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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: (a) Whether Plant XXXXXXXXXX for the purpose of subparagraph (c)(i) of Class 43.1 in Schedule II of the Regulations. (b) Whether the heat rate requirement under clause (c)(i)(B) of Class 43.1 in Schedule II of the Regulations for Plant XXXXXXXXXX would be met.
Position: (a) XXXXXXXXXX (b) Yes. However, this heat rate requirement must also be met in each and every year of the operation of Plant XXXXXXXXXX by A Co. pursuant to this subparagraph, unless subsection 1104(14) of the Regulations would apply.
Reasons: (a) Based upon the opinion of Natural Resources Canada dated XXXXXXXXXX , Plant XXXXXXXXXX for the purpose of subparagraph (c)(i) of Class 43.1 in Schedule II of the Regulations. (b) Based upon the opinion of Natural Resources Canada dated XXXXXXXXXX , the heat rate of the system of Plant XXXXXXXXXX would be about XXXXXXXXXX and therefore, the heat rate requirement under clause (c)(i)(B) of Class 43.1 in Schedule II of the Regulations would be considered as being met.
XXXXXXXXXX 1999-001276
Attention: XXXXXXXXXX
XXXXXXXXXX, 2000
Dear Sirs:
Re: Advance Income Tax Ruling
XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the subject corporation. We also acknowledge the information provided in your letters of XXXXXXXXXX, and during our various telephone conversations in connection with your ruling request.
We understand that to the best of your knowledge and that of the taxpayers involved, none of the issues involved in the ruling request is:
(i) dealt with in an earlier return of the taxpayers or a related person;
(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayers or a related person;
(iii) under objection by the taxpayers or a related person;
(iv) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; or
(v) subject of a ruling previously issued by the Income Tax Rulings Directorate.
Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:
Definitions
"Act" means the Income Tax Act R.S.C. 1985 (5the Supp.), c.1, as amended to the date hereof.
"A Co." means XXXXXXXXXX.
XXXXXXXXXX.
"Plant XXXXXXXXXX" means the plant as described in 3 and 4 below.
XXXXXXXXXX.
"private corporation" has the meaning assigned by subsection 89(1) of the Act.
"Regulations" means the Income Tax Regulations to the Act as amended to the date hereof.
"taxable Canadian corporation" has the meaning assigned by subsection 89(1) of the Act.
Facts
1. A Co. is a taxable Canadian corporation and a private corporation. The shareholders of A Co. are XXXXXXXXXX A Co. was incorporated in the Province of XXXXXXXXXX, with its head office at XXXXXXXXXX A Co. files its income tax return at the XXXXXXXXXX Taxation Centre, is served by the XXXXXXXXXX Tax Services Office, and its CCRA account number is XXXXXXXXXX. A Co. carries on the business of an independent power developer and consulting, and plans to develop, own and operate efficient and environmentally friendly power generating assets in Canada.
2. XXXXXXXXXX.
Proposed Transactions
3. In the course of its business, A Co. will construct, own and operate a XXXXXXXXXX power plant ("Plant XXXXXXXXXX") in XXXXXXXXXX. Plant XXXXXXXXXX will be new and be neither reconditioned nor remanufactured. Plant XXXXXXXXXX will burn XXXXXXXXXX to generate XXXXXXXXXX The produced electricity from Plant XXXXXXXXXX will be sold to a third party that deals at arm's length with XXXXXXXXXX A Co. XXXXXXXXXX.
4. The major components of Plant XXXXXXXXXX consist of: XXXXXXXXXX.
5. XXXXXXXXXX.
6. XXXXXXXXXX.
Purpose of the Proposed Transactions
A Co. intends to develop a highly efficient and environmentally acceptable XXXXXXXXXX power generating plant in XXXXXXXXXX in order to participate in the recently opened electrical power generation market in XXXXXXXXXX.
Rulings Given
Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions, and purpose of the proposed transactions and provided further that the proposed transactions are carried out as described above, our rulings are as follows:
A. Provided that all the other requirements (including those in Class 43.1) have been satisfied in order for Plant XXXXXXXXXX to be included in Class 43.1 of Schedule II to the Regulations, we confirm that Plant XXXXXXXXXX will comprise a system (other than an enhanced combined cycle system) used by A Co. to generate both electrical and heat energy using only fuel that is fossil fuel for the purposes of subparagraph (c)(i) of Class 43.1 of Schedule II to the Regulations.
B. XXXXXXXXXX.
The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act and Regulations which, if enacted into law, could have an effect on the rulings provided herein. Nothing in this advance income tax ruling should be construed as implying that the Canada Customs and Revenue Agency has agreed to or reviewed any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.
The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996 as amended and is binding on the Canada Customs and Revenue Agency provided that the contracts in respect of the construction and installation of Plant XXXXXXXXXX will be entered into by XXXXXXXXXX.
The provisions of Class 43.1 (c)(i)(B) in Schedule II to the Regulations provide requirements that have to be met each and every year by A Co. in respect of Plant XXXXXXXXXX. This will depend upon factors which are expected to vary each year. Consequently, we are unable to rule that the requirements of Class 43.1 (c)(i)(B) in Schedule II to the Regulations would be satisfied each and every year.
However, based upon the information that you have provided to date and opinions obtained from the Class 43.1 Secretariat of Natural Resources Canada, it is our opinion that the heat rate for Plant XXXXXXXXXX, calculated as required under Class 43.1 (c)(i)(B) in Schedule II to the Regulations, would not exceed 6,000 BTU per kilowatt-hour of electricity energy generated by Plant XXXXXXXXXX.
Our general comments in the above paragraph do not constitute an advance income tax ruling and accordingly they are not binding on the Canada Customs and Revenue Agency in accordance with paragraph 22 of Information Circular 70-6R3 as amended.
Yours truly,
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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