30 November 1990 Ruling 901081 F - Ontario "SR&ED" Superallowance

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.

19(1)

November 30, 1990

Dear Sirs:

Re:  Ontario Scientific Research and Experimental Development ("SR&ED") Superallowance (the "Superallowance")        

We are writing in reply to your letter of June 6, 1990 wherein you requested a technical interpretation of the applicability of paragraphs 37(1)(d) and 12(1)(x) of the income Tax Act to the Superallowance.

The Superallowance provides corporations with a deduction in calculating income for Ontario income tax purposes. The deduction is based on a percentage of amounts spent on eligible SR&ED expenditures. Although draft legislation is available, the Superallowance has not been passed into law. Paragraph 37(1)(d) requires a taxpayer to reduce its pool of qualified expenditures by the amount of government assistance or non-government assistance in respect of the qualified expenditures that, at the time of filing the return of income for the year, the taxpayer has received, is expected to receive or may reasonably be expected to receive. Subsection 127(9) defines "government assistance" as assistance from a government, municipality or other public authority whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance other than as a deduction under subsection (5) or (6). Subsection 127(9) defines "non-government assistance" as an amount that would be included in income by virtue of paragraph 12(1)(x) if that paragraph were read without reference to subparagraphs (vi) and (vii) thereof. Amounts are included in income under paragraph 12(1)(x) where an amount can reasonably be considered to have been received "(iii) as an inducement, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of assistance, or (iv) as a reimbursement, contribution, allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of assistance, in respect of the cost of the property or in respect of an expense". You have noted that these provisions are very broad and you question whether the proposed Superallowance will reduce the pool of qualified expenditures by virtue of paragraph 37(1)(d).

Neither the proposed Superallowance nor the related provincial tax savings will be viewed as government or non-government assistance for purposes of paragraph 37(1)(d). In addition, the proposed Superallowance and its related tax savings will not be considered as government assistance for purposes of paragraph 12(1)(x) or subsection 13(7.1).

We trust that these comments will be of assistance.

Yours truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch