9 February 2010 Ministerial Correspondence 2010-0353831M4 - HRTC - Eligible Expenditures

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: (1) Renovation work is projected to be completed after January 31, 2010. Will all of the work completed by January 31, 2010 qualify for the HRTC? (2) Will fees for engineering and construction management qualify for the HRTC? (3) Are expenses generally associated with a construction site eligible for the HRTC?

Position: (1) Yes, qualifying expenditures will be limited to the cost of goods acquired and services received during the eligible period. (2) They will qualify if they are directly attributable to a qualifying renovation by the strata corporation. (3) They will qualify if they are made or incurred by the strata corporation during the eligible period, directly attributable to a qualifying renovation by the strata corporation during, and have not otherwise been included in any other expenses claimed for the HRTC.

Reasons: Subsection 118.04(1) - definitions of qualifying expenditure, and eligible period; Paragraph 118.04(2)(a) - rules of application

XXXXXXXXXX

Dear XXXXXXXXXX :

Mrs. Lyse Ricard, Deputy Commissioner of the Canada Revenue Agency (CRA), has asked me to reply to your correspondence received on January 7, 2010, regarding the eligibility of your strata corporation's expenditures for the new home renovation tax credit (HRTC).

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 eligible 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.

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. Therefore, any housing unit that an individual owns and uses personally, including a home and a cottage, qualifies for the HRTC.

If the conditions outlined above are met for a renovation project that is completed after January 31, 2010, qualifying expenditures will be limited to the cost of goods acquired and services received during the eligible period. Fees for engineering and construction management services will qualify for the HRTC if they are directly attributable to a qualifying renovation by the strata corporation and were not made or incurred under the terms of an agreement entered into before the eligible period.

Expenses generally associated with the operation of a construction site, such as site office rental and site sanitation rental, will qualify for the HRTC if the following conditions are met:

• they are made or incurred by the strata corporation during the eligible period;
• they are directly attributable to a qualifying renovation by the strata corporation;
• and
• they have not otherwise been included in any other expenses claimed for the HRTC.

You are correct about the strata corporation's obligation to provide a statement to each unit owner that identifies the corporation's qualifying expenditures and the owner's share of those expenditures. The statement should be signed by an authorized individual and clearly identify the vendors and contractors, their business addresses, and, if applicable, their goods and services tax/harmonized sales tax registration numbers. The statement must also include a description of the work performed and the dates when the work or services were provided.

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

I trust that the information I have provided is helpful.

Sincerely,

Brian McCauley
Assistant Commissioner
Legislative Policy and
Regulatory Affairs Branch

William King
(905) 721-5194
2010-035383