5 June 2013 Roundtable, 2013-0490321M6 - AJCTC/ATTC - Government Assistance

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. For purposes of the apprenticeship job creation tax credit, whether an employer's otherwise eligible salaries and wages payable in the year in respect of its apprenticeship expenditure is reduced by the Ontario's apprenticeship training tax credit (ATTC) and 2. vice versa.

Position: 1. Yes. 2. No.

Reasons: 1. See comments. 2. For reasons given in XXXXXXXXXX.

MEMORANDUM TO FILE
Investment Tax Credit – Apprenticeship Expenditures
Federal AJCTC/Ontario ATTC – Government Assistance
2013-049032

Subject

On May 27, 2013, the Income Tax Rulings Directorate received an e-mail query from XXXXXXXXXX concerning the apprenticeship job creation tax credit ("AJCTC"). XXXXXXXXXX wanted to know if the Ontario Apprenticeship Training Tax Credit ("ATTC") is deducted from the employer's otherwise eligible apprenticeship expenditures in terms of computing the employer's eligible salaries and wages for purposes of the federal AJCTC.

Analysis

In general terms, the ATTC is a refundable tax credit available to Ontario businesses that hire and train apprentices in certain skilled trades. (footnote 1)

The ATTC is not reduced by the ITC. (footnote 2)

The AJCTC is a non-refundable federal tax credit. (footnote 3) The AJCTC is claimed by the taxpayer as an investment tax credit ("ITC") under subsection 127(5) of the Act to reduce taxable income for the year. (footnote 4) The ITC of a taxpayer at the end of a taxation year is defined in the Income Tax Act (Canada) ("Act") to include, inter alia, the total of all amounts each of which is an "apprenticeship expenditure" of the taxpayer for the taxation year in respect of an "eligible apprentice". (footnote 5) The taxpayer's apprenticeship expenditure is computed with reference to its "eligible salary and wages" payable in the taxation year to the eligible apprentice employed in the taxpayer's business carried on in Canada.

For purposes of applying the definition of ITC the amount of a taxpayer's eligible salary and wages for a taxation year is reduced by the amount of any government or non-government assistance that at the time of the filing of the taxpayer's income tax return, the taxpayer has received, is entitled to receive or can reasonably be expected to receive in respect of its eligible salary and wages for the year. (footnote 6) For this purpose, government assistance is assistance from a government, municipality or other public authority that includes, among other things, a deduction from tax (other than, inter alia, the ITC) such as the ATTC. (footnote 7)

To summarize, for federal income tax purposes, in applying the definition of ITC, if at the time of the filing of the taxpayer's income tax return for the year the taxpayer has received, is entitled to receive or can reasonably be expected to receive an amount of ATTC then as it relates to its apprenticeship expenditure for AJCTC purposes, the taxpayer's otherwise eligible salaries and wages is reduced accordingly. Conversely, for Ontario provincial income tax purposes, as mentioned above, the ATTC is not reduced by the AJCTC.

Contact/Resolution

On May 29, 2013, I called XXXXXXXXXX to discuss the above. He thanked me for the phone call and confirmed that a written reply from Rulings was unnecessary. A severed version of technical interpretation # 2009-033375 was sent to XXXXXXXXXX (see Appendix).

Since nothing further is required from Rulings, this file is now considered closed.

Tim Fitzgerald, CGA
Business Income and Capital Transactions Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Directorate
June 5, 2013

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 The ATTC is equal to a specified percentage (35% to 45%) of the eligible expenditures incurred by the corporation for a qualifying apprenticeship. The maximum credit for each apprentice is $10,000 per year to a maximum of $40,000 over the first 48 months of the qualifying apprenticeship.
2 In calculating the expenditure base for the ATTC, subsections 43.13(19) of the Corporations Tax Act (Ontario) and 89(19) of the Taxation Act, 2007 (Ontario) specifically exclude from the definition of government assistance any investment tax credit under section 127 of the ITA.
3 In very general terms, a taxpayer's apprenticeship expenditure [127(9) of the Act] in respect of an eligible apprentice is the lesser of $2,000 and 10% of the taxpayer's eligible salary and wages payable in the year to the eligible apprentice in respect of employment after May 1st, 2006.
4 Paragraph 12(1)(t) of the Act requires that the amount deducted as an ITC under subsection 127(5) should be included in computing the taxpayer's income for the taxation year following the year in which the credit is deducted to the extent that it was not included in computing income in a preceding taxation year pursuant to this paragraph or is not, among other possible things, used to reduce the capital cost of depreciable property. For more details see 2007-024462.
5 See paragraph 127(9)(a.4) of the definition of "investment tax credit" in the Act. Also defined in subsection 127(9) of the Act for purposes of the AJCTC, are the terms: "apprenticeship expenditure", "eligible apprentice" and "eligible salaries and wages".
6 See paragraph 127(11.1)(e.4) of the Act.
7 See definition of "government assistance" in subsection 127(9) of the Act.