial debt obligation, a computation must be made of the amount that would be the forgiven amount in respect of the commercial debt obligation issued by the partnership at the time the commercial debt obligation was settled as if the partnership were the debtor that issued the commercial debt obligation.

(3) If a taxpayer is a member of a partnership for which an amount is computed under subsection (2),

(

a) for the purposes of

section 124.12 [debt forgiveness rules] , the commercial debt obligation issued by the partnership is deemed to have been issued by the taxpayer, and

(

b) the amount is, for the purposes of paragraph (

b) of the definition of "forgiven amount" in

section 124.12 and to the extent of the taxpayer's share of that amount, a forgiven partnership amount in respect of the commercial debt obligation.

SECTION 48: [Liquefied Natural Gas Income Tax Act,

section 111] provides that

section 61 (1) (

f) of the Act, as added by this Bill, does not apply for the purposes

of computing the balance of a partnership's capital investment account

at the end of a fiscal period of the partnership.

Section 111 (4) (

b) is amended by striking out " paragraph (b) " and substituting " paragraphs (

b) and (f) ".

SECTION 49: [Liquefied Natural Gas Income Tax Act, Division 3.1 of

Part 6] for the purposes

of Division 3 of

Part 5 of the Act, provides for specific rules in relation

to a partnership's first fiscal period and the allocation of amounts to the members

of the partnership.

Part 6 is amended by adding the following Division:

Division 3.1 – Computations for First Fiscal Period

Qualifying partnership expenditures

114.1

(1) In this section, "qualifying expenditure" has the same meaning as in

section 83, except that the definition in that

section is to be read as if

(

a) subject to paragraph (

b) of this subsection,

(

i) the references to "taxpayer" were read as references to "partnership",

(ii) the references to "taxpayer's" were read as references to "partnership's", and

(iii) the references to "taxation year" were read as references to "fiscal period", and

(

b) paragraph (

c) of that definition were read as follows:

(

c) a qualifying partnership expenditure incurred by the partnership under

section 114.1 (3) if

(

i) the references in that

section to "taxpayer" were read as references to "partnership", and

(ii) the reference in that

section to "taxpayer's" were read as a reference to "partnership's"; .

(2) If a partnership has incurred a qualifying expenditure in respect of an LNG source, a computation must be made of the total of all amounts each of which is a qualifying expenditure incurred by the partnership in respect of the LNG source, but only to the extent that the qualifying expenditure would have been deductible in computing the partnership's income or loss from a business or property that is in respect of the LNG source if the qualifying expenditure had been incurred in the partnership's first fiscal period.

(3) If a taxpayer is a member of a partnership for which an amount is computed under subsection (2) in respect of an LNG source, that amount is, to the extent of the taxpayer's share of that amount, a qualifying partnership expenditure deemed to have been incurred by the taxpayer in respect of the LNG source.

Amounts respecting qualifying partnership property

114.2

(1) In this section, "qualifying partnership property" , in relation to a partnership, means property that is

(

a) capital investment property, and

(

b) owned by the partnership immediately before the partnership's first fiscal period.

(2) For the purposes of this section, if a taxpayer is a member of a partnership that is a member of another partnership, the taxpayer is deemed to be a member of the other partnership.

(3) Section 97 [reference to person or taxpayer who is member of partnership] does not apply to this section.

(4) If a taxpayer is a member of a partnership that has qualifying partnership property in respect of an LNG source, a computation must be made of the following amounts:

(

a) unless all of the members of the partnership who are taxpayers elect to apply

section 85 (6) [amounts included in capital investment account] in respect of the LNG source for the taxpayers' first taxation years, the total fair market value, as at the beginning of the partnership's first fiscal period, of all the qualifying partnership property of the partnership;

(

b) unless all of the members of the partnership who are taxpayers elect to apply

section 85 (3) in respect of the LNG source for the taxpayers' first taxation years,

(

i) the total of all amounts each of which is an amount that would otherwise be the capital cost to the partnership of each qualifying partnership property of the partnership, and

(ii) the total of all amounts each of which is a financial incentive that the partnership received before that first fiscal period in respect of or for the acquisition of the qualifying partnership property.

(5) If a taxpayer is a member of one or more partnerships that have qualifying partnership property in respect of an LNG source and the taxpayer elects to apply

section 85 (3) in respect of the LNG source for the taxpayer's first taxation year, the taxpayer is deemed to have acquired capital investment property immediately before the taxpayer's first taxation year with a fair market value equal to the total of all amounts each of which is the amount to which the taxpayer is directly or indirectly entitled as the taxpayer's share of the total amount computed under subsection (4) (

a) of this

section in respect of a partnership that has qualifying partnership property in respect of the LNG source.

(6) If a taxpayer is a member of one or more partnerships that have qualifying partnership property in respect of an LNG source and the taxpayer elects to apply

section 85 (6) in respect of the LNG source for the taxpayer's first taxation year, the taxpayer is

(

a) deemed to have acquired capital investment property immediately before the taxpayer's first taxation year for an amount that would otherwise be the capital cost to the taxpayer equal to the total of all amounts each of which is the amount to which the taxpayer is directly or indirectly entitled as the taxpayer's share of the total amount computed under subsection (4) (b) (

i) in respect of a partnership that has qualifying partnership property in respect of the LNG source, and

(

b) deemed to have received a financial incentive before the taxpayer's first taxation year for the acquisition of that capital investment property in an amount equal to the total of all amounts each of which is the amount to which the taxpayer is directly or indirectly entitled as the taxpayer's share of the total amount computed under subsection (4) (b) (ii) in respect of a partnership that has qualifying partnership property in respect of the LNG source.

SECTION 50: [Liquefied Natural Gas Income Tax Act, sections 116.1 and 117.1 to 117.3]

section 116.1, provides for the attribution of any income or loss from, or proceeds of disposition for, specified property to a person who provided the property to a trust;

section 117.1, provides for a deduction in computing a trust's income in respect of amounts that are paid or become payable to a specified beneficiary who is exempt from tax or who would be exempt if the income were the beneficiary's income;

section 117.2, provides for a deduction in computing a trust's net income in respect of the distribution of property or the payment of proceeds of disposition to a specified beneficiary who is exempt from tax or who would be exempt if the property were the beneficiary's property;

section 117.3, establishes a rule respecting when an amount becomes payable to a beneficiary.

50 The following sections are added:

Deemed income or loss if reversionary trust

116.1

(1) In this section, "person" includes a band.

