Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: "Approved" status requested for XXXXXXXXXX.
Position: Approval recommended.
Reasons: Information submitted meets the conditions for approval as set out in SR&ED Third Party Payments Policy which provides certain requirements to be met in respect of (a) SR&ED (b) facilities and personnel (c) non-profit status (d) the public as beneficiary and (e) adequate funding for the SR&ED activities.
January 2, 2020
XXXXXXXXXX 2018-074079
S. D’Angelo
Dear XXXXXXXXXX:
Re: XXXXXXXXXX (the “Institute”)
This is in reply to your letter of January 19, 2018 and our various telephone conversations with yourself and XXXXXXXXXX, in which you requested that the Institute be designated as an approved research institute for the purposes of clause 37(1)(a)(ii)(B) of the Income Tax Act (“Act”).
The Minister’s authority to grant or deny approval status is exercised pursuant to subsection 37(7) of the Act and is based on the information provided and representations made by the particular entity, its officers or directors and/or its authorized representatives. Changes in the organization or the activities carried on by the entity may affect its status as an approved entity. The requirements that must be met for an entity to receive approval status are more-fully described in the Canada Revenue Agency’s “Third-Party Payments Policy” which is available on the Canada.ca website.
Based on the information you submitted our understanding of the facts is as follows:
1. The Institute was incorporated as a not-for-profit corporation without share capital on XXXXXXXXXX. Effective XXXXXXXXXX, the Institute will assume the SR&ED activities that are currently carried out by the research departments of each of the XXXXXXXXXX Partner Institutions. The XXXXXXXXXX Partners Institutions include the XXXXXXXXXX.
2. The Institute’s basic objects, as described in its Letters Patent, are:
a. To advance education by carrying on SR&ED within the meaning of that term for purposes of the Act, that is basic research, applied research or experimental development in the fields of XXXXXXXXXX and by disseminating the results of the research to the public.
b. To improve the capacity and efficiency of other registered charities by providing the administration and management of all of their SR&ED activities.
c. To promote XXXXXXXXXX by developing new XXXXXXXXXX relevant to the provision of XXXXXXXXXX to the public.
3. You maintain that the Institute’s only activities will unquestioningly fall within the meaning of SR&ED, as that term is defined in subsection 248(1) of the Act, and none of the SR&ED conducted by the Institute, even when partnering with the industry or other third parties, is considered to be domain SR&ED restricted (in perpetuity) where the results may not be divulged to the general public. The results of any successful SR&ED undertaken by the Institute will also be made available to benefit the general public.
4. Pursuant to XXXXXXXXXX of the Institute’s Letters Patent, the Institute is specifically prohibited from carrying on any business or activity for the purpose of gain for its members, and to the extent that there are any profits or other accretions therefrom, such amounts shall be used in promoting its objects. The directors of the Institute must also serve without remuneration and no director may receive directly or indirectly any profit from his or her position. Directors may; however, be reimbursed for reasonable expenses.
5. The Institute’s Bylaws reflect the fact that the Institute does not have the authority to acquire control of other institutions. Further, upon the dissolution of the Institute and after payment of all debts and liabilities, any remaining property of the Institute must be distributed or disposed of to charities registered under the Act.
6. The Institute’s activities will be occurring at the same locations at which the XXXXXXXXXX Partners carry out their activities namely:
XXXXXXXXXX
The Institute and the XXXXXXXXXX partners will enter into an agreement effective XXXXXXXXXX whereby the Institute will be entitled to continue to use such research space to carry out its research activities. The same cutting-edge equipment as is currently available to each XXXXXXXXXX Partners will be made available to the Institute to carry out its research activities.
7. The number of employees with a research focus, as well as the degree to which their work is focused on research work varies across XXXXXXXXXX partners. Overall, there are XXXXXXXXXX FTEs involved in research, of which approximately XXXXXXXXXX are researchers conducting XXXXXXXXXX research activities. Approximately XXXXXXXXXX FTEs are focused on supporting research activities across all XXXXXXXXXX Partners.
At inception the Institute will have approximately XXXXXXXXXX employees dedicated to the leadership and management of the Institute. Researchers that are employees of the XXXXXXXXXX Partners will conduct their research activities under the umbrella of the Institute.
8. As part of its executive team, the Institute will employ Directors who will lead research activities within each of the following disciplines:
XXXXXXXXXX
9. The Institute will be, as the XXXXXXXXXX Partners have been, dedicated to ensuring that the general public will be the beneficiary of any successful research and that the results of its research lead to tangible positive impacts for the public.
10. All industrial and commercial contributors of funding for XXXXXXXXXX research carried on by the Institute will be entitled to exploit the results that they sponsor. The exact nature of how such results are exploited will be negotiated between the Institute and the contributor(s) and will be included in the terms of the particular agreement between them. This is consistent with the current arrangements of the XXXXXXXXXX Partner Institutions.
11. Currently, the XXXXXXXXXX Partners receive and rely on grants and /or contracts from municipal, provincial and federal governments as well as from various industrial and commercial third party contributors that fund specific SR&ED. The Institute will rely on the same or similar funding and grants as the XXXXXXXXXX Partners did. You have indicated that there will be sufficient funding to ensure ongoing research activities.
Approval
Provided that the above statements constitute a complete and accurate disclosure of all of the relevant facts, and the Institute continues to operate in the manner described above, I am pleased to advise that, pursuant to the authority granted under subsection 37(7) of the Act, the Institute is hereby approved as an approved research institute for the purposes of clause 37(1)(a)(ii)(B) of the Act.
Yours sincerely,
Geoff Trueman
Assistant Commissioner
Legislative Policy and Regulatory Affairs Branch
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