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.
This is in reply to your memorandum of March 9, 1989, wherein you requested our views as to whether XXX qualifies for exemption under paragraph 149(1)(d) of the Income Tax Act (the "Act"). If XXX qualifies for exemption it would not be eligible for the refundable investment tax credit under section 127.1 of the Act.
We understand the share structure of XXX is as follows: XXX
Other relevant facts are as follows:
XXX
Our Views
We confirm our earlier opinion, expressed in our letter dated February 11, 1988 to XXX that where the 90% share ownership test is met but the corporation has the right to redeem its preferred shares, it could, for uses of subparagraph 149(1)(d) of the Act, be considered that "a person other than Her Majesty in right of Canada or a Province or a Canadian municipality had during the period, a right under a contract, in equity or otherwise either immediately or in the future and either absolutely or contingently, to, or to acquire, shares or capital of that corporation. As a result such a corporation would not qualify for exempt status by virtue of subparagraph 149(1)(d)(i) of the Act.
Our interpretation of subparagraph 149(1)(d)(i) is consistent with our understanding of the intent of that provision. We understand that subparagraph 149(1)(d)(i) is intended to preclude exempt status to a corporation which is financed or funded by a Province or Canadian municipality purchasing redeemable preferred shares.
It is our view that XXX would not qualify for exempt status under paragraph 149(1)(d) and would therefore not be precluded from qualifying for the refundable investment tax credit under section 127.1 of the Act. The provisions of section 127.1 of the Act specifically provide that refundable investment tax credit may be earned by a taxable corporation controlled by a tax-exempt entity. Consequently, the fact that XXX may qualify for the refundable investment tax credit is not in and by itself offensive.
We trust this will be of assistance to you.
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© Her Majesty the Queen in Right of Canada, 1989
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© Sa Majesté la Reine du Chef du Canada, 1989
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