(2) Subsection (3) applies to a person in relation to particular property for a period if

(

a) a trust holds the particular property for the period on condition

(

i) that the particular property or property substituted for the particular property may

(

A) revert to the person, or

(

B) pass to other persons to be determined by the person at a time subsequent to the creation of the trust, or

(ii) that, during the existence of the person, the particular property may not be disposed of except with that person's consent or in accordance with that person's direction,

(

b) the particular property or property for which the particular property was substituted was directly or indirectly received by the trust from the person, and

(

c) the person is, for the period,

(

i) a person who is exempt from tax under

Part I of the federal Act in accordance with

section 149 (1) (c), (d.5) or (d.6) of the federal Act,

(ii) a trust that is exempt under

section 22 (2) from tax imposed under this Act,

(iii) an Indian who would have been exempt from taxation under

section 87 of the Indian Act or under a provision of a final agreement equivalent to that

section in respect of any income from or proceeds of disposition received for the particular property if the income or proceeds received were the income or proceeds of the Indian, or

(iv) a band that would have been exempt from taxation under

section 87 of the Indian Act in respect of any income from or proceeds of disposition received for the particular property if the income or proceeds received were the income or proceeds of the band.

(3) If this

section applies to a person in relation to particular property for a period,

(

a) any income or loss from the particular property or from property substituted for the particular property for the period is deemed to be income or a loss of the person for the period, and

(

b) any proceeds of disposition received for the particular property or for property substituted for the particular property in the period are deemed to be proceeds of disposition received by the person in the period.

Deduction in computing income from business or property

or another source – amount paid or payable to beneficiary

117.1 Despite

section 117, in computing a trust's income for a taxation year from a business or property or from another source described in Division 3 [Other Sources of Income] of

Part 3, the trust may deduct an amount that is paid or becomes payable in the taxation year to a beneficiary if the beneficiary is

(

a) a person who is exempt from tax under

Part I of the federal Act in accordance with

section 149 (1) (c), (d.5) or (d.6) of the federal Act at the time the amount is paid or becomes payable,

(

b) a trust that is exempt under

section 22 (2) from tax imposed under this Act at the time the amount is paid or becomes payable,

(

c) an Indian who would have been exempt from taxation under

section 87 of the Indian Act or under a provision of a final agreement equivalent to that

section in respect of the income if the income were the income of the Indian, or

(

d) a band that would have been exempt from taxation under

section 87 of the Indian Act in respect of the income if the income were the income of the band.

Deduction in computing net income –

distribution of property to beneficiary

117.2

(1) This

section applies to a trust for a taxation year in respect of an LNG source if an amount must be included under

section 54 (2) (b) [recaptured negative capital investment account balance] in computing the trust's net income for the taxation year from the LNG source and, in the taxation year,

(

a) capital investment property of the trust has been distributed to a beneficiary of the trust and the beneficiary is

(

i) a person who is exempt from tax under

Part I of the federal Act in accordance with

section 149 (1) (c), (d.5) or (d.6) of the federal Act at the time of the distribution,

(ii) a trust that is exempt under

section 22 (2) from tax imposed under this Act at the time of the distribution,

(iii) an Indian who would have been exempt from taxation under

section 87 of the Indian Act or under a provision of a final agreement equivalent to that

section in respect of the property if the property were the property of the Indian immediately before the trust distributed the property, or

(iv) a band that would have been exempt from taxation under

section 87 of the Indian Act in respect of the property if the property were the property of the band immediately before the trust distributed the property, or

(

b) all or part of the proceeds of disposition received for capital investment property of the trust are paid or become payable to a beneficiary of the trust and the beneficiary is

(

i) a person who is exempt from tax under

Part I of the federal Act in accordance with

section 149 (1) (c), (d.5) or (d.6) of the federal Act at the time the proceeds of disposition are paid or become payable,

(ii) a trust that is exempt under

section 22 (2) from tax imposed under this Act at the time the proceeds of disposition are paid or become payable,

(iii) an Indian who would have been exempt from taxation under

section 87 of the Indian Act or under a provision of a final agreement equivalent to that

section in respect of any proceeds of disposition received for the property if the property were the property of the Indian, or

(iv) a band that would have been exempt from taxation under

section 87 of the Indian Act in respect of any proceeds of disposition received for the property if the property were the property of the band.

(2) If this

section applies to a trust for a taxation year in respect of an LNG source, in computing the trust's net income for the taxation year from the LNG source, the trust must deduct under

section 54 (3) (

a) an amount equal to the lesser of the following amounts:

(

a) the amount equal to the total of all amounts each of which is

(

i) the fair market value of property referred to in subsection (1) (

a) of this

section that was distributed in the taxation year to a beneficiary referred to in that subsection, or

(ii) the proceeds of disposition referred to in subsection (1) (

b) of this

section that were paid or payable in the taxation year to a beneficiary referred to in that subsection;

(

b) the amount included under

section 54 (2) (

b) in computing the trust's net income for the taxation year from the LNG source.

Rule for sections 117.1 and 117.2 –

when amount becomes payable

117.3 For the purposes of sections 117.1 and 117.2, an amount is deemed not to have become payable to a beneficiary in a taxation year unless the amount was paid in the taxation year to the beneficiary or the beneficiary was entitled in the taxation year to enforce payment of the amount.

SECTION 51: [Liquefied Natural Gas Income Tax Act,

section 123] is consequential to the

addition by this Bill of a definition of "balance-due date" to

section 1 of the

Act.

Section 123 is amended by striking out " balance-due day " and substituting " balance-due date ".

SECTION 52: [Liquefied Natural Gas Income Tax Act,

section 124] authorizes the commissioner

to provide for an application form and to require information and

records in relation to the making of a claim by a taxpayer for a tax credit.

Section 124 (1) (

a) and (

b) is amended by striking out " minister " and substituting " commissioner ".

SECTION 53: [Liquefied Natural Gas Income Tax Act, Parts 8.1 to 8.8]

Part 8.1, provides for specific rules in relation to the seizure or surrender of property in satisfaction of a debt, the forgiveness of a debt, synthetic dispositions of property, bankruptcy and limits on expenditures in certain circumstances;

Part 8.2, provides for the registration of persons and partnerships that engage in or derive income from liquefaction activities and the suspension and cancellation of registrations;

Part 8.3, provides for

the filing of tax returns and partnership returns,

assessments of tax and other amounts and determinations of amounts relevant to the computation of net income and net operating income,

instalment payments, and

penalties, interest and refunds;

Part 8.4, provides for the administration and enforcement of the Act, including

audits and inspections,

demands for information and for the filing of an information return,

rules respecting communication of information,

requirements for the retention of records, and

a general anti-avoidance rule;

Part 8.5, provides for the minister considering an objection to a decision of the commissioner and for subsequent appeals to court;

Part 8.6, provides for

the deposit of a bond with the commissioner,

joint and several liability among participants in a transaction if one or more of the participants are not registered under the Act, and

remedies available to the government for the recovery of amounts owing to the government under the Act;

Part 8.7, provides for

the designation of a commissioner and the delegation of the commissioner's powers and duties,

the manners by which documents may be given to a person or partnership,

the provision of proof of matters by the commissioner, and

the measurement and determination of the heating value of natural gas;

Part 8.8, establishes offences for contraventions of the Act or for other conduct and provides for penalties for committing an offence.

