25 September 2001 External T.I. 2001-0099865 - class 43.1 wind turbines

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

1. Will the CCRA be bound by the test wind turbine opinion letters issued by NRCan?

2. When do test wind turbines get added to Class 43.1 and CRCE?

Position:

1. Yes

2. When the turbine is used primarily to generate electrical energy.

Reasons:

1. CRCE definition states that the Technical Guide shall apply conclusively with respect to engineering matters.

2. Wording of class 43.1 clause (v)(A)

									2001-009986
XXXXXXXXXX 								David Shugar
(613) 957-2134
September 25, 2001

Dear XXXXXXXXXX:

Re: Canadian Renewable and Conservation Expense (CRCE) -Test Wind Turbines

This is in response to your request for an advance income tax ruling regarding your proposed acquisition of test wind turbines to be financed by issuing flow-through shares. As explained in our telephone conversations (XXXXXXXXXX/Savage), we are unable to provide you with a ruling based on the information that you submitted. Your deposit of $535 will, therefore, be refunded under separate cover. Should you wish to resubmit your request providing the additional information required we would be pleased to consider it at that time.

Although we are unable to provide you with an advance income tax ruling in respect of your proposed transactions, we can confirm that the Canada Customs and Revenue Agency will accept the written opinions issued by Natural Resources Canada stating that proposed wind turbine installations meet the technical criteria for classification as Test Wind Turbines and will, therefore be eligible for inclusion in CRCE.

The term "test wind turbine" is defined in subsection 1219(3) of the Regulations to the Income Tax Act as follows:

"a fixed location device that is a wind energy conversion system that would, but for this section, be property included in Class 43.1 of Schedule II because of subparagraph (d)(v) thereof, and in respect of which the Minister, in consultation with the Minister of Natural Resources, determines that

(a) the device will be the first such device installed at the taxpayer's site for a proposed wind energy conversion system; and

(b) the primary purpose of the device is to test the level of electrical energy production at the site."

One of the requirements that must be met for a wind turbine to be included in Class 43.1 is that the wind turbine must be a property that, under Clause (v)(A) of Class 43.1, is:

(v) a fixed location device that is a wind energy conversion system that

(A) is used by the taxpayer, or by a lessee of the taxpayer, primarily for the purpose of generating electrical energy, ... (boldface added)

Although the test wind turbines are eligible for CRCE, they cannot be included in Class 43.1 until such time as they are put into use, and therefore, cannot be included in CRCE until that time.

We trust our comments will be of assistance to you.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate