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: Changes of facts and proposed transactions regarding financing of cost overruns.
Position: No change in rulings given.
Reasons: No direct impact on rulings given.
XXXXXXXXXX 2009-033286
XXXXXXXXXX , 2009
Dear XXXXXXXXXX :
Re: XXXXXXXXXX
Supplementary Advance Income Tax Ruling
We are writing in reply to your letter of XXXXXXXXXX in which you requested certain changes to the facts and proposed transactions described in the advance income tax ruling 2007-025724 issued on XXXXXXXXXX , 2007 (the "Original Ruling") on behalf of the above-referenced taxpayer and a further extension of time to complete the proposed transactions described in the Original Ruling in addition to the extensions of time granted in our letters of XXXXXXXXXX . Capitalized terms used in this letter have the meanings given to them in the Original Ruling.
The Original Ruling is amended as follows:
A. New paragraphs 19.1 to 19.3 are added to the Original Ruling immediately after paragraph 19:
19.1 Because of cost overruns in connection with the construction of the G Act Assets, the parties agreed that XXXXXXXXXX would temporarily fund XXXXXXXXXX % of such cost overruns through a series of non-interest bearing loans directly to Gco to allow the latter to continue to construct the G Act Assets under the Construction Agreement.
19.2 The parties also agreed that the amounts to be paid by the G.I.E to Gco under the Construction Agreement (as well as the amounts paid by Gco to the G.I.E. under the Lease) would be increased commensurately as a result of the cost overruns referred to above.
19.3 As it currently stands, (a) Gco owes approximately US$XXXXXXXXXX to XXXXXXXXXX under the terms of the non-interest-bearing loans referred to in 19.1 above, and (b) the G.I.E. owes approximately US$XXXXXXXXXX to Gco under the terms of the Construction Agreement as modified pursuant to the agreement referred to above. Each of these amounts is anticipated to increase to approximately US$XXXXXXXXXX in the near future.
B. Paragraphs 20 and 21 of the Original Ruling are replaced by the following:
20. XXXXXXXXXX now proposes to make a supplementary financing by means of the same basic method contemplated in the 2004 Tax Ruling in relation to between XXXXXXXXXX % and XXXXXXXXXX % of the amounts owing by the G.I.E to Gco referred to in paragraph 19.3 above. The possibility of such supplementary financing was discussed in paragraphs 17 and 18 of the 2004 Tax Ruling. The remainder, if any, of the above referenced amounts will be financed by the XXXXXXXXXX Investors by means of the XXXXXXXXXX Loan.
21. The proposed supplementary financing by XXXXXXXXXX will be effected as follows:
(a) XXXXXXXXXX will make an equity contribution in US LLC either with cash from its operations or with borrowed money, or some combination thereof, in an amount sufficient to enable US LLC to make the New G Act Loan;
(b) US LLC will then make the New G Act Loan to G.I.E. on condition that G.I.E. use the borrowed money to fund the cost overruns relating to the G Act Assets and a small portion of the related transaction costs;
(c) the G.I.E. will then use the funds received from US LLC to pay the amounts owing to Gco under the Construction Agreement; and
(d) Gco will then use the funds received from the G.I.E. to repay the amounts owing to XXXXXXXXXX under the terms of the non-interest-bearing loans described in 19.1 and 19.3 above.
C. The words "Provided that Gco remains a "controlled foreign affiliate" (within the meaning of that term in subsection 17(15) of the Act) of XXXXXXXXXX ," are added immediately before the existing wording of Ruling C.
We confirm that the rulings given in the Original Ruling, as amended by this letter, will continue to be binding on the Canada Revenue Agency ("CRA") subject to the same limitations and qualifications set out therein provided that the proposed transactions are completed by XXXXXXXXXX .
Yours truly,
XXXXXXXXXX
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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© Her Majesty the Queen in Right of Canada, 2009
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