53 The following Parts are added:

Part 8.1 – Special Rules Applicable

in Certain Circumstances

Surrender of property

124.10

(1) In this section:

"creditor" , in relation to a particular person,

(

a) includes a person to whom the particular person is obligated to pay an amount under a mortgage or similar obligation, and

(

b) includes, if property was sold to the particular person under a conditional sales agreement, the seller of the property or any assignee of the seller with respect to the agreement;

"debt" includes an obligation to pay an amount under a mortgage or similar obligation or under a conditional sales agreement;

"person" includes a partnership;

"property" does not include

(

a) money, or

(

b) indebtedness owed by or guaranteed by the government of a country, or a province, state, or other political subdivision of that country;

"specified amount" , in relation to a particular time for a debt owed by a person, means

(

a) the unpaid principal amount of the debt at that time, or

(

b) unpaid interest accrued to that time on the debt.

(2) For the purposes of this section, a property is surrendered at any time by a person to another person if

(

a) the beneficial ownership of the property is acquired or reacquired at that time from the person by the other person, and

(

b) the acquisition or reacquisition of the property is in consequence of the person's failure to pay all or part of one or more specified amounts of debts owed by the person to the other person immediately before that time.

(3) For the purposes of this Act, if a particular property is surrendered at any time by a person to a creditor of the person, the person's proceeds of disposition of the particular property are deemed to be equal to the fair market value at that time of the particular property.

(4) For the purposes of this Act, if a particular property is surrendered by a person to a creditor of the person, no amount is to be considered to have been paid or repaid by the person as a consequence of the acquisition or reacquisition of the surrendered property by the creditor.

Seizure of property

124.11

(1) In this section, "creditor" , "debt" , "person" , "property" and "specified amount" have the same meaning as in

section 124.10.

(2) For the purposes of this section, a property is seized at any time by a creditor in respect of a debt if

(

a) the beneficial ownership of the property is acquired or reacquired at that time by the creditor, and

(

b) the acquisition or reacquisition of the property is in consequence of a person's failure to pay to the person all or part of the specified amounts of debts owed by the person to the creditor immediately before that time.

(3) If a property is seized at any time in a particular taxation year by a creditor in respect of a debt, for the purpose of computing the creditor's net operating income or net operating loss for the particular taxation year, the amount deducted under

section 20 (1) (n) [reserve for unpaid amounts] of the federal Act, as that

section applies for the purposes of this Act, in computing the creditor's income from a business for the preceding taxation year in respect of any disposition of the property before the particular taxation year is deemed to be the amount, if any, by which the amount so deducted exceeds the fair market value at that time of the particular property.

(4) If a particular property is seized at any time in a taxation year by a creditor in respect of a debt, the cost to the creditor of the particular property is, for the purposes of this Act, deemed to be the amount, if any, by which the fair market value at that time of the particular property exceeds the amount, if any, deducted under

section 20 (1) (

n) of the federal Act, as that

section applies for the purposes of this Act, in respect of the particular property in computing the creditor's income for the preceding taxation year from a business.

(5) If a property is seized at any time in a taxation year by a creditor in respect of a debt, for the purposes of this Act,

(

a) the creditor is deemed to have disposed of the debt at that time,

(

b) the amount received on account of the debt as a consequence of the seizure is deemed

(

i) to be received at that time, and

(ii) to be equal to the fair market value of the property at that time, and

(

c) if any portion of the debt is outstanding immediately after that time, the creditor is deemed to have reacquired that portion immediately after that time at a cost equal to zero.

(6) If a property is seized at any time in a taxation year by a creditor in respect of a debt, no amount in respect of the debt

(

a) is deductible in computing the creditor's income from a business or property for the taxation year or a subsequent taxation year as a bad, doubtful or impaired debt, or

(

b) is to be included after that time in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts of the creditor as a bad, doubtful or impaired debt.

Debt forgiveness rules

124.12

(1) In this section:

"excluded obligation" means a commercial debt obligation issued by a debtor if

(

a) the proceeds from the issue of the commercial debt obligation

(

i) were included in computing the debtor's income from a business or property or the balance of the debtor's capital investment account or, but for the reference to "but does not include an amount described in

section 7300 (a) [First Nations economic development] of the federal regulation or a prescribed amount" in the definition of "financial incentive" in

section 1 of this Act, would have been so included,

(ii) were deducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts, or

(iii) were deducted in computing the capital cost or cost to the debtor of any property of the debtor,

(

b) section 78 [unpaid amounts] of the federal Act, as that

section applies for the purposes of this Act, applies to the commercial debt obligation, or

(

c) the principal amount of the commercial debt obligation would, if this Act were read without reference to

section 124.10 [surrender of property] and this

section and the commercial debt obligation were settled without any amount being paid in satisfaction of its principal amount, be included in computing the debtor's income from a business or property because of the settlement of the commercial debt obligation;

"forgiven amount" , at any time in respect of a commercial debt obligation issued by a debtor, means,

(

a) subject to paragraph (b), the amount determined by the following formula:

amount = obligation amount – reductions

where

obligation amount

the lesser of the amount for which the commercial debt obligation was issued and the principal amount of the commercial debt obligation immediately before that time;

reductions

the total of the following:

(

i) the amount, if any, paid at that time in satisfaction of the principal amount of the commercial debt obligation;

(ii)

any portion of the principal amount of the commercial debt obligation that is satisfied by a surrender of the property by the debtor at or before that time;

(iii)

if the debtor is a bankrupt at that time, the principal amount of the commercial debt obligation immediately before that time;

(iv)

that portion of the principal amount of the commercial debt obligation immediately before that time as represents the principal amount of an excluded obligation;

(

v) if the debtor is a partnership and the commercial debt obligation was, since the later of the creation of the partnership or the issue of the commercial debt obligation, always payable to a member of the partnership actively engaged, on a regular, continuous and substantial basis, in those activities of the partnership that are other than the financing of the partnership business, the principal amount of the commercial debt obligation immediately before that time;

(vi)

the amount, if any, given at or before that time by the debtor to another person or partnership as consideration for the assumption of the commercial debt obligation by the other person or partnership, or

(

b) in the case of a commercial debt obligation deemed to have been issued by the debtor under

section 106.1 (3) (a), the forgiven partnership amount under

section 106.1 (3) (

b) in respect of the commercial debt obligation issued by the debtor.

(2) The following rules apply for the purposes of this section:

(

a) a commercial debt obligation issued by a debtor is settled at any time if the commercial debt obligation is settled or extinguished at that time, other than by way of a bequest or inheritance;

(

b) if a corporation issues a share to a person or partnership as consideration for the settlement of a commercial debt obligation issued by the corporation and payable to the person or partnership, the amount paid in satisfaction of the commercial debt obligation because of the issue of the share is deemed to be equal to the fair market value of the share at the time the share was issued;

(

c) if a commercial debt obligation issued by a corporation and payable to a person or partnership is settled at any time, the amount, if any, that can reasonably be considered to be the increase, as a consequence of the settlement of the commercial debt obligation, in the fair market value of shares of the capital stock of the corporation owned by the person or partnership, other than any shares acquired by the person or partnership as consideration for the settlement of the commercial debt obligation, is deemed to be an amount paid at that time in satisfaction of the commercial debt obligation;

(

d) if any part of the consideration given by a debtor to another person or a partnership for the settlement at any time of a particular commercial debt obligation issued by the debtor and payable to the other person or the partnership consists of a new commercial debt obligation issued by the debtor to the other person or the partnership,

(

i) an amount equal to the principal amount of the new commercial debt obligation is deemed to be paid by the debtor at that time, because of the issue of the new commercial debt obligation, in satisfaction of the principal amount of the particular commercial debt obligation, and

(ii) the new commercial debt obligation is deemed to have been issued for an amount equal to the amount, if any, by which the principal amount of the new commercial debt obligation exceeds the amount, if any, by which the principal amount of the new commercial debt obligation exceeds the amount for which the particular commercial debt obligation was issued;

(

e) for the purpose of determining, at any time, whether 2 persons are related to each other or whether any person is controlled by any other person, it is to be assumed that

(

i) each partnership and each trust is a corporation having a capital stock of a single class of voting shares divided into 100 issued shares,

(ii) each member of a partnership and each beneficiary under a trust owned at that time the number of issued shares of that class that is equal to the proportion of 100 that

(

A) the fair market value at that time of the member's interest in the partnership or the beneficiary's interest in the trust

is of

(

B) the fair market value at that time of all members' interests in the partnership or all beneficiaries' interests in the trust, and

(iii) if a beneficiary's share of the income or capital of a trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power, the fair market value at any time of the beneficiary's interest in the trust is equal to,

(

A) if the beneficiary is not entitled to receive or otherwise obtain the use of any of the income or capital of the trust before the death after that time of one or more other beneficiaries under the trust, zero, and

(

B) in any other case, the total fair market value at that time of all beneficiaries' interests under the trust;

(

f) if a commercial debt obligation is denominated in a currency, other than Canadian currency, the forgiven amount at any time in respect of the commercial debt obligation is to be determined with reference to the relative value of that currency and Canadian currency at the time the commercial debt obligation was issued;

(

g) if an amount is paid in satisfaction of the principal amount of a particular commercial debt obligation issued by a debtor and, as a consequence of the payment, the debtor is legally obliged to pay that amount to another person or a partnership, the obligation to pay that amount to the other person or the partnership is deemed to be a commercial debt obligation that was issued by the debtor at the same time and in the same circumstances as the particular commercial debt obligation;

(

h) for greater certainty, the amount that can be applied under this

section to reduce another amount may not exceed that other amount;

(

i) except for the purposes of this paragraph, if

(

i) a commercial debt obligation issued by a debtor is settled at any time,

(ii) the debtor is at that time a member of a partnership, and

(iii) the commercial debt obligation was, under the agreement governing that commercial debt obligation, treated immediately before that time as a debt owed by the partnership,

the commercial debt obligation is to be considered to have been issued by the partnership and not by the debtor;

(

j) despite paragraph (i), if a commercial debt obligation, for which a particular person or partnership is liable with one or more other persons or partnerships, is settled at any time in respect of the particular person but not in respect of all of the other persons, the portion of the commercial debt obligation that can reasonably be considered to be the particular person's share of that commercial debt obligation is to be considered to have been issued by the particular person and settled at that time and not at any subsequent time.

(3) If a commercial debt obligation issued by a taxpayer is settled at any time, the forgiven amount at that time in respect of the commercial debt obligation is, for the purposes of

section 58 [net operating loss account balance] , deemed at that time to be an amount deducted by the taxpayer under

section 54 (3) (a.1) in respect of an LNG source for the taxation year that includes that time, to the extent that

(

a) the commercial debt obligation relates to the LNG source, and

(

b) the amount deemed to be deducted does not reduce to less than zero the balance of the taxpayer's net operating loss account for the taxation year for the LNG source.

(4) If a commercial debt obligation issued by a taxpayer is settled at any time and an amount less than the forgiven amount is deemed under subsection (3) to be deducted in respect of an LNG source, the remaining portion of the forgiven amount at that time in respect of the commercial debt obligation is deemed to be an amount deducted under

section 61 (1) (

f) immediately after that time from the balance of the taxpayer's capital investment account for the LNG source, to the extent that the amount deemed to be deducted does not reduce to less than zero the balance of the taxpayer's net capital investment account for the LNG source immediately after that time.

(5) If a commercial debt obligation issued by a taxpayer is settled in a taxation year and an amount less than the forgiven amount is deemed under subsection (3) and (4) to be deducted, in computing the taxpayer's income for the taxation year from the business or property in connection with which the obligation was issued, the remaining portion of the forgiven amount in respect of the obligation is, for the purposes of

section 31 (f) [other income inclusions – debt forgiveness rules] , income of the taxpayer for that taxation year from that business or property.

Synthetic dispositions

124.13

(1) For the purposes of this Act, if a synthetic disposition arrangement is entered into in respect of a property owned by a taxpayer and the synthetic disposition period of the arrangement is one year or more, the taxpayer is deemed

(

a) to have disposed of the property immediately before the beginning of the synthetic disposition period for proceeds of disposition equal to the fair market value of that property at the beginning of the synthetic disposition period, and

(

b) to have reacquired that property at the beginning of the synthetic disposition period at a cost, or in the case of capital investment property, at a capital cost, equal to that fair market value.

(2) Subsection (1) does not apply in respect of a property owned by a taxpayer if

(

a) the synthetic disposition arrangement referred to in subsection (1) is a lease of tangible property, or

(

b) the property is disposed of as part of the arrangement within one year after the day on which the synthetic disposition period of the arrangement begins.

Application of federal provisions – special rules

applicable in certain circumstances

124.14 Subject to this Act, the following sections of the federal Act apply for the purposes of this Act:

section 128 (1) [bankruptcy] ;

section 143.3 [expenditure – limitations] ;

section 143.4 [expenditure – limit for contingent amount] .

Application of

section 128 (1) of federal Act – bankruptcy

124.15 (1)

Section 128 (1) (

f) and (

g) of the federal Act does not apply for the purposes of this Act.

(2) In applying

section 128 (1) of the federal Act for the purposes of this Act, the following rules apply:

(

a) subject to paragraph (

b) of this subsection, that

section is to be read as if the references to "corporation" were read as references to "taxpayer";

(

b) paragraph (

c) of that

section is to be read as if the reference to "the income and the taxable income of the corporation" were read as a reference to "the taxpayer's net income, net operating income or net operating loss from an LNG source, or the taxpayer's income or loss from a business or property,";

(

c) paragraph (

e) of that

section is to be read as if the reference to ", or solidarily," were excluded.

