Words and Phrases - "fixture"
26 May 2022 External T.I. 2019-0813761E5 - Taxable Canadian property-solar and wind projects
Were Canadian-situs solar electric power generating projects (consisting of a leasehold interest, solar panels, steel racks and metal posts, and wires, inverters and transformers, collectively the “Solar Equipment”) and wind electric power generating projects (consisting of a leasehold interest, foundation. and wind turbine including tower) taxable Canadian property (TCP)?
In finding that the Solar Equipment consisted of fixtures and, thus, was TCP under para. (a) of the definition (referring to “real … property situated in Canada”), CRA first indicated:
The determination of whether or not an object has become a fixture requires consideration of the degree of annexation and the purpose of annexation. The Maple Ridge case [Royal Bank of Canada v. Maple Ridge Farmers Market Ltd., 1995 CanLII 896 (BC SC)] provided guidance for making the determination, which included the following:
- Any item which is unattached to the property, except by its own weight, and can be removed without damage or alterations to the fixtures or land that will need repair, is a chattel.
- Any item which is plugged in and can be removed without any damage or alteration is a chattel.
- Any item which is attached even minimally (i.e. it cannot simply be unplugged) is a fixture; an example given was that if an item requires the removal of screws, nails, bolts, detachment of plumbing, or the cutting and capping of hardwire, it will be a fixture.
- If a piece of equipment is attached to a structure, a part of which could be removed but which would be useless without the attached part, then the entire piece of equipment is a fixture. In other words, the item will be a fixture if it loses its essential character because it is of no use unless attached to a permanent and substantial improvement to the premises of which it formed part. ...
- In very exceptional circumstances not covered by these rules the court should have resort to the purpose test. For example, a mobile home may be resting on the land by its own weight but it may be clearly established that it was intended to be a fixture. These circumstances should only arise rarely and in relation to very large or expensive items.
CRA then stated:
[A]ny item which is attached even minimally (such as with screws or bolts) is a fixture and if a piece of equipment is attached to a structure, a part of which could be removed but which would be useless without the attached part, then the entire piece of equipment is a fixture. Solar panels would not lose their essential character nor be useless without the racking system however, they could not effectively function in the context of utility-scale power generation without the racking, which itself serves no purpose unless used with the attached framed solar panels. As all components of the Solar Equipment are attached to the land on which they are situated, it is our view that the Solar Equipment is described in paragraph (a) … .
The wind turbines also constituted fixtures and, thus, TCP. The above conclusions were obtained notwithstanding the requirement to remove the items upon termination of the leases.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxable Canadian Property - Paragraph (a) | commercial solar equipment and wind turbines were Canadian real estate and, thus, TCP | 441 |
7 April 2022 CBA Roundtable, Q.3
CRA confirmed that since appliances and common area furniture and equipment that are acquired in connection with the construction of, say, a residential complex such as an apartment building and which do not become fixtures, will be considered to have been acquired for the purpose of the intended exempt rental of the completed units, so that no input tax credits will be available. Regarding what is a fixture, it stated:
Whether personal property has become real property is a question of fact. Generally, if property is resting on its own weight or can be easily removed with no damage, such as unplugging an appliance, it would remain personal property. When personal property is even slightly attached, one has to consider both the degree and the object of the annexation to determine if personal property has become real property:
- The degree of annexation test generally involves the personal property being attached or connected to land or a building in a substantial manner, such as by nails or screws; the more firmly or irreversibly the personal property is affixed to the land or the building, the more likely it is to be regarded as a fixture.
- The object of the annexation test generally involves the purpose for which the personal property is attached or connected to the land. Generally, personal property is not regarded as a fixture where it is attached or connected to land for purposes of the enjoyment of the personal property. For example, the courts have long accepted that something which is affixed merely to facilitate its display, or in order to steady it, is not to be regarded as a fixture.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 191 - Subsection 191(3) | no ITCs for appliances acquired during the construction of a rental residential complex | 201 |
16 May 2017 External T.I. 2016-0670661E5 - Capital Cost of De-icing Equipment
New aluminum shingles with an electric cable (the “Equipment”) will be attached over existing asphalt shingles on the portion of a roof immediately beneath existing solar panels (which satisfy the conditions of s. (d)(vi) of Class 43.1)), so as to melt snow accumulations, which otherwise would hinder the functioning of the solar panels.. Would the cost of the Equipment be eligible for inclusion in Class 43.2?
