Large construction projects engage a litany of tax considerations

Tax considerations arising under a major construction project include:

• Significant deferral benefits can arise from the choice of the Project LP’s year end given that the stub period accrual rules do not bite if the previous year was not yet profitable.
• CRA has accommodated (e.g., in 2006-0218781R3) treating the Project LP’s construction costs as consideration for a right to access the construction site, so that such costs can be amortized as a Class 14 asset.
• For long-term projects, faster CCA write-offs may be available with a s. 13(29) election (or, alternatively, reliance might be placed on the rolling-start rule in s. 13(7)(b).)
• The interest capitalization rule in s. 21 also extends to s. 20(1)(e) financing costs.
• Investment in the project by a public corporation may engage consideration of the SIFT partnership rules – and sale of an interest in a project may engage the tax shelter rules if too much is stated about the projected results.
• PST considerations in B.C. engage the distinction between fixtures and tangible personal property.

Neal Armstrong. Summaries of Shane Onufrechuk and Warren Pashkowick, "Tax Considerations of Major Construction Projects", 2014 Conference Report, Canadian Tax Foundation, 10:1-35 under s. 34.2(1) - Adjusted Stub Period Accrual Income, s. 12(1)(l.1), s. 18(6)(d), Class 14, s. 13(27)(b), s. 13(29), s. 21(1), s. 20(1)(e.1), s. 122.1(1) – investment, s. 237.1(1) – tax shelter, Provincial Sales Tax Act (B.C.), s. 1 – taxable service.