(3) If a taxpayer has become a bankrupt and an order of discharge is granted in respect of the taxpayer, the following rules apply:

(

a) despite

section 20 [tax pool balance] , the following may not be taken into account in computing the balance of the taxpayer's tax pool for an LNG source for the taxation year in which the order was granted or a subsequent taxation year:

(

i) an amount payable by the taxpayer under

section 21 [tax on net operating income] in respect of the LNG source for any taxation year previous to the taxation year in which the order was granted;

(ii) an amount deducted by the taxpayer under

section 19 (1) (a), (

b) or (c) [deduction from tax on net income] in respect of the LNG source for any taxation year previous to the taxation year in which the order was granted;

(

b) despite

section 58 [net operating loss account balance] , the following may not be taken into account in computing the balance of the taxpayer's net operating loss account for an LNG source for the taxation year in which the order was granted or a subsequent taxation year:

(

i) a net operating loss of the taxpayer from the LNG source for any taxation year previous to the taxation year in which the order was granted;

(ii) an amount deducted by the taxpayer under

section 54 (3) (a.1) in respect of the LNG source for any taxation year previous to the taxation year in which the order was granted.

(4) If an individual has become a bankrupt and, in a taxation year beginning after an order of discharge has been granted in respect of the individual, the trustee deals in the estate of the individual or performs any act in the carrying on of the business of the individual,

(

a) the trustee must file a tax return under

section 124.301 [tax return required to be filed by person dealing with property or business of taxpayer] on behalf of the individual for the taxation year

(

i) as if the individual had failed to file a tax return for the taxation year under

section 124.300 [tax returns – general rule] , and

(ii) with the individual's income for the taxation year from a business or property computed as if the only income of the individual for that taxation year was the income for the taxation year, if any, arising from dealings in the estate of the individual or acts performed in the carrying on of the business of the individual by the trustee, and

(

b) the trustee is liable to pay any tax payable under this Act by the individual for that taxation year in respect of the trustee's dealings and actions referred to in paragraph (a).

Application of

section 143.3 of federal Act –

expenditure – limitations

124.16 In applying

section 143.3 of the federal Act for the purposes of this Act, the following rules apply:

(a) subsection (2) of that

section is to be read as if the reference to "income, taxable income" were read as a reference to "income or loss from a business or property";

(b) subsections (2), (3) and (4) of that

section are to be read as if the references to "on or after November 17, 2005" were excluded;

(

c) that

section is to be read as if the following subsection were included:

(2.1) In computing the balance of a taxpayer's capital investment account, an expenditure of the taxpayer is deemed not to include any portion of the expenditure that would, if this Act were read without reference to this subsection, be included in determining the expenditure because of the taxpayer having granted or issued an option. ;

(d) subsection (3) of that

section is to be read

(

i) as if the reference to "income, taxable income or tax payable" were read as a reference to "income or loss from a business or property or tax payable, the balance of the corporation's capital investment account",

(ii) without reference to paragraph (a) (

i) of that subsection, and

(iii) as if the reference in paragraph (a) (ii) of that subsection to "in any other case," were excluded;

(e) subsection (4) of that

section is to be read

(

i) as if the reference to "income, taxable income or tax payable" were read as a reference to "income or loss from a business or property or tax payable, the balance of the taxpayer's capital investment account",

(ii) without reference to paragraph (a) (

i) of that subsection, and

(iii) as if the reference in paragraph (a) (ii) of that subsection to "in any other case," were excluded;

(f) subsection (5) of that

section is to be read without reference to paragraphs (

a) and (

c) of that subsection.

Limitation respecting employee stock options

124.17

(1) In this section:

"benefit" means a benefit within the meaning of

section 7 (1) of the federal Act;

"qualifying person" means a corporation or a mutual fund trust;

"securities" ,

(

a) in relation to a qualifying person that is a corporation, means shares of the capital stock of the corporation, and

(

b) in relation to a qualifying person that is a mutual fund trust, means units of the trust.

(2) If a particular qualifying person has agreed to sell or issue securities of the particular qualifying person, or of a qualifying person with which the particular qualifying person does not deal at arm's length, to an employee of the particular qualifying person or of a qualifying person with which the particular qualifying person does not deal at arm's length, the particular qualifying person's income or loss for a taxation year from a business or property is deemed to be not less than what the particular qualifying person's income or loss for the taxation year from the business or property would have been if a benefit had not been conferred on the employee by the sale or issue of the securities.

Application of

section 143.4 of federal Act –

expenditure – limit for contingent amount

124.18

(1) Section 143.4 (7) of the federal Act does not apply for the purposes of this Act.

(2) In applying

section 143.4 of the federal Act for the purposes of this Act, the following rules apply:

(a) subsection (2) of that

section is to be read without reference to paragraph (b) (ii) (

B) of that subsection;

(b) subsection (3) of that

section is to be read as if the reference to "earning income" were read as a reference to "gaining or producing income from an LNG source";

(c) subsection (4) of that

section is to be read

(

i) as if the reference to "another taxpayer" were read as a reference to "another person or partnership",

(ii) as if the reference to "other taxpayer" were read as a reference to "other person or partnership",

(iii) as if paragraph (

a) of that subsection were read as follows:

(

a) to be an amount received as a financial incentive at that time by the taxpayer in the course of gaining or producing income from an LNG source. , and

(iv) without reference to paragraph (b);

(d) subsection (6) of that

section is to be read as if the reference to "another taxpayer" were read as a reference to "another person or partnership".

Part 8.2 – Registration

Requirement to be registered and transact only

with registered persons or partnerships

124.20

(1) A person must not engage in or derive income from liquefaction activities in respect of an LNG source unless the person is

(

a) registered in respect of the LNG source,

(

b) exempt from tax imposed under this Act, or

(

c) exempt by regulation from the requirement to be registered in respect of the LNG source.

(2) Without limiting subsection (1), a person must not engage in or derive income from liquefaction activities in respect of an LNG source as a member of a partnership unless

(

a) the partnership is registered in respect of the LNG source, or

(

b) all members of the partnership are each

(

i) exempt from tax imposed under this Act, or

(ii) exempt by regulation from the requirement to be registered in respect of the LNG source.

(3) A person who is registered in respect of an LNG source must not participate with another person or a partnership in a transaction in respect of the LNG source unless, at the time the transaction occurs,

(

a) in the case of the other person, that person

(

i) is registered in respect of the LNG source,

(ii) is exempt from tax imposed under this Act,

(iii) is exempt by regulation from the requirement to be registered in respect of the LNG source, or

(iv) is not engaging in or deriving income from liquefaction activities in respect of the LNG source, or

(

b) in the case of the partnership,

(

i) that partnership

(

A) is registered in respect of the LNG source, or

(

B) is not engaging in or deriving income from liquefaction activities in respect of the LNG source, or

(ii) all the members of that partnership are each

(

A) exempt from tax imposed under this Act, or

(

B) exempt by regulation from the requirement to be registered in respect of the LNG source.