After noting other more general requirements for the claiming of capital cost allowance, CRA stated:
Generally, if something is “related to” a particular subject it concerns that subject. … Thus, if the Equipment is necessary for the proper functioning of the existing photovoltaic equipment, it would likely be considered to be “related equipment”… .
…The test [of whether the Equipment is a fixture] asks whether an article is attached to another property to effect a permanent and substantial improvement of that other property or to enable more complete enjoyment and use of the first article. … In a situation where there is a dual or multiple purposes, the courts have considered what the dominant purpose of the annexation is [citing Hansen, 1998 ABQB 1103].
Here, the intention to install the Equipment is to resolve a problem caused by the deficient operation of the solar panels. Thus, the fact that the Equipment is necessary for the proper operation of the photovoltaic equipment during the winter period and that its main function is to support the solar panels (with any benefits to the building being negligible), may support the inclusion of its capital cost to Class 43.2… .
Zellstoff Celgar Limited v. British Columbia, 2014 BCCA 279
The machinery and equipment in a pulp mill purchased by the taxpayer was fixtures and, therefore subject to land transfer tax under the Property Transfer Tax Act (B.C.). Tysoe JA stated (at para. 45):
[T]he evidence established an intention of permanent affixation despite the fact that most of the equipment could be dismantled and sold in a secondary market. The objective intention was that, barring unforeseen circumstances, the equipment was to remain for its useful lifetime. Together with her consideration of the use of the land as a pulp mill, this finding informed the judge’s conclusion that the object of annexation was for the better use of the land and that the items of machinery and equipment had therefore become fixtures. In my view, she did not err in reaching this conclusion.
Stack v. T. Eaton Co., [1902] O.J. No. 155 (Div. Ct.)
After reviewing the then-leading decisions (including Bain v. Brand (1876), 1 App. Cas. 762, Holland v. Hodgson (1872), L.R. 7 C.P. 328, Hobson v. Gorringe, [1897] 1 Ch. 182, and Haggert v. Town of Brampton, [1897] S.C.J. No. 73, Meredith CJ synthesized the governing principles and articulated the following five rules respecting when property was a fixture, which he characterized as "settled law":
(1) That articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as shew that they were intended to be part of the land.
(2) That articles affixed to the land even slightly are to be considered part of the land unless the circumstances are such as to shew that they were intended to continue chattels.
(3) That the circumstances necessary to be shewn to alter the primâ facie character of the articles are circumstances which shew the degree of annexation and object of such annexation, which are patent to all to see.
(4) That the intention of the person affixing the article to the soil is material only so far as it can be presumed from the degree and object of the annexation.
(5) That, even in the case of tenants' fixtures put in for the purposes of trade, they form part of the freehold, with the right, however, to the tenant, as between him and his landlord, to bring them back to the state of chattels again by severing them from the soil, and that they pass by a conveyance of the land as part of it, subject to this right of the tenant.
Ontario Hydro v. Ontario (Ministry of Revenue), [1996] O.J. No. 333, 60 A.C.W.S. (3d) 1080, aff’d on other grounds [1999] O.J. No. 1723, 44 O.R. (3d) 1, 120 O.A.C. 184, 88 A.C.W.S. (3d) 507
Borins J found that microwave telecommunications and power line carrier equipment which for the most part was attached by screws to metal racks which, in turn, were bolted to the floor in the Pickering nuclear facility of the taxpayer, were not fixtures, and instead were tangible personal property subject to Ontario retail sales tax. He stated (at paras. 7-8):
[T]he courts are more inclined to regard an item as a chattel if it is installed as part of its owner's business, as opposed to items installed to improve the freehold. For example, equipment installed in a factory to operate a business is usually found to be a chattel because it has nothing to do with improving the freehold. ...
In this case, the microwave equipment did not improve the building in which it was installed. It was installed to enable Hydro to carry out its business of producing and distributing electricity. Therefore, it constitutes a chattel. The retail sales tax was properly paid [thereon].