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: "Approved" status requested for the XXXXXXXXXX.
Position: Approval recommended.
Reasons: Information submitted meets the conditions for approval, as set out in Application Policy Paper 96-10 which provides certain requirements to be met in respect of (a) SR&ED, (b) facilities and personnel (c) non-profit status (d) the public as beneficiary and (e) adequate funding for the SR&ED activities. These requirements are described in this letter.
January 16, 2013
This is in reply to your letter of June 29, 2012 which you requested that the XXXXXXXXXX ("Institute") be designated as an approved research institute for the purposes of clause 37(1)(a)(ii)(B) of the Income Tax Act ("Act").
The Minister's authority to grant or deny approval status is exercised pursuant to subsection 37(7) of the Act and is based on the information provided and representations made by the particular entity, its officers or directors and/or its authorized representatives. Changes in the organization or the activities carried on by the entity may affect its status as an approved entity.
Based on the information you submitted, XXXXXXXXXX, my understanding of the facts is as follows:
1. The Institute, XXXXXXXXXX, was incorporated as a not-for-profit corporation without share capital by Letters Patent dated XXXXXXXXXX.
2. The Institute was established to engage in research to facilitate the delivery of XXXXXXXXXX. The Institute supports scientists who contribute to the relevant and practical knowledge in XXXXXXXXXX. The Institute's basic objects, as described in its Letters Patent, are as follows:
- To conduct research in the areas of XXXXXXXXXX and disseminate the results of that research to the public as well as to professionals working in those areas.
- To provide and assist in the coordination of education programs for XXXXXXXXXX, researchers and students in the fields of XXXXXXXXXX.
- To create partnerships between service providers and faculty working in the areas of XXXXXXXXXX to develop new knowledge, evidence and education programs and to transfer knowledge pertaining to those areas to people working in all levels of XXXXXXXXXX and system development.
- To collaborate with universities, XXXXXXXXXX research centres and other organizations having similar or complimentary interests to stimulate research and education in the fields of XXXXXXXXXX.
3. As a not-for-profit corporation, the Institute's activities must be carried on without the purpose of gain for its members and any profits or other accretions to the corporation shall be used in promoting its objects. The directors of the Institute must also serve without remuneration and no director may receive any profit from his or her position. Directors may, however, be reimbursed for reasonable expenses incurred by them in the performance of their duties. You maintain that the Institute currently qualifies as a "not-for-profit organization" within the meaning of paragraph 149(1)(1) of the Act and is expected to continue to be operated, in such a manner.
4. The Institute does not, nor will it, own or control any other corporation or entity. Further, upon the dissolution of the Institute and after payment of all debts and liabilities, any remaining property shall only be distributed, or disposed of, to an entity that is a "registered charity" within the meaning of that term in subsection 248(1) of the Act.
5. You also maintain that the Institute's only activities have and will unquestioningly fall within the meaning of "scientific research and experimental development" ("SR&ED"), as that term is defined in subsection 248(1) of the Act, and none of the SR&ED conducted by the Institute, even when partnering with the industry or other third parties, is considered to be domain SR&ED restricted (in perpetuity) where the results may not be divulged to the general public. The results of any successful SR&ED undertaken by the Institute will also be made available to benefit the general public. In some cases, while release of the SR&ED results may be delayed and specific third party intellectual property rights may be protected, as per mutual agreement with the particular sponsoring third party contributor, the SR&ED results or related information will be made available publically by the Institute via annual reports, conference presentations, and other forms of knowledge transfer. Secondary benefits (i.e., more general) from the SR&ED carried on by the Institute are accrued to the general public through job creation, student and researcher training, growth of Canadian small businesses, research capacity growth in universities and community sustainability. Currently there are in excess of XXXXXXXXXX SR&ED projects being pursued by the Institute.
6. The Institute receives funding in the form of various federal and provincial grants as well as from various industrial and commercial third party contributors that fund specific SR&ED, including but not limited to: XXXXXXXXXX, charitable foundations and universities. These industrial and commercial third party contributors are entitled to exploit the specific results from the SR&ED that they sponsor. The exact nature of how such SR&ED results may be divulged to the general public is negotiated between the Institute and the particular third party contributor(s) and included in the terms of the particular agreement between the parties.
7. The management structure of the Institute facilitates the undertaking of SR&ED in an effective manner, with SR&ED projects being led by Research Program Directors, each having significant scientific expertise and experience in XXXXXXXXXX and who serve as the direct SR&ED and knowledge transfer link for numerous university professors and other researchers working with the Institute or research centres. The Institute reports to a Board of Directors on strategic matters and to a Research Management Committee on technical/scientific matters. Research Program Directors report to its President, who also engages other research institutions, mostly at the level of Dean, Vice President and President. The Institute's President and/or Research Directors also direct research projects involving post-graduate students and professors, post-doctoral fellows, and other researchers. In order to be relevant to its stakeholders (industry, government and academia), care has been taken to ensure the Institute's Board of Directors and members comprising its various committees include sufficient industry representation while providing opportunities for universities to generate new knowledge of public and industry benefit, to train students and facilitate skill building in junior researchers.
8. Pursuant to an Affiliation Agreement and Memorandum of Understanding dated XXXXXXXXXX, between XXXXXXXXXX and XXXXXXXXXX, the parties have agreed and or acknowledged inter alia, that XXXXXXXXXX teaching staff, students and research fellows may actively participate in the SR&ED activities carried out by the Institute and that the XXXXXXXXXX will make such staff available for SR&ED activities carried out by the Institute.
9. The Institute XXXXXXXXXX has access to computer resources at the XXXXXXXXXX. The Institute is located in XXXXXXXXXX. The Institute also has access to teaching staff, students and research fellows of other collaborating Canadian universities.
10. The Institute owns or has access to all necessary equipment required for conducting SR&ED including equipment located at XXXXXXXXXX.
Provided that the above statements constitute a complete and accurate disclosure of all of the relevant facts, and provided that the Institute continues to operate as an NPO conducting SR&ED as described above, I am pleased to advise that, pursuant to the authority granted under subsection 37(7) of the Act, the Institute is hereby approved as an approved research institute for the purposes of clause 37(1)(a)(ii)(B) of the Act.
Legislative Policy and Regulatory Affairs Branch
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