(4) If a person who is registered in respect of an LNG source participates in a transaction with another person or a partnership that was registered in respect of the LNG source but whose registration is suspended or cancelled, the person does not contravene subsection (3) in relation to a transaction that occurs before the commissioner has given notice to the person under

section 124.22 (8).

Registration

124.21

(1) An applicant may apply to the commissioner to be registered for the purposes of this Act in respect of an LNG source by filing with the commissioner

(

a) an application in the form, and containing the information, required by the commissioner, and

(

b) any other information or records required by the commissioner.

(2) On receipt of an application and the information and records referred to in subsection (1), the commissioner may, subject to subsections (4) to (6) and the regulations,

(

a) register the applicant for the purposes of this Act in respect of the LNG source and issue the applicant a registration number, and

(

b) make the registration subject to conditions specified by the commissioner.

(3) In addition to the conditions under subsection (2) (b), an applicant's registration under subsection (2) is subject to conditions imposed by regulation.

(4) Before the commissioner registers an applicant under subsection (2), the commissioner may require a bond to be deposited under

section 124.600 [collection bond] .

(5) The commissioner may refuse to register an applicant under subsection (2) if any of the following apply:

(

a) the applicant does not hold the registrations, licences, permits or other authorizations that the applicant is required by law to hold in order to carry out operations in respect of the LNG source;

(

b) the applicant has refused or neglected to comply with a provision of, or has committed an offence against,

(

i) this Act or any other Act that has, as its purpose, the imposition of a tax,

(ii) the regulations made under this Act or any other Act described in subparagraph (i), or

(iii) the federal Act.

(6) The commissioner must refuse to register an applicant under subsection (2) if a bond required under

section 124.600 has not been deposited by the date specified by the commissioner under that section.

(7) If the commissioner refuses to register an applicant under subsection (2), the commissioner, as soon as reasonably possible, must give the applicant written reasons for the refusal.

(8) This

section applies to provide for the registration of a partnership in accordance with the following rules:

(

a) the partnership is the applicant for registration;

(

b) a member of the partnership may apply for registration of the partnership on behalf of the partnership.

Suspension or cancellation of registration

124.22

(1) The commissioner may, without advance notice to a person, suspend the person's registration in respect of an LNG source for a period of up to 120 days if any of the following apply:

(

a) the commissioner is satisfied that the person knowingly made a false statement or an omission in an application for registration or other record filed in respect of the application;

(

b) the person refuses or neglects to comply with

(

i) a condition, specified by the commissioner under

section 124.21 (2) (

b) or imposed by regulation, to which the person's registration is subject, or

(ii) a requirement to deposit a bond under

section 124.600;

(

c) the person has refused or neglected to comply with a provision of, or has committed an offence against,

(

i) this Act or any other Act that has, as its purpose, the imposition of a tax,

(ii) the regulations made under this Act or any other Act described in subparagraph (i), or

(iii) the federal Act;

(

d) the person does not hold the registrations, licences, permits or other authorizations that the person is required by law to hold in order to carry out operations in respect of the LNG source.

(2) If the commissioner suspends the registration of a person under subsection (1), the commissioner must, as soon as reasonably possible,

(

a) give the person written reasons for the suspension, and

(

b) provide the person with an opportunity to show the commissioner why the suspension should be lifted.

(3) Suspension of a person's registration under subsection (1) takes effect on the later of

(

a) the date the written reasons for the suspension are given to the person, and

(

b) the date the suspension begins as stated in the written reasons.

(4) Subject to subsection (5), the commissioner may, by written notice given to a person, cancel the person's registration in respect of an LNG source if any of the following apply:

(

a) the commissioner is satisfied that the person knowingly made a false statement or an omission in an application for registration or other record filed in respect of the application;

(

b) the person refuses or neglects to comply with

(

i) a condition, specified by the commissioner under

section 124.21 (2) (

b) or imposed by regulation, to which the person's registration is subject, or

(ii) a requirement to deposit a bond under

section 124.600;

(

c) the person has refused or neglected to comply with a provision of, or has committed an offence against,

(

i) this Act or any other Act that has, as its purpose, the imposition of a tax,

(ii) the regulations made under this Act or any other Act described in subparagraph (i), or

(iii) the federal Act;

(

d) the person does not hold the registrations, licences, permits or other authorizations that the person is required by law to hold in order to carry out operations in respect of the LNG source.

(5) Before cancelling a person's registration under subsection (4), the commissioner must

(

a) give the person written notice of the reasons for the proposed cancellation, and

(

b) provide the person with an opportunity to show the commissioner why the registration should not be cancelled.

(6) Whether or not a request for cancellation is made by a person, the commissioner may, by written notice given to the person, cancel the person's registration in respect of an LNG source if the commissioner is satisfied that the person is not engaging in or deriving income from liquefaction activities in respect of the LNG source.

(7) Cancellation of a person's registration under subsection (4) or (6) takes effect on the later of

(

a) the date the notice of cancellation is given to the person, and

(

b) a future date stated in the notice.

(8) If a person's registration in respect of an LNG source is suspended or cancelled under subsection (1), (4) or (6), the commissioner must as soon as reasonably possible give notice of the suspension or cancellation to all persons who are registered in respect of the LNG source.

(9) This

section applies in relation to a partnership registered under

section 124.21 as if the partnership were a person.

Part 8.3 – Returns, Assessments, Determinations, Payments, Penalties, Interest and Refunds

Division 1 – Tax Returns

Tax returns – general rule

124.300

(1) Subject to subsection (2), a person must file with the commissioner a separate tax return for a taxation year in respect of each LNG source for which the person is a taxpayer.

(2) Subsection (1) does not apply to a taxpayer for a taxation year if,

(

a) for a period that includes the taxation year, the taxpayer is exempt under

section 22 (1) to (3) [exemptions from tax] from tax imposed under this Act, or

(

b) at the end of the taxation year, the taxpayer is exempt under

section 22 (4) from tax imposed under this Act.

(3) Subject to subsection (4), the taxpayer must file the tax return under subsection (1) within 6 months after the end of the taxpayer's taxation year and without any notice or demand.

(4) The commissioner may at any time extend the time established by subsection (3) for filing a tax return under subsection (1).

Tax return required to be filed by person dealing

with property or business of taxpayer

124.301

(1) Subject to subsection (2), a trustee in bankruptcy, assignee, liquidator, receiver, administrator or any other person administering, managing, winding up, controlling or otherwise dealing with the property or business of a taxpayer who has not filed a tax return for a taxation year required under

section 124.300 must file the tax return with the commissioner within 6 months after the later of

(

a) the end of the taxpayer's taxation year, and

(

b) the date on which the person began dealing with the property or business of the taxpayer.

(2) The commissioner may at any time extend the time established by subsection (1) for filing a tax return under that subsection.

Tax return required on demand

124.302

(1) On written demand given to a person by the commissioner, the person must file with the commissioner, on or before the date specified in the demand, a tax return for a taxation year in respect of an LNG source.

