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 by XXXXXXXXXX that will assume the activities carried out by XXXXXXXXXX , conducting more than $XXXXXXXXXX in research annually.
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, respectively, in this letter at (i) paragraphs 1, 2, 5, 6, and 7, (ii) paragraph 1, 3, 4 and 5, (iii) paragraphs 8, 9 and 10, (iv) paragraphs 2, 11, 12, 13, 14, and 15 (v) paragraphs 16 and 17.
XXXXXXXXXX
2010-037381
Charles Rafuse
613- 247-9237
September 28, 2010
Dear XXXXXXXXXX :
Re: XXXXXXXXXX
Request for "Approved" Status under Section 37 of the Income Tax Act
This is in reply to your letter of June 30, 2010, in which you requested that your client, 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).
My understanding of the facts is as follows:
Facts
1. The Institute was incorporated as a corporation without share capital by Letters Patent dated XXXXXXXXXX . Effective XXXXXXXXXX , the Institute will assume the activities that are currently carried out by a division (the "Division") of XXXXXXXXXX . The Division is XXXXXXXXXX conducting more than $XXXXXXXXXX in scientific research annually. XXXXXXXXXX is a research intensive XXXXXXXXXX fully affiliated with the XXXXXXXXXX . On XXXXXXXXXX , substantially all of the assets of XXXXXXXXXX used in the operation of the Division will be transferred to the Institute as a gift.
2. Article XXXXXXXXXX of the Institute's Letters Patent sets out the Institute's object to be to "(c)arry on or promote XXXXXXXXXX scientific research and experimental development (including basic and XXXXXXXXXX research to produce scientific knowledge that contributes to the XXXXXXXXXX ) at, or in conjunction with, XXXXXXXXXX and the XXXXXXXXXX , for the benefit of the general public". The Institute will in fact carry on activities that fall unquestionably within the definition of the expression "scientific research and experimental development" (SR&ED) in subsection 248(1) of the Act.
3. The Institute's SR&ED activities will be carried on at the same locations at which the Division carries on its activities, namely:
XXXXXXXXXX
4. The space used for SR&ED at the XXXXXXXXXX location currently comprises XXXXXXXXXX square feet, with more than XXXXXXXXXX square feet of additional space to be added by XXXXXXXXXX . The Institute and XXXXXXXXXX will enter into a lease agreement effective XXXXXXXXXX , whereby the Institute will be entitled to continue to use the space at all XXXXXXXXXX locations to carry on its SR&ED activities. The lease agreement will provide for rent payment rates that do not exceed commercial rates.
5. The Institute will use the same cutting-edge equipment as is currently being used or available for use to the Division to carry on its SR&ED activities. All such equipment will be transferred or made available to the Institute. Some equipment will have to remain with XXXXXXXXXX because of legislation related to XXXXXXXXXX and will be rented to the Institute at rates that do not exceed commercial rates. Below are examples of the equipment that the Institute will use:
XXXXXXXXXX
6. As is currently the case with the Division, to carry on its SR&ED activities the Institute will have over XXXXXXXXXX scientists and XXXXXXXXXX -scientists, with a total of over XXXXXXXXXX research staff (including more than XXXXXXXXXX support staff and XXXXXXXXXX trainees - XXXXXXXXXX and students). XXXXXXXXXX of these scientists currently hold Canada Research Chairs, one of the most prestigious research awards granted by the federal government.
7. Each scientist is aligned with one of following XXXXXXXXXX research disciplines and is affiliated with one or more of the following XXXXXXXXXX research programs:
XXXXXXXXXX
8. 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 Paragraph XXXXXXXXXX of Article XXXXXXXXXX of the Institute's Letters Patent, where the Institute is referred to as the "Corporation", "(t)he Corporation shall be carried on without the purpose of gain for its members and any profits or other accretions to the Corporation shall be used in promoting its objects." Pursuant to Paragraph XXXXXXXXXX of Article XXXXXXXXXX , "(t)he directors shall serve as such without remuneration and no director shall directly or indirectly receive any profit from their positions as such, provided that directors may be paid reasonable expenses incurred by them in the performance of their duties."
9. The Institute's by-laws will reflect that the Institute does not have any authority to acquire control of other institutions.
10. In the event of the dissolution or winding-up of the Institute, its remaining net assets will be distributed to an entity that meets the definition of "charitable organization" or "charity" in subsection 149.1(1) of the Act. Paragraph XXXXXXXXXX of Article XXXXXXXXXX of the Institute's Letters Patent states that "(i)n the event of the dissolution or winding-up of the Corporation, all its remaining assets after payment of its liabilities shall be distributed to XXXXXXXXXX provided that at the time of such dissolution or winding-up of the Corporation, XXXXXXXXXX is a charitable organization, or if not, or if XXXXXXXXXX has ceased to exist, to one or more charities registered under the Income Tax Act (Canada), as amended from time to time or equivalent designation under such legislation, in Canada."
11. As indicated above, in accordance with Article XXXXXXXXXX of its Letters Patent, the Institute's object to carry on or promote XXXXXXXXXX SR&ED is 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.
12. The scientists who will be transferred to the Institute and who are currently with the Division, extensively publish articles about their research and their results XXXXXXXXXX
13. None of the research conducted, even when partnering with the industry or other third parties, is restricted domain research and development where the results may not be divulged to the general public.
14. The Institute will be, as the Division has been, dedicated to ensuring that the results of its research lead to tangible positive impacts for the public, and as such will continue partnering with industry through licensing technology to companies. The Division has been issued more than XXXXXXXXXX patents and is holding more than XXXXXXXXXX active licenses. The Institute will continue to pursue arrangements of this nature.
15. All industrial and commercial contributors of funding for scientific research and experimental development carried on by the Institute (as is the case with the Division) will be entitled to exploit the results that they sponsor. The exact nature of how such results are exploited will be negotiated between the Institute and the contributor(s) and will be included in the terms of the particular agreement between them. This is consistent with the current arrangements of the Division.
16. The Institute will fund its activities through a variety of sources. Pursuant to Subparagraph XXXXXXXXXX of Article XXXXXXXXXX of the Institute's Letters Patent, the Institute may "solicit and receive and maintain a fund or funds from solicitations, donations, bequests, devises, legacies, gifts, grants, or benefit of trusts and to enter into agreements, contracts and undertakings incidental thereto".
17. Accordingly, as is currently the case with the Division, the Institute will rely on grants and/or contracts from all levels of government including but not limited to: XXXXXXXXXX ; as well as non-government sources including but not limited to XXXXXXXXXX foundations; charitable foundations and industry; to ensure sufficient funding to carry out its research activities. In addition, the Institute will rely on gifts from the XXXXXXXXXX and XXXXXXXXXX , and returns from research commercialization activities. The Institute's proposed operating budget for the next fiscal period ending on XXXXXXXXXX has $XXXXXXXXXX in revenues and expenditures.
18. In support of your request and enclosed with your letter, you provided the following documents in respect of the Institute:
(a) a copy of Letters Patent dated XXXXXXXXXX regarding XXXXXXXXXX , including the document titled "Schedule "XXXXXXXXXX " to Application for Incorporation of a Corporation Without Share Capital for XXXXXXXXXX ", and
(b) Appendix XXXXXXXXXX containing additional information regarding the Institute.
Approval Given
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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