4 January 2000 External T.I. 9912805 - GOVERNMENT ASSISTANCE - DEDUCTION FROM TAX

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.

Principal Issues: Whether a reduction, arising under the Potash Production Tax Regulations of Saskatchewan, to the "profit tax" otherwise payable by a producer of potash constitutes "government assistance" as defined in subsection 127(9).

Position: Unable to provide comments

Reasons: The above reduction is the subject of certain reassessments in respect of which the time period to appeal to the Courts has not yet expired. As such, in our view, it would be inappropriate to comment thereon.

					991280
XXXXXXXXXX 								A.A. Cameron
(613) 347-1361
Attention: XXXXXXXXXX  

January 4, 2000

Dear Sirs:

We are writing in response to your request for a technical interpretation with regard to the definition of the term "government assistance" found in subsection 127(9) of the Income Tax Act (the "Act") and certain provisions of the Potash Production Tax Regulations of Saskatchewan (the "Saskatchewan Regulations").

In particular, you have asked for our comments as to whether a reduction arising under paragraph 19(1)(c) of the Saskatchewan Regulations to the "profit tax" otherwise payable by a producer of potash would constitute "government assistance" as defined in subsection 127(9) of the Act. You have indicated that the above paragraph of the Regulations "...provides for a deduction equal to an amount not exceeding 40% of the approved research and development costs that: (i) are incurred by the producer during the year; and (ii) the producer has not deducted in determining its profits for the year."

Our Comments

The term "government assistance" is defined for the purposes of section 127 of the Act in subsection 127(9) thereof to mean:

...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).

As such, it is expressly recognized that "government assistance" for purposes of section 127 of the Act may take the form of a "deduction from tax". We would also note that, pursuant to subparagraph 12(1)(x)(iv) of the Act, an amount included in computing the income of a taxpayer for a taxation year under paragraph 12(1)(x) thereof may include "assistance" in the form of a "deduction from tax".

We understand that tax service offices have made certain reassessments under which the above reduction to the "profit tax" otherwise payable by a producer of potash under the Saskatchewan Regulations has been included in the producer's income pursuant to paragraph 12(1)(x) of the Act. In addition, we also understand that at this time the period of time in which those parties may file an appeal to the Courts in respect of the above reassessments has not yet expired.

Given the above reassessing action and that the appropriate treatment under the Act of the above reduction to the "profit tax" otherwise payable by a producer of potash under the Saskatchewan Regulations may soon be before the Courts, in our view, it would be inappropriate to comment further on this matter.

Please contact the writer if you have any questions with regard to the above.

Yours truly,

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