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.
Principal Issues: "Approved" status requested XXXXXXXXXX.
Position: Approval recommended.
Reasons: Information submitted meets the conditions for approval, as set out in Application Policy Paper 96-10 which provides certain requirements to be met in respect of (a) SR&ED, (b) facilities and personnel (c) non-profit status (d) the public as beneficiary and (e) adequate funding for the SR&ED activities. These requirements are described in this letter.
July 6, 2012
XXXXXXXXXX 2012-043384
Charles Rafuse
613-247-9237
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
Request for "Approved" Status under Section 37 of the Income Tax Act
This is in reply to your letter of January 3, 2012 and your other correspondence, in which you requested that the XXXXXXXXXX (“Institute”) be designated as approved research institute for the purposes of clause 37(1)(a)(ii)(B) of the Income Tax Act (“Act”).
The Minister’s authority to grant or deny approval status is exercised pursuant to subsection 37(7) of the Act and is based on the information provided and representations made by an entity at the time the entity applies for such approval. Changes in the organization or the activities of an entity may affect its status as an approved entity.
Based on the information you submitted, my understanding of the facts is as follows:
1. The Institute was incorporated as a not-for-profit corporation without share capital by Letters Patent dated XXXXXXXXXX. The Institute is the XXXXXXXXXX and became active on XXXXXXXXXX. The XXXXXXXXXX is a “registered charity” within the meaning of that term in subsection 248(1) of the Act and its charitable registration number is XXXXXXXXXX.
2. XXXXXXXXXX of the Institute’s Letters Patent sets out the Institute’s object to be to “XXXXXXXXXX”. The sole purpose of the Institute is to engage in all forms of “scientific research and experimental development” (“SR&ED”) activities, as that term in subsection 248(1) of the Act, in the XXXXXXXXXX and related fields and XXXXXXXXXX processes, practices and procedures of all kinds and to provide facilities for such research.
3. The Institute’s SR&ED activities will be carried on at the research space at the XXXXXXXXXX which is currently approximately XXXXXXXXXX square feet XXXXXXXXXX.
4. The majority of the Institute’s XXXXXXXXXX researchers are members of the XXXXXXXXXX. The XXXXXXXXXX and the XXXXXXXXXX have entered into an Affiliation Agreement. There are between XXXXXXXXXX researchers and XXXXXXXXXX research staff within the XXXXXXXXXX engaging in various research projects annually. The XXXXXXXXXX is a “registered charity” within the meaning of that term in subsection 248(1) of the Act and its charitable registration number is XXXXXXXXXX.
5. XXXXXXXXXX
6. As one example of the equipment used in SR&ED activities, a XXXXXXXXXX research scientist whose area of expertise is XXXXXXXXXX will have sufficient equipment contained within their research space for: XXXXXXXXXX. The research scientist will also have access to a XXXXXXXXXX and computer equipment including, research software.
7. The Institute is organized and will be operated as a not-for-profit organization, with no part of its income being payable or otherwise made available for the personal benefit of any member or shareholder thereof. Pursuant to XXXXXXXXXX of the Institute’s Letters Patent, the Institute must carry on its operations without pecuniary gain to its members and any profits or other accretions to the Corporation are to be used in promoting its objects. Moreover, pursuant to XXXXXXXXXX of the Institute’s By-laws, the Institute’s directors must serve as such without remuneration and no director shall directly or indirectly receive any profit from his/her positions as such. However, a director may be paid or reimbursed for reasonable expenses incurred by the director in the course of performing his or her duties.
8. The Institute does not, and will not, own or control any other corporation or entity.
9. None of the SR&ED to be conducted, even when partnering with the industry or other third parties, is restricted to domain research and development where the results may not be divulged to the general public. Moreover, in accordance with XXXXXXXXXX of the Institute’s Letters Patent, the Institute’s object is to carry on its SR&ED activities for the benefit of the general public and thus, ultimately, for the enhancement of XXXXXXXXXX. That is, the general public will be the beneficiary of the results of any successful research.
10. In the event of the dissolution or winding-up of the Institute, XXXXXXXXXX of the Institute’s Letters Patent provides that all the Institute’s remaining assets after payment of its liabilities shall be distributed to the XXXXXXXXXX, including any successor thereto. Accordingly, upon any dissolution or winding-up of the Institute, its remaining net assets will only be distributed to an entity that meets the definition of a “registered charity” within the meaning of that term in subsection 248(1) of the Act.
11. The Institute will fund its activities through a variety of sources. Pursuant to XXXXXXXXXX of the Institute’s Letters Patent, the Institute may solicit and receive donations, bequests, legacies, and grants, and to enter into agreements, contracts and undertakings incidental thereto. In addition, pursuant to the Affiliation Agreement with the XXXXXXXXXX, the majority of research funds are to be administered (received) by the XXXXXXXXXX. Funds that are transferred from the XXXXXXXXXX to the XXXXXXXXXX research accounts and/or received directly by the XXXXXXXXXX research accounts from granting agencies/sponsors/donors will be held in Research Restricted Accounts. These accounts are intended to hold funds received from indirect costs associated with research agreements/contracts, unencumbered balances from completed contracts/grants/agreements, donations/gifts/endowments for the purpose of research, and funds provided by internal/external funding sources for the support of research activities. Together, the XXXXXXXXXX and the XXXXXXXXXX receive more than $XXXXXXXXXX per year in XXXXXXXXXX related research funding from external sources, approximately XXXXXXXXXX of which supports research carried out at the XXXXXXXXXX.
Approval
Provided that the above statements constitute a complete and accurate disclosure of all of the relevant facts, and the Institute continues to operate in the manner described above, I am pleased to advise that, pursuant to the authority granted under subsection 37(7) of the Act, the Institute is hereby approved as an approved research institute for the purposes of clause 37(1)(a)(ii)(B) of the Act.
Yours sincerely,
Brian McCauley
Assistant Commissioner
Legislative Policy and Regulatory Affairs Branch
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