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Annex 9 - Tax Measures
Notice of Ways and Means Motion

Notice of Ways and Means Motion to Amend the Income Tax Act

That is is expedient to amend the Income Tax Act to provide among other things:

Tax Fairness for Persons with Disabilities

(1) That, for the 2004 and subsequent taxation years, the attendant care expenses deduction described in section 64 of the Act be replaced by a disability supports deduction that includes both attendant care expenses and other eligible disability supports expenses in accordance with proposals described in the budget documents tabled by the Minister of Finance in the House of Commons on March 23, 2004.

(2) That, for the 2004 and subsequent taxation years, the refundable medical expense supplement described in subsection 122.51(2) of the Act be amended to include 25 per cent of the amount determined for the disability supports expenses deduction.

Caregiver Expenses

(3) That, for the 2004 and subsequent taxation years, an individual be permitted to claim in calculating the medical expense tax credit

(a) medical expenses incurred on behalf of the individual, the individual’s spouse or common-law partner, or the individual’s child who has not attained the age of 18 years before the end of the year, to the extent that

(i) the total of those amounts exceeds the individual’s medical expense threshold for the year (the lesser of $1,813 for 2004 (indexed) and 3% of the individual’s net income for the year), and

(ii) those expenses are not included in calculating medical expenses claimed by any other taxpayer; and

(b) medical expenses, to a maximum of $5,000, incurred by the individual on behalf of any other dependant to the extent that

(i) the medical expenses paid by the individual on behalf of the dependant exceed the dependant’s medical expense threshold for the year (the lesser of $1,813 for 2004 (indexed) and 3% of the dependant’s net income for the year), and

(ii) those expenses are not included in calculating medical expenses claimed by any other taxpayer.

Education Tax Credit

(4) That, for the 2004 and subsequent taxation years, a qualifying educational program for the purpose of the education tax credit include an otherwise eligible program that an individual takes in connection with, or as part of, the duties of an office or employment.

Small Business Deduction Limit

(5) That the rules in subsection 125(2) and (3) of the Act determining the business limit of a Canadian-controlled private corporation (CCPC) be modified for taxation years that end after 2004 such that

(a) the business limit of a CCPC for a taxation year be, subject to subparagraph (b), the total of

(i) that proportion of $250,000 that the number of days in the taxation year that are in 2004 is of the number of days in the taxation year, and

(ii) that proportion of $300,000 that the number of days in the taxation year that are after 2004 is of the number of days in the taxation year; and

(b) for the purpose of subsection 125(3) of the Act, associated CCPCs allocate a business limit for taxation years beginning after 2004 by allocating a total business limit of $300,000.

(6) That the references in the description of M in the definition "specified partnership income" in subsection 125(7) of the Act to $275,000 and $754, respectively, for fiscal periods of a partnership that end in 2005 be replaced with references to $300,000 and $822 respectively.

Refundable SR&ED Investment Tax Credits—Expenditure Limit

(7) That, subject to paragraph (8), for taxation years that end after March 22, 2004, if a Canadian-controlled private corporation (in this paragraph and paragraph (8) referred to as the "particular corporation") is associated with another corporation (in this paragraph and paragraph (8) referred to as "the other corporation"), in circumstances where those corporations would not be associated if the Act were read without reference to paragraph 256(1.2)(a) of the Act, and there is at least one shareholder of the particular corporation who is not a shareholder of the other corporation, the two corporations not be considered to be associated for the purposes of

(a) computing the particular corporation’s expenditure limit under subsection 127(10.2) of the Act;

(b) determining the particular corporation’s business limit, as applied for the purpose only of calculating the particular corporation’s expenditure limit under subsection 127(10.2) of the Act; and

(c) paragraph (f) of the definition "refundable investment tax credit" in subsection 127.1(2) of the Act.

(8) That paragraph (7) apply only if the Minister of National Revenue is satisfied

(a) that the particular corporation and the other corporation are not otherwise associated; and

(b) that the existence of a shareholder of the particular corporation who is not a shareholder of the other corporation, is not for the purpose of satisfying the requirements of that paragraph.

Carry-Forward Period for Business Losses

(9) That, in respect of any non-capital loss, unused foreign tax credit or a life insurer’s Canadian life investment loss, for a taxation year that ends after March 22, 2004, there be extended from seven to 10 the number of taxation years, after that taxation year, in respect of which

(a) the non-capital loss may be deducted in computing taxable income under Part I of the Act or applied in determining the tax payable under Part IV of the Act,

(b) the unused foreign tax credit may be claimed in computing tax payable under Part I of the Act, and

(c) the life insurer’s Canadian life investment loss may be applied in determining the life insurer’s taxable Canadian life investment income under Part XII.3 of the Act.

Mineral Exploration Tax Credit

(10) That the definition "flow-through mining expenditure" in subsection 127(9) of the Act be extended to include expenses otherwise described in that definition that are incurred, or deemed by subsection 66(12.66) of the Act to have been incurred, by a corporation in 2005.

Fines and Penalties

(11) That no deduction be allowed in respect of an amount that is a fine or penalty (other than a prescribed type of fine or penalty) imposed after March 22, 2004 under a law of Canada or a province or a foreign state, other than penalty interest imposed under the Excise Act, the Air Travellers Security Charge Act and the GST/HST portions of the Excise Tax Act.

Income Trusts

(12) That a designated taxpayer who holds restricted investment property at the end of a month that ends after 2004 be required to pay a tax for the month equal to 1% of the amount by which

(a) the total of all amounts each of which is the cost amount to the taxpayer of a restricted investment property held by it at the end of the month

exceeds

(b) the greater of

(i) 1% of the total of all amounts each of which is the cost amount to the taxpayer of a property held by it at the end of the month, and

(ii) the total of all amounts each of which is the cost amount to the taxpayer of an excluded property held by it at the end of the month.

(13) That a designated taxpayer who holds, directly or indirectly, units of a class of units of a business income trust at the end of a month that ends after 2004 be required to pay a tax for the month equal to 1% of the taxpayer’s excess investment for the month in respect of that class.

(14) That, for the purposes of paragraphs (12) and (13) and this paragraph,

(a) a business income trust at any time be a unit trust (other than an exempt trust) any unit of which is, at that time, listed on a stock exchange, 50% or more of the fair market value, at that time, of all of the property of which trust is attributable to the fair market value of property of the trust that is

(i) a debt issued by an entity (other than an exempt trust) in respect of which, at that time, the trust has a significant interest,

(ii) a participating interest in an entity (other than an exempt trust or a corporation that is not a mutual fund corporation, an investment corporation or a mortgage investment corporation) in respect of which, at that time, the trust has a significant interest,

(iii) property the fair market value of which at that time is primarily derived, directly or indirectly, from property described in clause (i) or (ii), or

(iv) property the fair market value of which at that time is primarily determined, directly or indirectly, by reference to the fair market value of property described in any of clauses (i) to (iii);

(b) a designated taxpayer be a taxpayer who is described in any of paragraphs 149(1)(o) to (o.2) of the Act or the Canada Pension Plan Investment Board;

(c) an entity include a natural person, an association, an organization, a fund, a joint venture, a corporation, a partnership, a trust and a syndicate;

(d) the excess investment of a taxpayer for a month in respect of a class of units of a business income trust be the amount determined by the formula

(A - B) x C/D

where

A is the total fair market value of all the units of that class held at the end of the month by any of the taxpayer and entities not dealing at arm’s length with the taxpayer,

B is the greater of

(i) 5% of the total fair market value of all of the issued and outstanding units of that class, and

(ii) the total fair market value of all the units of that class, that are excluded property to the holder, held at the end of the month by any of the taxpayer and entities not dealing at arm’s length with the taxpayer,

C is the total fair market value of all the units of that class (other than units that are excluded property to the holder) held at the end of the month directly, or indirectly through entities (other than a corporation described in paragraph 149(1)(o.2) of the Act) not dealing at arm’s length with the taxpayer, by the taxpayer, and

D is the total fair market value of all the units of that class (other than units that are excluded property to the holder) held at the end of the month by any of the taxpayer and entities not dealing at arm’s length with the taxpayer;

(e) an excluded property held by an entity at any particular time before 2014 be

(i) where the month that includes the particular time ends before 2009, a restricted investment property that was acquired by the entity before March 23, 2004 and held continuously by the entity at all times after March 22, 2004 and before the particular time; and

(ii) where the month that includes the particular time ends after 2008 and before 2014, a unit of, or a debt issued by, a business income trust that was acquired by the entity before March 23, 2004 and held continuously by the entity at all times after March 22, 2004 and before the particular time;

(f) an exempt trust, at any time, be a unit trust 90% or more of the fair market value, at that time, of the property of which is attributable to the fair market value of property of the trust that is

(i) real property, or a debt secured by a mortgage or charge on real property,

(ii) a Canadian or foreign resource property, or a timber resource property,

(iii) shares of the capital stock of, or debt issued by, a corporation listed on a prescribed stock exchange,

(iv) cash,

(v) debt described in clause 212(1)(b)(ii)(C) of the Act, or issued by a government of or a political subdivision of a country other than Canada,

(vi) property more than 90% of the fair market value of which is derived, directly or indirectly, from property described in clauses (i) to (v), or

(vii) property more than 90% of the fair market value of which is determined, directly or indirectly, by reference to the fair market value of property described in any of clauses (i) to (vi);

(g) a participating interest in an entity be

(i) in the case of an entity that is a corporation, a share of the capital stock of the corporation,

(ii) in the case of an entity that is a trust, an interest as a beneficiary under the trust, and

(iii) in the case of an entity that is a partnership, a partnership interest in the partnership;

(h) a restricted investment property held by an entity at any time be a property that is

(i) a unit of, or debt issued by, a trust that is, at that time, a business income trust,

(ii) an interest in, a share of the capital stock of, or a debt issued by an entity that is, at that time, a trust, a partnership, a mutual fund corporation, an investment corporation or a mortgage investment corporation if the total of all amounts each of which is the cost amount to the entity of a restricted investment property held by it at that time exceeds 1% of the total of all amounts each of which is the cost amount to the entity of a property held by it at that time,

(iii) a debt issued by a corporation that is at that time controlled directly or indirectly in any manner whatever by one or more designated taxpayers if the total of all amounts each of which is the cost amount to the corporation of a restricted investment property held by it at that time exceeds 1% of the total of all amounts each of which is the cost amount to the corporation of a property held by it at that time, and

(iv) a property the fair market value of which is at that time primarily determined, directly or indirectly, by reference to the fair market value of property described in any of clauses (i) to (iii); and

(i) a trust have, at any time, a significant interest in respect of an entity if the total fair market value of participating interests in the entity that are held, at that time, by any of the trust and entities that do not deal at arm’s length with the trust equals or exceeds 10% of total fair market value of all participating interests in the entity that exist at that time.

Mutual Funds: Taxation of TCP Gains Distributions

(15) That, after March 22, 2004,

(a) every mutual fund, whether a trust or a corporation, be required to maintain a "TCP gains distributions account," to which it adds its gains from dispositions after March 22, 2004 of taxable Canadian properties and any TCP gains distributions (as described in subparagraphs (b) and (c)) it receives from other mutual funds, and from which it deducts its losses from dispositions after March 22, 2004 of taxable Canadian properties and any amounts its unitholders or shareholders receive from it as TCP gains distributions,

(b) if the mutual fund is a trust, and it designates an amount under subsection 104(21) of the Act for a taxation year of the trust in respect of a unitholder of the trust,

(i) the unitholder be deemed to have received from the trust as a TCP gains distribution the lesser of twice the amount designated and the unitholder’s portion (determined by reference to the trust’s outstanding units) of the trust’s TCP gains distributions account, and

(ii) if the unitholder is non-resident, the TCP gains distribution be deemed to be received as a distribution of the trust’s income to which the exception from withholding tax provided by subparagraph 212(1)(c)(i) of the Act does not apply, and

(c) if the mutual fund is a corporation, and it elects to treat a dividend paid to a shareholder as a capital gains dividend,

(i) the shareholder be deemed to have received from the corporation as TCP gains distribution the lesser of the amount of the dividend and the shareholder’s portion (determined by reference to the corporation’s outstanding shares) of the corporation’s TCP gains distribution account, and

(ii) if the shareholder is non-resident, the TCP gains distribution be deemed, for the purpose of subsection 212(2) of the Act, to be a taxable dividend paid by the corporation that is not a capital gains dividend.

(16) That where, at any time after 2004, the value of a mutual fund trust unit, or of a mutual fund corporation share, that is listed on a prescribed stock exchange is primarily attributable to real property in Canada, Canadian resource property or timber resource property, and the mutual fund pays or makes payable an amount to a non-resident person (including a partnership other than a Canadian partnership) that holds the unit or share, as a distribution on the unit or share,

(a) the mutual fund be required to withhold and remit to the Receiver General, on account of the non-resident person’s liability to tax, 15% of the amount of the distribution,

(b) to the extent that the non-resident person (or, in the case of a partnership, its non-resident members) is not otherwise subject to tax under the Act on the distribution, the person be deemed for the purposes of the Act to have disposed at that time, for proceeds equal to amount of the distribution, of a property

(i) that is a taxable Canadian property the adjusted cost base of which to the person immediately before that time is nil, and

(ii) that is in all other respects identical to the unit or share,

(c) a loss realized by the non-resident person on the disposition of the unit or share be treated as a "TCP holding loss" of the person, to the extent of all distributions, on the unit or share,

(i) to which the rule described in subparagraph (b) applies, and

(ii) that were paid or payable to the person after the person last acquired the unit or share, and at or before the time of the disposition, and

(d) for the 2005 and subsequent taxation years, a non-resident person be liable to a tax equal to 15% of the amount, if any, by which

(i) the total of all distributions, paid or payable in the year to the person, to which the rule described in subparagraph (b) applies

exceeds

(ii) the total of the person’s TCP holding losses for the year and such amount as the person may claim of its unused TCP holding losses for a preceding taxation year or any of the three following taxation years.

(17) That, after March 22, 2004, Canadian resource properties and timber resource properties be taxable Canadian property for the purposes of the rules that limit the amount of such property that a mutual fund that was established, or is maintained, primarily for the benefit of non-resident persons may hold, except that this measure not apply before 2007 to an entity that would otherwise cease on March 23, 2004, as a result of this measure, to be a mutual fund trust or a mutual fund corporation.

General Anti-Avoidance Rule

(18) That, for greater certainty, subsection 245(4) of the Act has operated from its inception to exclude a transaction from the operation of subsection 245(2) of the Act only where it may reasonably be considered that the transaction would not result directly or indirectly in a misuse of the provisions of the Income Tax Act, the Income Tax Regulations, the Income Tax Application Rules, any enactments amending the Income Tax Act, the Income Tax Regulations, the Income Tax Application Rules or a tax treaty, or in an abuse having regard to those provisions, read as a whole.

Affiliated Persons Rules and Trusts

(19) That, for the purposes of determining after March 22, 2004 whether persons (including partnerships) are affiliated within the meaning of section 251.1 of the Act,

(a) subsection 104(1) of the Act, which generally treats a reference to a trust as including a reference to the trustee or other persons who own or control the trust property, not apply;

(b) a person be affiliated with a trust if the person

(i) is a majority interest beneficiary of the trust, or

(ii) would, if this paragraph were read without reference to this subparagraph, be affiliated with a majority interest beneficiary of the trust; and

(c) two trusts be affiliated with each other at any time if a contributor to one trust is affiliated with a contributor to the other trust, and

(i) a majority interest beneficiary of one trust is, or is affiliated with, a majority interest beneficiary of the other trust,

(ii) a majority interest beneficiary of one trust is affiliated with each member of a majority-interest group of beneficiaries of the other trust, or

(iii) each member of a majority-interest group of beneficiaries of each trust is affiliated with at least one member of a majority-interest group of beneficiaries of the other trust.

