2 March 2011 External T.I. 2009-0351571E5 - Test Wind Turbine

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: Whether certain proposed wind turbines will qualify as test wind turbines within the meaning of subsection 1219(3) of the Income Tax Regulations?

Position: Yes

Reasons: favourable opinion received from NRCan and otherwise meets criteria /compliance with the legislation

XXXXXXXXXX 								2009-035157
									L. Holloway
									(613) 946-3553
March 2, 2011

Dear XXXXXXXXXX :

Re: Test Wind Turbine

We are writing in response to your application dated October 21, 2009, concerning your request for a determination that a planned wind turbine to be installed on land owned by XXXXXXXXXX (the "Applicant") as part of a XXXXXXXXXX project (the "Project") will qualify as a "test wind turbine" within the meaning of subsection 1219(3) of the Income Tax Regulations (the "Regulations").

The Applicant is pursuing the development of the Project to be located on a site of approximately XXXXXXXXXX acres XXXXXXXXXX . The Applicant has retained the company, XXXXXXXXXX to help with obtaining the necessary permits and approvals required to proceed with the Project

The Project has a planned total capacity of XXXXXXXXXX . The Test Wind Turbine Model has been described as XXXXXXXXXX with a Rating of XXXXXXXXXX Kilowatts (referred to herein as the "Test Turbine"). The Applicant has title to the land that the Test Turbine will be situated on as well as the land required to install subsequent wind turbines in order to complete the Project after the test period.

After obtaining all required approvals and permits, construction of access roads and the completion of environmental assessment impacts, the Test Turbine will be constructed and will be located at XXXXXXXXXX . It is anticipated that the Test Turbine will be commissioned and enter into service before the end of XXXXXXXXXX . The Applicant will receive all revenue from the generation of electrical energy by the Project.

Natural Resources Canada ("NRCan") has reviewed the application for a technical opinion on the Test Turbine (the "Application"; NRCan file number XXXXXXXXXX ).

It is our understanding, based upon representations and information provided on behalf of the Applicant in the Application prepared by XXXXXXXXXX , that:

(i) at least 50% of the capital cost of the depreciable property to be used in the Project would be the capital cost of property that is described in either Class 43.1 or 43.2 of Schedule II to the Regulations or that would be such property but for subsection 1219(1) of the Regulations;

(ii) the Test Turbine will be a fixed location device that is part of a wind energy conversion system that would, but for section 1219 of the Regulations, be property of the Applicant that is described in subparagraph (d)(v) of Class 43.1 of Schedule II;

(iii) the Project will not share with any other project a point of interconnection to an electrical energy transmission or distribution system;

(iv) the primary purpose for installing the Test Turbine is to test the level of electrical energy produced by the Test Turbine from wind at its place of installation;

(v) no other test wind turbine (as defined in subsection 1219(3) of the Regulations) will be installed within 1,500 meters of the Test Turbine;

(vi) no other wind energy conversion system will be installed within 1,500 meters of the Test Turbine until the level of electrical energy produced from wind by the Test Turbine has been tested for at least 120 calendar days; and

(vii) the electrical energy produced from wind by the Test Turbine will not exceed 20% of the planned nameplate capacity for the Project.

Our Opinion

Provided that:

(a) the Project will be undertaken as described in the Application with the Test Turbine being installed and used for the testing program described therein; and

(b) the facts and representations relating to the Project remain as stated in the Application and as described herein it is our opinion that the Test Turbine will constitute a test wind turbine for purposes of subsections 1219(1) and (3) of the Regulations at the time the wind energy conversion system that it forms part of would, but for section 1219 of the Regulations, be property included in either subparagraph (d)(v) of Class 43.1 or paragraph (b) of Class 43.2 of Schedule II to the Regulations. In other words, the cost of the Test Turbine will not qualify as a "Canadian renewable and conservation expense" ("CRCE"), as defined in subsection 66.1(6) of the Income Tax Act (the "Act"), until such time as it is commissioned and enters into service.

Our Comments

(I) Except as expressly stated, our opinion does not imply acceptance or approval of any income tax implications relating to the Project. In particular, we are not providing any confirmation as to the extent to which the cost of any particular property (such as the cost of permits and agreements acquired) may be considered to be CRCE.

(II) CRCE does not include any amount that is paid or payable to a person or partnership with whom the taxpayer does not deal at arm's length.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

c.c. T.J. Jewett
Class 43.1/43.2 Secretariat,
Industry Group,
CANMET Energy Technology Centre- Ottawa
Natural Resources Canada
Bells Corners Complex, Building 3, Room 204
1 Haanel Drive
Nepean, Ontario
K1A 1M1