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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Investment Tax Credit - Grain Storage Bins and Silos
This is in reply to your letter dated March 29, 1993 wherein you requested our opinion on whether grain storage bins included in class 6 of Schedule II of the Income Tax Regulations (the "Regulations") and silos which are included in class 8(d) of Schedule II of the Regulations are "qualified property" for the purpose of the investment tax credit provided in subsection 127(5) of the Income Tax Act (the "Act").
In your letter you seem to suggest that a "prescribed building" will not be a "qualified property" for the purpose of the investment tax credit unless it is also a "prescribed machinery or equipment" as defined in subsection 4600(2) of the Regulations.
Buildings and silos acquired after June 23, 1975 and described in subsection 4600(1) of the Regulations are "qualified property" for the purpose of the investment tax credit provided, among other things, they are used in Canada primarily for one of the purposes mentioned in paragraph (c)(i) to (xiii) of the definition of "qualified property" in subsection 127(9) of the Act. Those buildings and silos do not need to be "prescribed machinery or equipment" to be classified as "qualified property" for the purpose of the investment tax credit.
Thus, if a grain storage bin that is a building or a silo, is a property of class 6 or class 8(d) of Schedule II of the Regulations, it will be a "qualified property" for the purpose of the investment tax credit if it is used for the purpose of storing grain. Such building or silo will give rise to an investment tax credit at the "specified percentage" mentioned in subsection 127(9) of the Act that is, generally, 0% for property acquired after 1988.
On the other hand, "qualified property" that are not "prescribed machinery or equipment" described in subsection 4600(2) of the Regulations will not be eligible to the proposed 10% investment tax credit in respect of "qualified small-business property" that was announced on December 2, 1992 by the Honourable Don Mazankowski, then Finance Minister, in his Economic Statement. Bill C-136, which was tabled in response to the above-mentioned economic statement, proposes an amendment to subsection 127(9) of the Act to add the following definition of the expression "qualified small-business property" for the purpose of the proposed 10% investment tax credit:
""qualified small-business property" means property, acquired by a taxpayer who was an eligible taxpayer at the time the property was acquired, that, if this subsection were read without reference to subsection (11.2), would be
...
(c) qualified property of the taxpayer if the definition "qualified property" were read without reference to paragraphs (a) and (d) of it and if the reference to "after June 23, 1975" were read as a reference to "after December 2, 1992 and before 1994",
..."
As you mentioned in your letter, oil and water tanks are mentioned in subsection 4600(2) of the Regulations while grain storage bins and silos are not. Thus, the acquisition of oil and water tanks could, if the Bill C-136 is adopted, give rise to a 10% investment tax credit while the acquisition of grain storage bins and silos would not. If you have any concern with this differential tax treatment, we suggest you write to the Department of Finance.
We trust that these comments will be of assistance to you.
Yours truly,
for Director Manufacturing Industries, Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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