(20) That, after March 22, 2004, for the purposes of subsection 251.1(1) of the Act,

(a) a "contributor" to a trust include a person who has at any time made a loan or transfer of property, either directly or indirectly, in any manner whatever, to or for the benefit of the trust other than, where the person deals at arm’s length with the trust at that time, and is not, immediately after that time, a majority interest beneficiary of the trust,

(i) a loan made at a reasonable rate of interest, or

(ii) a transfer made for fair market value consideration;

(b) a "majority interest beneficiary" of a trust at any time mean a person,

(i) the fair market value of whose beneficial interest, if any, in the income of the trust at that time together with the income interests in the trust of all persons with whom the person is affiliated, is greater than 50% of the fair market value of all the income interests in the trust at that time, or

(ii) the fair market value of whose beneficial interest, if any, in the capital of the trust at that time, together with the capital interests in the trust of all persons with whom the person is affiliated, is greater than 50% of the fair market value of all the capital interests in the trust at that time;

(c) a "majority-interest group of beneficiaries" of a trust at any time mean a group of persons each of whom is beneficially interested in the trust at that time such that

(i) if one person held the interests of all members of the group, that person would be a majority interest beneficiary of the trust, and

(ii) if any member of the group were not a member, the test described in subparagraph (i) would not be met; and

(d) for the purposes of determining whether a person is affiliated with a trust,

(i) where a right of the person under the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, the power be deemed to have been fully exercised or not exercised, as the case may be, and

(ii) the beneficial interest of a person in a trust be disregarded in determining whether the person deals at arm’s length with the trust if the person would, in the absence of the beneficial interest, be considered to deal at arm’s length with the trust.

Patronage Dividends

(21) That, section 135 of the Act be amended to prevent persons, other than co-operatives and credit unions, from deducting patronage dividends paid after March 22, 2004 to non-arm’s length persons.

Taxpayer-Requested Adjustments

(22) That, for requests made in a calendar year that is after 2004, by a taxpayer who is an individual (other than a trust) or a testamentary trust, the Minister of National Revenue may not, in respect of a taxation year of the taxpayer that ended more than ten calendar years before the beginning of that calendar year

(a) make a reassessment under subsection 152(4.2) of the Act in respect of the taxation year,

(b) refund under paragraph 164(1.5)(a) of the Act any overpayment for the taxation year,

(c) waive or cancel, under subsection 220(3.1) of the Act, all or any portion of any penalty assessed in or in respect of, or interest otherwise accrued during, the taxation year, or

(d) extend the time for making an election, or grant permission to amend or revoke an election, under subsection 220(3.2) of the Act, that was otherwise required to have been made before the end of the taxation year.

(23) That, for requests made in a calendar year that is after 2004, by a taxpayer or a partnership, the Minister of National Revenue may not in respect of a taxation year of the taxpayer (or, in the case of a partnership, a fiscal period of the partnership) that ended more than ten calendar years before the beginning of that calendar year

(a) waive or cancel, under subsection 220(3.1) of the Act, all or any portion of any penalty assessed in or in respect of, or interest otherwise accrued during, the taxation year or fiscal period, or

(b) extend the time for making, or grant permission to amend or revoke an election, under subsection 220(3.2) of the Act, that was otherwise required to have been made before the end of the taxation year or fiscal period.

Trading Charitable Donations

(24) That, in respect of gifts made after March 22, 2004, the Act be amended to provide that no deduction may be claimed by a corporation under section 110.1 of the Act in respect of

(a) a gift made by the corporation before a time at which control of the corporation is acquired by a person or a group of persons, for a taxation year of the corporation that ends on or after that time; or

(b) a gift made by the corporation on or after a time that control of the corporation is acquired by a person or a group of persons, if the property was acquired by the corporation before that time under an arrangement under which it was expected that control of the corporation would be so acquired and the gift would be so made.

Registered Charities—Regulatory Reform

(25) That the provisions of the Act relating to charities be modified in accordance with proposals described in the budget documents tabled by the Minister of Finance in the House of Commons on March 23, 2004.

Canadian Forces Personnel and Police

(26) That, for the 2004 and subsequent taxation years, a deduction be allowed in computing taxable income for members of the Canadian Forces or a Canadian police force in respect of employment income earned in a high-risk deployed operational mission as described in the budget documents tabled by the Minister of Finance in the House of Commons on March 23, 2004.

Notice of Ways and Means Motion to Amend the Excise Tax Act

That it is expedient to amend the Excise Tax Act to provide among other things:

GST Rebate for Municipalities

(1) That subsection 123(1) of the Act be amended by adding the following in alphabetical order:

"designated municipal property" means property

(a) that is property of a person who is at any time designated to be a municipality for the purposes of section 259;

(b) that the person intended at that time to consume, use or supply in the course of activities specified in the designation and otherwise than exclusively in the course of activities that are not activities specified in the designation; and

(c) in respect of which, or in respect of an improvement to which, an amount included in the "total tax charged in respect of the property or service" under paragraph (a) of the definition "non-creditable tax charged" in subsection 259(1) is an amount

(i) of tax in respect of a supply made to, or the importation or bringing into a participating province of the property or an improvement to it by, the person at that time,

(ii) deemed to have been paid or collected at that time by the person,

(iii) required to be added under subsection 129(7) in determining the person’s net tax as a result of a branch or division of the person becoming a small supplier division at that time, or

(iv) required to be added under paragraph 171(4)(b) in determining the person’s net tax as a result of the person ceasing, at that time, to be a registrant.

