2000 Ruling 2000-0016043 - Class 43.1 Energy Conservation Equipment

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 the facility (including a new natural-gas-powered turbine generator and a new heat recovery steam generator) would be considered as one system that is used by the taxpayer to generate electrical energy, or both electrical and heat energy, using only fuel that is fossil fuel as contemplated at clause (c)(i)(A) of Class 43.1, and whether an existing steam turbine would be considered as the steam host, notwithstanding that the facility and steam turbine would be used in a combined cycle for generating electricity. (b) Whether the heat rate requirements of clause (c)(i)(B) of Class 43.1 would be satisfied in respect of the facility.

Position: (a) Yes (b) Yes

Reasons: (a) Based upon the opinion of Natural Resources Canada dated May 29, 2000, the facility would be considered as one system and the steam turbine would be considered as the steam host to take delivery of steam generated from the facility, notwithstanding that the facility and steam turbine would be used in a combined cycle for generating electricity. (b) Based upon the opinion of Natural Resources Canada dated May 29, 2000, the heat rate requirement of clause (c)(i)(B) of Class 43.1 would be met.

XXXXXXXXXX
XXXXXXXXXX 2000-001604
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 2000

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Supplement to Advance Income Tax Ruling # 992244

Further to our ruling letter of XXXXXXXXXX, 1999 in respect of the subject partnership (the "Ruling Letter") and our letter of XXXXXXXXXX, 2000 to extend the deadline for commencement of certain proposed transactions as stated in the Ruling Letter, this is to confirm the following changes to the Ruling Letter as requested in your letters of XXXXXXXXXX:

Paragraph 10 of the Ruling Letter is deleted and replaced by the following:

"Limited Partnership has agreed to lease the Power Assets from Power Co. under a site lease agreement (the "Site Lease Agreement") and will use Unit #XXXXXXXXXX to create a combined cycle generation facility in the Province. Under the Site Lease Agreement, Power Co. reserves the right to operate Units XXXXXXXXXX of the Power Assets. The Site Lease Agreement provides for an initial lease for a term of twenty-one (21) years and nine (9) months from the effective date of the Site Lease Agreement of XXXXXXXXXX, with an option to renew for a five (5) year term."

The reference to "XXXXXXXXXX" in paragraph 11 of the Ruling Letter is deleted and replaced by the following:

"XXXXXXXXXX"

Paragraph 18 of the Ruling Letter is deleted and replaced by the following:

"The Facility will be capable of being operated without the Unit #XXXXXXXXXX Steam Turbine to produce electricity and steam. As stated in paragraph 2 above, the steam produced by the Facility will be used to power the Unit #XXXXXXXXXX Steam Turbine, which will be considered the steam host."

Notwithstanding the above-noted changes and subject to the limitations, qualifications and comments stated in the Ruling Letter, we confirm that the rulings as stated in the Ruling Letter will continue to apply provided that the supply and installation of the Facility as described in paragraph 8 of the Ruling Letter commences by

XXXXXXXXXX.

Yours truly,

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch