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: Clarification of our earlier letter (document 2012-044047) in which we provided the opinion that administrative penalties paid by an emitter for failing to rectify non-compliance with the Alberta's Climate Change legislation would not be deductible for ITA purposes because of section 67.6 of the ITA.
Position: Alberta's Climate Change legislation provides taxpayers the opportunity to comply with emission targets through the use of credits. Payments made to obtain credits in order to comply with the legislation are different than penalties paid for non-compliance. The payment of a penalty for non-compliance is not deductible due to section 67.6 of the ITA
Reasons: Wording of the legislation
XXXXXXXXXX
2012-046262
L. Zannese
(613) 941-0782
September 28, 2012
Dear XXXXXXXXXX:
Re: Payments Pursuant to Alberta’s Greenhouse Gas Legislation
We are writing further to our letter dated July 10, 2012 (our document 2012-044047) in order to clarify our position with respect to the tax consequences of administrative penalties paid pursuant to Alberta’s climate change legislation.
As you know, certain taxpayers (“Emitters”) are subject to emission limits established by the Province of Alberta’s Climate Change and Emissions Management Act and its regulations. Emitters are required to reduce their greenhouse gas emissions by a prescribed amount each year. An Emitter that has exceeded its emission limit for the year can still meet this limit by taking certain compliance measures within a prescribed time period. For example, under section 8 of the Specified Gas Emitters Regulation, an Emitter may obtain credits by contributing money to the Climate Change and Emissions Management Fund (the “Fund”). The Emitter can then use the credits to satisfy its emission limit for a particular year by submitting the credits to the Province of Alberta. Since contributions to the Fund under section 8 of the Specified Gas Emitters Regulation are not penalties, section 67.6 of the Income Tax Act (the “Act”) will not apply to preclude the deductibility of these contributions made by the Emitters.
Where an Emitter does not take compliance measures within the prescribed time period to satisfy its emission limit, the Emitter is subject to administrative penalties under both the Climate Change and Emissions Management Act and its regulations. As stated in our previous letter, the amounts described as penalties under the Climate Change and Emissions Management Act and its regulations are not deductible in computing income due to the application of section 67.6 of the Act.
We hope that this clarifies our position.
Yours truly,
Fiona Harrison, C.A.
Manager
Resources Section
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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