(2) That the Act be amended by adding the following after section 141.1:

141.2 (1) Despite section 141.1, for the purposes of this Part, a supply (other than an exempt supply) made by way of sale of personal property of a municipality is deemed to have been made in the course of its commercial activities.

(2) Despite section 141.1, for the purposes of this Part, a supply (other than an exempt supply) made by way of sale of personal property of a person designated to be a municipality for the purposes of section 259 is deemed to have been made in the course of its commercial activities if the property is designated municipal property of the person.

(3) That section 166 of the Act be replaced by the following:

166. If a person makes a taxable supply and the consideration or a part of it for the supply becomes due, or is paid before it becomes due, at a time when the person is a small supplier who is not a registrant, that consideration or part, as the case may be, shall not be included in calculating the tax payable in respect of the supply except if the supply is

(a) a supply by way of sale of real property;

(b) a supply by way of sale of personal property by a municipality that is capital property of the municipality; or

(c) a supply by way of sale of designated municipal property of a person designated to be a municipality for the purposes of section 259 that is capital property of the person.

(4) That the Act be amended by adding the following after section 198:

198.1 (1) In the case of property of a municipality that is not a listed financial institution, the basic tax content of the property at any time after January 30, 2004 shall be determined by applying the following rules:

(a) an amount of tax described by any of subparagraphs (i) to (v) of the description of A in paragraph (a) of the definition "basic tax content" in subsection 123(1) may be included in determining the value of A only if the tax

(i) became payable, or would have become payable in the absence of the circumstances described in subparagraph (iii) or (iv) of that description, after January 2004 under subsection 165(1) or section 212 or 218 in respect of the property, or

(ii) was payable, or would have been payable in the absence of circumstances described in subparagraph (iii) or (iv) of that description, under subsection 165(2), 212.1(2) or 218.1(1) or Division IV.1 in respect of the property;

(b) in determining the value of B in paragraph (a) of the definition "basic tax content" in subsection 123(1), any reference in the description of B to tax referred to in a subparagraph of the description of A shall be read to include an amount of tax only if the tax is included in the determination of the value of A in accordance with paragraph (a) of this subsection;

(c) in determining the value of J in paragraph (b) of the definition "basic tax content" in subsection 123(1),

(i) paragraphs (a) and (b) of this subsection shall be applied in determining the basic tax content referred to in subparagraph (i) of the description of J, and

(ii) an amount of tax described by any of subparagraphs (iii) to (vi) of the description of J may be included only if the tax

(A) became payable, or would have become payable in the absence of the circumstances described in subparagraph (iv) or (v) of that description, after January 2004 under subsection 165(1) or section 212 or 218 in respect of the improvements to the property, or

(B) was payable, or would have been payable in the absence of the circumstances described in subparagraph (iv) or (v) of that description, under subsection 165(2), 212.1(2) or 218.1(1) or Division IV.1 in respect of improvements to the property; and

(d) in determining the value of K in paragraph (b) of the definition "basic tax content" in subsection 123(1), any reference in the description of K to tax referred to in a subparagraph of the description of J shall be read to include an amount of tax only if the tax is included in the determination of the value of J in accordance with paragraph (c) of this subsection.

(2) In subsection (1), "municipality" includes a person designated to be a municipality for the purposes of section 259 and, in the case of a person so designated, "property" means property that, on January 31, 2004, was property of the person and was used, consumed or supplied by the person otherwise than exclusively in the course of activities that are not activities specified in the designation.

(5) That subsection 200(3) of the Act be replaced by the following:

(3) Despite paragraph 141.1(1)(a) but subject to section 141.2, for the purposes of this Part, if a registrant (other than a government) makes a supply by way of sale of personal property that is capital property of the registrant and, before the earlier of the time that ownership of the property is transferred to the recipient and the time that possession of the property is transferred to the recipient under the agreement for the supply, the registrant was last using the property otherwise than primarily in commercial activities of the registrant, the supply is deemed to have been made in the course of activities of the registrant that are not commercial activities.

(6) That the portion of subsection 200(4) of the Act before paragraph (a) be replaced by the following:

(4) Despite subsection 141.1(1) but subject to section 141.2, for the purposes of this Part, if a supplier that is a government makes a supply by way of sale of particular personal property that is capital property of the supplier,

(7) That the Act be amended by adding the following after section 200:

200.1 If a registrant is a municipality or a person designated to be a municipality for the purposes of section 259, subsection 193(2) applies, with any modifications that the circumstances require, to personal property (other than a passenger vehicle, an aircraft of a registrant who is an individual or a partnership and property of a person designated to be a municipality for the purposes of section 259 that is not designated municipal property of the person) acquired or imported by the registrant for use as capital property of the registrant as if the personal property were real property.

