29 January 2010 External T.I. 2009-0315561E5 - HRTC- Housing Co-op

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.

Principal Issues: Can members of a co-operative housing corporation claim the HRTC for renovations to the housing unit they reside in for expenditures incurred either directly by the member or by the co-operative housing corporation?

Position: Yes. The HRTC can be claimed for qualifying expenditures incurred directly by a member to renovate the co-operative housing unit that is the individual's eligible dwelling. The HRTC may also be claimed for the member's share of the cost of qualifying expenditures incurred by the co-operative housing corporation.

Reasons: Subsection 118.04(1) - definition of eligible dwelling; Paragraph 118.04(2)(a) - application rules for co-operative housing corporation

XXXXXXXXXX 							2009-031556
  								William King
January 29, 2010

Dear Sirs:

Re: Home Renovation Tax Credit

This is in response to your correspondence of March 9, 2009, wherein you requested whether individual members of the XXXXXXXXXX would be eligible to make a claim under the home renovation tax credit (HRTC) for renovations made to their individual units. We apologize for this delayed reply.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advance Income Tax Rulings", dated May 17, 2002. This Information Circular can be accessed on the internet at http://www.cra-arc.gc.ca. However, we are prepared to provide the following comments.

Our Comments

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 qualifying 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. Qualifying expenditures are not reduced by government tax credits or grants to which an individual may be entitled. For example, an individual can claim the HRTC on the same expenditures for which a grant has been received under the ecoENERGY Retrofit - Homes program.

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. In the case of a co-operative housing unit, the individual must own at the time of the renovation, alone or jointly with another person, a share of the capital stock of the co-operative housing corporation which the individual acquired for the sole purpose of inhabiting the housing unit owned by that corporation.

The HRTC can be claimed for qualifying expenditures incurred directly by a member to renovate the co-operative housing unit that is the individual's eligible dwelling. The HRTC may also be claimed for the member's share of the cost of qualifying expenditures incurred by the co-operative housing corporation. Section 118.04 does not prescribe how the member's share is determined. Generally, the qualifying expenditures incurred by the corporation are allocated to the members based on the governing documents of the co-operative housing corporation.

Your correspondence indicates that the XXXXXXXXXX is contemplating the replacement of the furnaces in the individual member's units. Provided all the above-mentioned requirements are met, the costs associated with the purchase and installation of a new furnace will qualify for the HRTC. To support a claim for renovations to the co-operative housing unit or the common areas of the co-operative housing corporation made by the corporation on behalf of individual members, members 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 member's share of these qualifying expenditures. 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.

As with all non-refundable tax credits, the HRTC will reduce an individual's federal income tax payable. If, however, the total non-refundable tax credits, including the HRTC, is more than the individual's federal income tax payable, he or she will not receive a refund for the difference.

You can find more information on the HRTC, including how the credit is calculated, on the CRA Web site at www.cra.gc.ca/hrtc and in the Government of Canada Web brochure available at www.actionplan.gc.ca/grfx/docs/hrtc_eng.pdf.

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