Principal Issues: 1. Does re-shingling a condominium unit qualify for the HRTC?
2. How are costs allocated to unit owners?
3. What documentation is required by owners when they file their tax returns?
Position: 1. Re-shingling qualifies as an eligible expense.
2. Generally, the costs incurred for renovations to common areas are allocated to owners based on the governing documents of the condominium corporation.
3. The condominium corporation should provide owners with a letter which provides details of the renovation.
Reasons: 118.04
XXXXXXXXXX 2009-034882
Robert Dubis
February 1, 2010
Dear XXXXXXXXXX :
Re: Home Renovation Tax Credit
This is in response to your correspondence of November 19, 2009, wherein you requested a formal tax ruling on behalf of the XXXXXXXXXX regarding the new home renovation tax credit (HRTC).
The issue in your request for an advance income tax ruling relates to a completed transaction. As noted in paragraph 7 of Information Circular IC 70-6R5, Advance Income Tax Rulings, the Canada Revenue Agency (CRA) will not provide an advance ruling on a completed transaction. Where a situation involves a specific taxpayer and a completed transaction, the request should be addressed to the relevant tax services office. However, we trust the following general comments regarding the HRTC will be helpful.
The legislation regarding the new HRTC has been enacted and is contained in section 118.04 of the Income Tax Act. The HRTC provides individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for services received or goods acquired, after January 27, 2009, and before February 1, 2010. However, expenditures for services received or goods acquired under agreements entered into before January 28, 2009, do not qualify for the HRTC. Taxpayers can claim this credit for the 2009 tax year on eligible expenditures exceeding $1,000, but not more than $10,000, which will result in a non-refundable tax credit of up to $1,350.
Under section 118.04, expenditures qualify for the HRTC if they are directly attributable to a renovation or an alteration of an eligible dwelling, including land that forms part of the eligible dwelling, and if the renovation or alteration is of an enduring nature and is integral to the eligible dwelling. Such expenditures include the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits.
An eligible dwelling is a housing unit located in Canada that is owned by the individual, at the time of the renovation, and ordinarily inhabited by the individual, his or her current or former spouse or current or former common-law partner, or his or her children at any time after January 27, 2009, and before February 1, 2010.
The HRTC can be claimed for eligible expenditures incurred to renovate the condominium unit that is the individual's eligible dwelling. The HRTC may also be claimed for the individual's share of the cost of qualifying expenditures incurred by the condominium corporation for common areas of the condominium. Generally, the expenditures incurred for common areas are allocated to the individual owners based on the governing documents of the condominium corporation.
You state that the condominium re-shingled some of the townhouse units and paid for the expenditure from its reserve funds. Renovations and alterations paid from a contingency or special purpose fund administered by the corporation will qualify for the HRTC provided all other requirements (e.g., integral to the dwelling, enduring nature) are met.
Re-shingling a roof is a qualifying expenditure for the HRTC. The determination of whether a particular expense is a common area expense is a question of fact. If the roofs are considered to form part of the common area expenses under your corporation's governing documents, then the costs associated with re-shingling the twelve units could be allocated to all unit owners in accordance with those documents. However, the individual unit owner must ascertain whether his/her unit is an eligible dwelling before making a claim for the HRTC.
To support a claim for renovations to a condominium unit or the common areas of the condominium made by the corporation on behalf of individual unit owners, owners will need documentation from the corporation or board of directors that identifies the amounts incurred for the renovation work. The documentation should clearly identify the individual unit owner's portion of these expenses. Supporting documentation should include the name of the contractor and, if applicable, the goods and services tax/harmonized sales tax registration number, a description of the work performed, and the dates when the work or services were performed. Generally, such documentation can be a letter from the corporation that is signed by an authorized individual and can include copies of any agreements, invoices, or receipts.
You can find more information on the HRTC on the CRA Web site at www.cra.gc.ca/hrtc.
We trust our comments will be of assistance to you.
Yours truly,
Nerill Thomas-Wilkinson
Acting Manager
For Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy & Regulatory Affairs Branch