(8) That the description of B in paragraph 201(b) of the Act be replaced by the following:

B is

(i) if the registrant is deemed under subsection 199(3) or 206(2) or (3) to have acquired the vehicle or a portion of it at the particular time, or the registrant is bringing the vehicle into a participating province at the particular time, and the registrant was previously entitled to claim a rebate under section 259 in respect of the vehicle or any improvement to it, the difference between 100% and the specified percentage within the meaning of that section that applied in determining the amount of that rebate, and

(ii) in any other case, 100%; and

(9) That the portion of subsection 203(1) of the Act before the formula be replaced by the following:

203. (1) If a registrant (other than a municipality), at a particular time in a reporting period of the registrant, makes a taxable supply by way of sale of a passenger vehicle (other than a vehicle that is designated municipal property of a person designated at the particular time to be a municipality for the purposes of section 259) that, immediately before the particular time, was used as capital property in commercial activities of the registrant, the registrant may, despite section 170, paragraph 199(2)(a) and subsections 199(4) and 202(1), claim an input tax credit for that period equal to the amount determined by the formula

(10) That subsection 203(3) of the Act be replaced by the following:

(3) Despite paragraph 141.1(1)(a), for the purposes of this Part, a supply shall be deemed not to be a taxable supply if

(a) an individual or a partnership (other than a municipality) who is a registrant makes, at a particular time, the supply by way of sale of a passenger vehicle or an aircraft (other than a vehicle or an aircraft that is designated municipal property of a person designated at the particular time to be a municipality for the purposes of section 259) that is capital property of the registrant; and

(b) at any time after the individual or partnership became a registrant and before the particular time, the registrant did not use the vehicle or aircraft exclusively in commercial activities of the registrant.

(4) If a registrant (other than an individual or a partnership) that is a municipality or a person designated to be a municipality for the purposes of section 259, at a particular time in a reporting period of the registrant, makes a taxable supply by way of sale of a passenger vehicle (other than a vehicle of a person designated to be a municipality for the purposes of section 259 that is not designated municipal property of the person) that, immediately before the particular time, was capital property of the registrant, the registrant may, despite section 170, paragraph 199(2)(a) and subsections 199(4) and 202(1), claim an input tax credit for that period equal to the lesser of

(a) the amount determined by the formula

A x (B - C)/B

where

A is the basic tax content of the vehicle at the particular time,

B is the total of

(i) the tax that was payable by the registrant in respect of the last acquisition or importation of the vehicle by the registrant,

(ii) if the registrant brought the vehicle into a participating province after it was last acquired or imported by the registrant, the tax that was payable by the registrant in respect of bringing it into that province, and

(iii) the tax that was payable by the registrant in respect of improvements to the vehicle acquired, imported or brought into a participating province by the registrant after the property was last acquired or imported, and

C is the total of all input tax credits that the registrant was entitled to claim in respect of any tax included in the total for B, and

(b) the tax that is or would, in the absence of section 167, be payable in respect of the taxable supply.

(11) That subsections 209(1) and (2) of the Act be replaced by the following:

209. (1) If a registrant (other than a financial institution or a government) is a public service body, section 141.2 and subsections 199(2) to (4) and 200(2) and (3) apply, with any modifications that the circumstances require, to real property acquired by the registrant for use as capital property of the registrant or, in the case of subsection 199(4), to improvements to real property that is capital property of the registrant, as if the real property were personal property.

(2) If a registrant (other than a financial institution) is a specified Crown agent, section 141.2 and subsections 199(2) to (4) and 200(2) and (4) apply, with any modifications that the circumstances require, to real property acquired by the registrant for use as capital property of the registrant or, in the case of subsection 199(4), to improvements to real property that is capital property of the registrant, as if the real property were personal property.

(12) That the portion of subsection 209(3) of the Act before paragraph (a) be replaced by the following:

(3) Despite subsections (1) and (2), section 141.2 and subsections 200(3) and (4) do not apply to

(13) That the Act be amended by adding the following after section 257:

257.1 (1) If a person that is a municipality, or is designated to be a municipality for the purposes of section 259, and that is not a registrant makes, at any time, a taxable supply by way of sale of personal property that is capital property of the person (other than property of a person designated to be a municipality for the purposes of section 259 that is not designated municipal property of the person), the Minister shall, subject to subsection (2), pay a rebate to the person equal to the lesser of

(a) the basic tax content of the property at that time, and

(b) the tax that is or would, in the absence of section 167, be payable in respect of the taxable supply.

(2) A rebate shall not be paid under subsection (1) to a person in respect of the supply by way of sale of personal property by the person unless the person files an application for the rebate within two years after the day the consideration for the supply became due or was paid without having become due.

(3) If, for the purposes of satisfying in whole or in part a debt or obligation owing by a person (in this subsection referred to as the "debtor"), a creditor exercises a right under an Act of Parliament or the legislature of a province or an agreement relating to a debt security to cause the supply of personal property and the debtor has a right to redeem the property under the Act or the agreement, the following rules apply:

(a) the debtor is not entitled to claim a rebate under subsection (1) with respect to the property unless the time limit for redeeming the property has expired and the debtor has not redeemed the property; and

(b) if the debtor is entitled to claim the rebate, consideration for the supply is deemed, for the purposes of subsection (2), to have become due on the day on which the time limit for redeeming the property expires.

