25 June 1998 Internal T.I. 9807367 - LOGGING AND INVESTMENT TAX CREDITS

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

June 25, 1998

	Ted Fitz-Clarke	Resource Industries Section
	Technical Business Services	Denise Dalphy
	Client Services Division	(613) 957-9231
	Vancouver TSO
	980736

Logging Tax Credits and Investment Tax Credits

This is in reply to your FAX of March 23, 1998 wherein you forwarded a letter from XXXXXXXXXX which requests the Department’s views on the interaction between subsections 127(1) and (5) of the Income Tax Act (the “Act”). In particular, our interpretation is sought on the ordering of these deductions.

Both subsection 127 (1) of the Act, the logging tax credit, and subsection 127(5) of the Act, the investment tax credit, begin with the same words: “There may be deducted from tax otherwise payable by a taxpayer under this Part... (emphasis added)”. Former subsection 127(17) defined “tax otherwise payable” to carve out 127(5) and 120.1 and 120.2 amounts for the purpose of applying this phrase for section 127 of the Act; however, this subsection was repealed for taxation years that begin after 1993. “Tax otherwise payable” is defined in subsection 117(1), however it merely provides: “For the purposes of this Division, except..., tax otherwise payable under this Part and tax under this Part shall be computed as if this Part were read without reference to Division E.1.”

Both subsections 127(1)( and 127(5) of the Act are permissive deductions and the Act does not provide for an ordering of these deductions. In our view, if one particular ordering is more beneficial to a taxpayer than another ordering, the wording of the Act is broad enough to permit such ordering.

Please contact the writer if we can be of further assistance.

for Director
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Division
Policy and Legislation Branch