(2) Subsection (1) applies whether or not a tax return has been or is required to be filed under

section 124.300 or 124.301.

Form and contents of tax return

124.303

(1) A tax return must be in the form and contain the information required by the commissioner.

(2) Without limiting subsection (1), a person required to file a tax return must in the tax return estimate the amount of tax payable, if any, under this Act for the taxation year in respect of the LNG source.

(3) A person required to file a tax return must

(

a) file the tax return in the manner required by the regulations, and

(

b) file, with the tax return, any other information or records required by the commissioner.

Division 2 – Assessments and Determinations

in Respect of Taxpayers

Examination of tax return and resulting

assessment and determination

124.310 After the commissioner receives a taxpayer's tax return filed for a taxation year in respect of an LNG source and any other information or records required to be filed with the tax return, the commissioner must

(

a) examine the tax return,

(

b) assess the taxpayer for any assessable amounts for the taxation year in respect of the LNG source, and

(

c) determine any determinable amounts for the taxpayer for the taxation year in respect of the LNG source.

Assessments and determinations – general rules

124.311

(1) The commissioner may assess a taxpayer for an assessable amount for a taxation year in respect of an LNG source, or determine a determinable amount for a taxpayer for a taxation year in respect of an LNG source,

(

a) at any time, if

(

i) the taxpayer has failed to file a tax return for the taxation year in respect of the LNG source,

(ii) the taxpayer or a person filing the taxpayer's tax return for the taxation year in respect of the LNG source has made any misrepresentation or committed any fraud

(

A) in filing the tax return, or

(

B) in supplying at any time other information or records under this Act for the taxation year in respect of the LNG source, or

(iii) a waiver filed under subsection (2) by the taxpayer for the taxation year in respect of the LNG source is in effect at that time, or

(

b) within 6 years after the date of the original notice of assessment for the taxation year in respect of the LNG source, in any other case.

(2) A taxpayer may file with the commissioner a waiver for a taxation year in respect of an LNG source, in the form and containing the information required by the commissioner, before the expiration of the normal reassessment period for the taxation year.

(3) A waiver filed under subsection (2) continues in effect until 6 months after the taxpayer files with the commissioner a notice revoking the waiver in the form and containing the information required by the commissioner.

(4) Despite subsection (1), an assessment or determination to which subsection (1) (a) (ii) or (iii) applies in respect of a taxpayer for a taxation year may be made after the taxpayer's normal reassessment period for the taxation year, but only to the extent that the assessment or determination can reasonably be considered as relating to,

(

a) if subsection (1) (a) (ii) applies to the assessment or determination, any misrepresentation made by the taxpayer or a person who filed the taxpayer's tax return for the taxation year or any fraud committed by the taxpayer or that person in filing the tax return or in supplying any other information or records under this Act, or

(

b) if subsection (1) (a) (iii) applies to the assessment or determination, a matter specified in the waiver filed with the commissioner for the taxation year.

(5) The authority of the commissioner to assess a taxpayer for an assessable amount, or determine a determinable amount for a taxpayer, under sections 124.312 to 124.318

(

a) is in addition to the authority to make an assessment or a determination under

section 124.310 or this section,

(

b) is not limited by the authority to make an assessment or a determination under

section 124.310 or this section, and

(

c) does not limit the authority to make an assessment or a determination under

section 124.310 or this section.

Consequential assessments and determinations – partnerships

124.312

(1) Subject to subsection (2), if the commissioner makes a determination under Division 4 in respect of a partnership or the minister amends or varies a decision of the commissioner on an objection that relates to a determination under Division 4 in respect of a partnership, the commissioner may do one or both of the following:

(

a) assess any member of the partnership and any other taxpayer for an assessable amount for any taxation year in respect of an LNG source;

(

b) determine a determinable amount for any member of the partnership and any other taxpayer for any taxation year in respect of an LNG source,

but only as is necessary to give effect to the determination under Division 4 or the decision of the minister in respect of the partnership.

(2) The commissioner may make an assessment or determination under subsection (1) only before the later of

(

a) the expiration of the normal reassessment period for the taxation year, and

(

b) the end of the day that is one year after the day on which,

(

i) if the assessment or determination is giving effect to a determination under Division 4, all rights of objection and appeal expire or are determined in respect of the determination under Division 4 in respect of the partnership, or

(ii) if the assessment or determination is giving effect to a decision of the minister, all rights of appeal expire or are determined in respect of that decision.

(3) Subsection (4) applies if

(

a) a determination is made under Division 4 in respect of a partnership for a fiscal period as a result of representations made to the commissioner that a person was a member of the partnership at any time in the fiscal period, and

(

b) the commissioner, the minister or a court concludes at a subsequent time

(

i) that the partnership did not exist for the fiscal period, or

(ii) that, throughout the fiscal period, the person was not a member of the partnership.

(4) If this subsection applies, the commissioner may, subject to subsection (5), assess any taxpayer for an assessable amount for any taxation year, or determine a determinable amount for any taxpayer for any taxation year, but only to the extent that the assessment or determination can reasonably be considered

(

a) as relating to any matter that was relevant in the making of the determination made under Division 4,

(

b) as resulting from the conclusion that the partnership did not exist for the fiscal period, or

(

c) as resulting from the conclusion that the person was, throughout the fiscal period, not a member of the partnership.

(5) The commissioner may make an assessment or determination under subsection (4) only before the later of

(

a) the expiration of the normal reassessment period for the taxation year, and

(

b) the end of the day that is one year after the subsequent time referred to in subsection (3).

Consequential assessments and determinations –

other income taxes

124.313 (1) Subsection (2) applies in relation to a taxpayer for a taxation year if

(

a) the taxpayer is issued a notice of assessment, reassessment, additional assessment, determination or redetermination under the Income Tax Act or the federal Act for the taxation year, and

(

b) an amount relevant in computing an assessable amount or determinable amount for the taxpayer would be changed if an assessment or determination were made under this Part applying a provision of this Act in a manner consistent with a similar provision of the Income Tax Act or the federal Act that was applied in relation to the notice referred to in paragraph (a).

(2) If this subsection applies in relation to a taxpayer for a taxation year,

(

a) the taxpayer must notify the commissioner, within 90 days of receiving the notice referred to in subsection (1) (a), by filing with the commissioner

(

i) a notice in the form and containing the information required by the commissioner, and

(ii) with the notice, any other information or records required by the commissioner, and

(

b) subject to subsection (3), the commissioner may assess the taxpayer for an assessable amount for the taxation year in respect of an LNG source, or determine a determinable amount for the taxpayer for the taxation year in respect of an LNG source, but only to the extent that the assessment or determination can reasonably be considered as relating to the assessment, reassessment, additional assessment, determination or redetermination under the Income Tax Act or the federal Act.

(3) The commissioner may make an assessment or determination under subsection (2) only before the later of

(

a) the expiration of the normal reassessment period for the taxation year, and

(

b) the end of the day that is one year after the day that is the earlier of

(

i) the day that the commissioner is notified by the taxpayer under subsection (2) (a), and

(ii) the day that the commissioner is otherwise notified of the assessment, reassessment, additional assessment, determination or redetermination under the Income Tax Act or the federal Act.

Consequential reassessments and redeterminations after appeal

124.314

(1) This

section applies in relation to a taxpayer if

(

a) a court has, on the disposition of an appeal by the taxpayer in respect of an assessment or determination under this Division,

(

i) allowed the appeal,

(ii) varied the decision from which the appeal was made, or

(iii) referred the decision back to the commissioner for reconsideration, and

(

b) any further appeal is disposed of or the time for filing any further appeal has expired.

(2) If this

section applies in relation to a taxpayer, the commissioner must

(

a) reassess the taxpayer for an assessable amount, or

(

b) redetermine a determinable amount for the taxpayer

in accordance with the decision of the court, unless otherwise directed in writing by the taxpayer.

Consequential reassessments and redeterminations –

subsequent taxation years

124.315

(1) This

section applies in relation to a taxpayer if the result of an assessment or determination under this Division, or a decision on an objection or appeal that relates to an assessment or determination under this Division, is to change a particular assessable amount or determinable amount for the taxpayer for a particular taxation year in respect of an LNG source.

(2) Subject to subsection (3), the commissioner may do one or both of the following in relation to a taxpayer to whom this

section applies:

(

a) reassess the taxpayer for an assessable amount for a subsequent taxation year;

(

b) redetermine a determinable amount for the taxpayer for a subsequent taxation year,

but only to the extent that the reassessment or redetermination can reasonably be considered as relating to the change in the particular assessable amount or determinable amount for the taxpayer for the particular taxation year in respect of the LNG source.

(3) The commissioner may make a reassessment or redetermination under subsection (2) only before the later of

(

a) the expiration of the normal reassessment period in respect of the subsequent taxation year, and

(

b) the end of the day that is one year after the day on which all rights of objection and appeal expire or are determined in respect of the particular taxation year.

Other assessments and determinations

124.316

(1) The commissioner may at any time assess a taxpayer for an assessable amount for any taxation year, or determine a determinable amount for a taxpayer for any taxation year,

(

a) as is necessary to give effect to

section 67.5 (1) [non-deductibility of illegal payments] of the federal Act, as that

section applies for the purposes of this Act, or

(

b) as is necessary to give effect to

section 143.4 [expenditure – limit for contingent amount] of the federal Act, as that

section applies for the purposes of this Act.

(2) For the purpose of disposing of an appeal made under this Act, the commissioner may at any time, with the taxpayer's written consent, assess a taxpayer for an assessable amount for any taxation year, or determine a determinable amount for the taxpayer for any taxation year, as is necessary to give effect to the consent.

Assessments of other amounts payable

124.317

(1) The commissioner may at any time assess a person who is a legal representative of a taxpayer for any amount payable by the person under

section 159 (3) [personal liability re person acting for another] of the federal Act, as that

section applies for the purposes of this Act.

(2) The commissioner may at any time assess a person for any amount payable by the person under

section 124.354 [if excess refunded] .

(3) This Act applies to a person who is assessed under subsection (1) or (2) as if

(

a) the person were a taxpayer, and

(

b) the amount payable by the person were tax payable under this Act by the person for the taxation year in which the amount became payable.

Assessments of penalties and interest

124.318

(1) The commissioner may at any time assess a person for a penalty to which the person is liable under this Act, other than a penalty to which the person is liable under any of the following sections:

(

a) section 80 [transfer pricing penalty] ;

(

b) section 124.361 (1), (4) or (7) [failure to file tax return] ;

(

c) section 124.365 [failure to make election before filing-due date] ;

(

d) section 124.367 [failure to report amount] ;

(

e) section 124.368 [false statement or omission] .

(2) The commissioner may at any time assess a person for any interest payable under this Act by the person.

(3) The commissioner may at any time reassess a person

(

a) as is necessary to give effect to a cancellation under

section 124.372 of all or part of a penalty otherwise payable under this Act by the person, or

(

b) as is necessary to give effect to a cancellation under

section 124.385 of all or part of any interest otherwise payable under this Act by the person.

Rules relating to assessments

124.319

(1) Despite a prior assessment, or if no assessment has been made, a person continues to be liable for taxes, penalties and interest due under this Act.

(2) In making an assessment or determination under this Division, the commissioner

(

a) is not bound by a return filed under this Act or any other information or records supplied under this Act, and

(

b) may assess an assessable amount or determine a determinable amount despite the filing of a return or the supply of any other information or records under this Act or if no return has been filed.

(3) Subject to being amended or varied on an objection or on appeal or by a reassessment or redetermination, an assessment or determination under this Division is valid and binding despite any error, defect or omission in the assessment or determination or in procedure.

Notice of assessment

124.320

(1) After making an assessment or a determination under this Division in respect of a person, the commissioner must give the person a notice of assessment that includes a statement of the assessable amounts, any other amounts assessed under this Division and the determinable amounts.

(2) If a notice of assessment has been given to a person as required by this Act, the assessment or determination under this Division is deemed to have been made on the date of the notice.

(3) Evidence that a notice of assessment has been given is proof, in the absence of evidence to the contrary,

(

a) that the amounts assessed under this Act are due and owing, and the onus of proving otherwise is on the person liable to pay the amounts assessed, and

(

b) that the determinable amounts determined under this Division are correct, and the onus of proving otherwise is on the person in relation to whom the amounts have been determined.

Division 3 – Partnership Returns

Deemed member of partnership

124.330 For the purposes of this Division, if a person is a member of a partnership that is a member of another partnership, the person is deemed to be a member of the other partnership.

Partnership returns – general rule

124.331

(1) This

section applies to a person in relation to a fiscal period of a partnership if

(

a) the person is, at any time in the fiscal period, a member of the partnership, and

(

b) the partnership engages in or has income derived from liquefaction activities in respect of an LNG source at any time in the fiscal period.

(2) A person to whom this subsection applies must file with the commissioner a separate partnership return for the fiscal period of the partnership in respect of each LNG source for which the partnership engages in or has income derived from liquefaction activities.

(3) Subject to subsection (4), the person must file the partnership return under subsection (2) within 5 months after the end of the partnership's fiscal period and without any notice or demand.

(4) The commissioner may at any time extend the time established by subsection (3) for filing a partnership return under subsection (2).

Partnership return required on demand

124.332

(1) On written demand given by the commissioner to a person who is, at any time in a fiscal period of a partnership, a member of the partnership, the person must file with the commissioner, on or before the date specified in the demand, a partnership return for the fiscal period in respect of an LNG source.

(2) Subsection (1) applies whether or not a partnership return has been or is required to be filed under

section 124.331.

Form and contents of partnership return

124.333 (1)