(14) That subsection 259(1) of the Act be amended by adding the following in alphabetical order:

"specified percentage" means

(a) if the person is a charity or a qualifying non-profit organization and is not a selected public service body, 50%;

(b) if the person is a hospital authority, 83%;

(c) if the person is a school authority, 68%;

(d) if the person is a university or public college, 67%; and

(e) if the person is a municipality, 100%;

"specified provincial percentage" means

(a) if the person is a charity, or a qualifying non-profit organization, that is not a selected public service body and that is resident in a participating province, 50%;

(b) if the person is a hospital authority resident in Nova Scotia, 83%;

(c) if the person is a school authority resident in Nova Scotia, 68%;

(d) if the person is a university or public college resident in Nova Scotia, 67%;

(e) if the person is a municipality resident in Nova Scotia or New Brunswick, 57.14%; and

(f) in any other case, 0%.

(15) That subsection 259(3) and (4) of the Act be replaced by the following:

(3) If a person (other than a listed financial institution, a registrant prescribed for the purposes of subsection 188(5) and a person designated to be a municipality for the purposes of this section) is, on the last day of a claim period of the person or of the person’s fiscal year that includes that claim period, a selected public service body, charity or qualifying non-profit organization, the Minister shall, subject to subsections (4.1), (4.2), (4.21) and (5), pay a rebate to the person equal to the total of

(a) the amount equal to the specified percentage of the non-creditable tax charged in respect of property or a service (other than a prescribed property or service) for the claim period, and

(b) the amount equal to the specified provincial percentage of the non-creditable tax charged in respect of property or a service (other than a prescribed property or service) for the claim period.

(4) If a person is, on the last day of a claim period of the person or of the person’s fiscal year that includes that claim period, designated to be a municipality for the purposes of this section in respect of activities (in this subsection referred to as the "designated activities") specified in the designation, the Minister shall, subject to subsections (4.01), (4.1), (4.2), (4.21), (4.3) and (5), pay a rebate to the person in respect of property or a service (other than a prescribed property or service) equal to the total of

(a) all amounts, each of which is an amount determined by the formula

A x B x C

where

A is the specified percentage,

B is an amount that is included in the total tax charged in respect of the property or service for the claim period and is an amount of tax in respect of a supply made to, or the importation or bringing into a participating province of the property by, the person at any time, an amount deemed to have been paid or collected at any time by the person, an amount required to be added under subsection 129(7) in determining the person’s net tax as a result of a branch or division of the person becoming a small supplier division at any time, or an amount required to be added under paragraph 171(4)(b) in determining the person’s net tax as a result of the person ceasing, at any time, to be a registrant, and

C is the extent (expressed as a percentage) to which the person intended, at that time, to consume, use or supply the property or service in the course of the designated activities, and

(b) all amounts, each of which is an amount determined by the formula

D x E x F

where

D is the specified provincial percentage,

E is an amount that is included in the total tax charged in respect of the property or service for the claim period and is an amount of tax in respect of a supply made to, or the importation or bringing into a participating province of the property by, the person at any time, an amount deemed to have been paid or collected at any time by the person, an amount required to be added under subsection 129(7) in determining the person’s net tax as a result of a branch or division of the person becoming a small supplier division at any time, or an amount required to be added under paragraph 171(4)(b) in determining the person’s net tax as a result of the person ceasing, at any time, to be a registrant, and

F is the extent (expressed as a percentage) to which the person intended, at that time, to consume, use or supply the property or service in the course of the designated activities.

(16) That the portion of subsection 259(4.01) of the Act before paragraph (a) be replaced by the following:

(4.01) An amount shall not be included in determining the value of B or E in subsection (4) in respect of a claim period of a person to the extent that

(17) That subsection 259(4.1) of the Act be replaced by the following:

(4.1) Subject to subsections (4.2) and (4.21), if a person is a charity, a public institution or a qualifying non-profit organization, and is a selected public service body, the rebate, if any, payable to the person under subsection (3) or (4) in respect of property or a service for a claim period is equal to the total of

(a) 50% of the non-creditable tax charged in respect of the property or service for the claim period, and

(b) the total of all amounts, each of which is an amount that would be determined under paragraph (4)(a) or (b) in respect of the property or service for the claim period if that subsection applied to the person and if

(i) the reference in subsection (4) to "specified percentage" were read as a reference to "the specified percentage applicable to a selected public service body described in whichever of paragraphs (a) to (e) of the definition of that expression in subsection (1) applies to the person minus 50%",

(ii) the reference in subsection (4) to "specified provincial percentage" were read as a reference to the greater of "the specified provincial percentage applicable to a selected public service body described in whichever of paragraphs (a) to (e) of the definition of that expression in subsection (1) applies to the person minus 50%" and "0%", and

(iii) in the case of a person who is not designated to be a municipality for the purposes of this section, the reference in the description of C or F in subsection (4) to "designated activities" were read as a reference to

(A) in the case of a person determined to be a municipality under paragraph (b) of the definition "municipality" in subsection 123(1), activities engaged in by the person in the course of fulfilling the person’s responsibilities as a local authority, and

(B) in any other case, activities engaged in by the person in the course of operating a recognized degree-granting institution, a college affiliated with, or research body of, such an institution, a public hospital, an elementary or secondary school or a post-secondary college or technical institute, as the case may be.

