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: Whether waste generated from forestry operations, regulated forest management activities, or construction and demolition activities is included in the definition of "wood waste".
Position: Question of fact.
Reasons: “Wood waste” would generally mean an unwanted material or by-product that would otherwise be discarded and that consists of the substance that is found in parts of trees, shrubs, etc. Material salvaged from each of the activities outlined above could be captured by the definition of “wood waste” in subsection 1104(13) of the Regulations, provided that it is waste and that it has maintained its physical and chemical properties of wood. However, whether any particular material is waste that meets these conditions is a question of fact that can only be resolved on a case-by-case basis.
XXXXXXXXXX 2023-100006
Michael Sims
June 24, 2024
Dear XXXXXXXXXX:
Re: Meaning of “wood waste”
This is in reply to your email dated November 30, 2023, wherein you asked for clarification on the meaning of “wood waste”. In particular, you enquired as to whether the definition includes waste generated from:
1) forestry operations, including slash piles,
2) provincially/territorially regulated forest management activities that support improving the health of forest stands and forest fire resiliency (e.g., residues from stand thinning, salvaged wood from fire/pest affected stands, residues from fire smarting), and
3) construction and demolition activities.
Our Comments
This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.
Overview
Subsection 1104(13) of the Regulations (footnote 1) sets out the definition of “wood waste” as follows:
wood waste includes scrap wood, sawdust, wood chips, bark, limbs, saw-ends and hog fuel, but does not include spent pulping liquor and any waste that no longer has the physical or chemical properties of wood.
The definition includes certain materials and by-products and specifically excludes both “spent pulping liquor” and “any waste that no longer has the physical or chemical properties of wood”. The definition itself does not specifically include or exclude any source from which the waste is generated.
Based on a textual, contextual and purposive approach to interpreting the meaning of “wood waste”, it is our view that there is no inherent limitation to the activity or process from which the waste is generated. However, the material or by-product being generated must be considered “waste” and it must still have the physical and chemical properties of “wood”.
Definitions of “wood”
The Oxford English Dictionary defines “wood” as “[t]he substance of which the roots, trunks, and branches of trees or shrubs consist; trunks or other parts of trees collectively (whether growing or cut down ready for use)”. (footnote 2)
The Cambridge Online Dictionary defines “wood” as “a hard substance that forms the branches and trunks of trees and can be used as a building material, for making things, or as a fuel”. (footnote 3)
The Merriam-Webster Online Dictionary defines “wood” as “the hard fibrous substance consisting basically of xylem that makes up the greater part of the stems, branches, and roots of trees or shrubs beneath the bark and is found to a limited extent in herbaceous plants”. (footnote 4)
Definitions of “waste”
The Oxford English Dictionary defines “waste” as “[r]efuse matter; unserviceable material remaining over from any process of manufacture; the useless by-products of any industrial process; material or manufactured articles so damaged as to be useless or unsaleable”. (footnote 5)
The Cambridge Online Dictionary defines “waste” as “unwanted matter or material of any type, especially what is left after useful substances or parts have been removed”. (footnote 6)
The Merriam-Webster Online Dictionary defines “waste” as “damaged, defective, or superfluous material produced by a manufacturing process: such as (1) material rejected during a textile manufacturing process and used usually for wiping away dirt and oil, (2) scrap, and (3) an unwanted by-product of a manufacturing process, chemical laboratory, or nuclear reactor”. (footnote 7)
Conclusion
Taken together, it appears as though “wood waste” would generally mean an unwanted material or by-product that would otherwise be discarded and that consists of the substance that is found in parts of trees, shrubs, etc. Whether any waste meets these conditions is a question of fact that can only be resolved on a case-by-case basis.
Based on the foregoing, material salvaged from each of the activities outlined above could be captured by the definition of “wood waste” in subsection 1104(13) of the Regulations, provided that it is waste and that it has maintained its physical and chemical properties of wood.
We trust that these comments will be of assistance.
Yours truly,
Kimberley Wharram
Manager, Resources Section
for Division Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
FOOTNOTES
Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:
1 Income Tax Regulations, C.R.C., c.945, as amended (the “Regulations”)
2 Available at: https://www.oed.com/dictionary/wood_n1?tab=meaning_and_use#14267387
3 Available at: https://dictionary.cambridge.org/dictionary/english/wood
4 Available at: https://www.merriam-webster.com/dictionary/wood
5 Available at: https://www.oed.com/dictionary/waste_n?tab=meaning_and_use#15000620
6 Available at: https://dictionary.cambridge.org/dictionary/english/waste
7 Available at: https://www.merriam-webster.com/dictionary/waste
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