(18) That the portion of subsection 259(4.2) of the Act before paragraph (a) be replaced by the following:

(4.2) In determining an amount under paragraphs (3)(a) and (4)(a) for the purpose of determining a rebate payable to a person, no tax under any of subsection 165(2), sections 212.1 and 218.1 and Division IV.1 payable or deemed to have been paid or collected by the person shall be included

(19) That subsection 259(4.21) of the Act be replaced by the following:

(4.21) In determining an amount under paragraphs (3)(b) and (4)(b) for the purpose of determining a rebate payable to a person, no tax under any of subsection 165(1) and sections 212 and 218 payable or deemed to have been paid or collected by the person shall be included

(a) in any amount referred to in any of subparagraphs (a)(i) to (iv) of the definition "non-creditable tax charged" in subsection (1);

(b) in any amount referred to in subparagraph (v) of that definition that is required under subsection 129(7) to be added in determining the person’s net tax; or

(c) in determining any amount referred to in subparagraph (v) of that definition that is an input tax credit required under paragraph 171(4)(b) to be added in determining the person’s net tax.

(20) That paragraph 259(4.3)(e) of the Act be replaced by the following:

(e) the total of all amounts each of which is an amount that would be determined under paragraphs (4)(a) or (b) in respect of the property or service for the claim period if

(i) the specified percentage for the purposes of subsection (4) were 0%,

(ii) the specified provincial percentage for the purposes of that subsection were 50%, and

(iii) the reference to designated activities in the description of F in that subsection were a reference to the person’s other activities.

(21) That subsection 259(9) of the Act be repealed.

(22) That section 259 of the Act be amended by adding the following after subsection (12):

(13) If the amount of a rebate under subsection (3) or (4) that is approved by the Minister for payment to a municipality is increased as a result of the application to the municipality of the specified percentage instead of 57.14% in respect of any period, the Minister may, despite section 295, release for publication by the Government of Canada information as to the amount of the increase and any information necessary to identify the municipality. On publication, the information is not confidential information for the purposes of section 295.

(23) That section 1 of Part V.1 of Schedule V to the Act be amended by striking out the word "or" at the end of paragraph (l), by adding the word "or" at the end of paragraph (m) and by adding the following after paragraph (m):

(n) designated municipal property, if the charity is a person designated to be a municipality for the purposes of section 259 of the Act.

(24) That the portion of section 5.1 of Part V.1 of Schedule V to the Act before paragraph (a) be replaced by the following:

5.1 A supply by way of sale made by a charity to a recipient of tangible personal property (other than capital property of the charity or, if the charity is a person designated to be a municipality for the purposes of section 259 of the Act, designated municipal property), or of a service purchased by the charity for the purpose of making a supply by way of sale of the service, if the total charge for the supply is the usual charge by the charity for such supplies to such recipients and

(25) That section 2 of Part VI of Schedule V to the Act be amended by striking out the word "or" at the end of paragraph (l) and by adding the following after paragraph (m):

(n) property or a service made by a municipality; or

(o) designated municipal property, if the public institution is a person designated to be a municipality for the purposes of section 259 of the Act.

(26) That the portion of section 6 of Part VI of Schedule V to the Act before paragraph (a) be replaced by the following:

6. A supply by way of sale made by a public service body (other than a municipality) to a recipient of tangible personal property (other than capital property of the body or, if the body is a person designated to be a municipality for the purposes of section 259 of the Act, designated municipal property), or of a service purchased by the body for the purpose of making a supply by way of sale of the service, if the total charge for the supply is the usual charge by the body for such supplies to such recipients and

(27) That the portion of section 25 of Part VI of Schedule V to the Act before paragraph (a) be replaced by the following:

25. A supply of real property made by a public service body (other than a financial institution, a municipality or a government), but not including a supply of

(28) That section 25 of Part VI of Schedule V to the Act be amended by striking out the word "or" at the end of paragraph (h), by adding the word "or" at the end of paragraph (i) and by adding the following after paragraph (i):

(j) designated municipal property, if the body is a person designated to be a municipality for the purposes of section 259 of the Act.

(29) That an enactment founded on any of paragraphs (1), (11), (12) and (21) be deemed to have come into force on February 1, 2004.

(30) That any enactment founded on any of paragraphs (2), (3), (5) to (7), (9), (10), (13) and (23) to (28) apply to any supply for which consideration becomes due after March 9, 2004 or is paid after that day without having become due, but does not apply to any supply made under an agreement in writing entered into before March 10, 2004.

(31) That any enactment founded on paragraph (4) be deemed to have come into force on January 31, 2004.

(32) That any enactment founded on paragraph (8) apply for the purpose of determining an input tax credit of a registrant in respect of a passenger vehicle that the registrant acquires, imports or brings into a participating province after January 2004.

(33) That any enactment founded on any of paragraphs (14) to (20) apply for the purpose of determining a rebate under section 259 of the Act of a person for claim periods ending on or after February 1, 2004, except that the rebate shall be determined as if those paragraphs did not come into force for the purpose of determining a rebate of a person for the claim period of the person that includes that day in respect of

(a) an amount of tax that became payable by the person before that day;

(b) an amount that is deemed to have been paid or collected by the person before that day; or

(c) an amount that is required to be added in determining the person’s net tax

(i) as a result of a branch or division of the person becoming a small supplier division before that day, or

(ii) as a result of the person ceasing before that day to be a registrant.

(34) That any enactment founded on paragraph (22) come into force on Royal Assent.

Notice of Ways and Means Motion to Amend the Income Tax Conventions Interpretation Act

That it is expedient to amend the Income Tax Conventions Interpretation Act to clarify that section 245 of the Income Tax Act applies to any benefit provided under a convention.

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