Income Tax Act — I-3.3 27.1
Emissions allowances 27.1 (1) Notwithstanding section 10, for the purpose of computing a taxpayer’s income from a business, an emissions allowance shall be valued at the cost at which the taxpayer acquired it. Determination of cost of emissions allowances (2) If at any particular time a taxpayer that owns one emissions allowance, or two or more identical emissions allowances (for the purposes of this subsection two or more emissions allowances will be considered identical if they could be used to settle the same emissions obligations), acquires one or more other emissions allowances (in this subsection referred to as newly acquired emissions allowances ), each of which is identical to each of the previously-acquired emissions allowances, for the purposes of computing, at any subsequent time, the cost of the taxpayer of each of the identical emissions allowances, (a) the taxpayer is deemed to have disposed of each of the previously-acquired emissions allowances immediately before the particular time for proceeds equal to its cost to the taxpayer immediately before the particular time; and (b) the taxpayer is deemed to have acquired each of the identical emissions allowances at the particular time at a cost equal to the amount determined by the formula (A + B)/C where A is the total cost to the taxpayer immediately before the particular time of the previously-acquired emissions allowances, B is the total cost to the taxpayer (determined without reference to this section) of the newly-acquired emissions allowances, and C is the number of the identical emissions allowances owned by the taxpayer immediately after the particular time. Expense restriction (3) Notwithstanding any other provision of this Act, in computing a taxpayer’s income from a business for a taxation year, the total amount deductible in respect of a particular emissions obligation for a taxation year shall not exceed the amount determined by the formula A + B x C where A is the total cost of emissions allowances either (a) used by the taxpayer to settle the particular emissions obligation in the year, or (b) held by the taxpayer at the end of the taxation year that can be used to satisfy the particular emissions obligation in respect of the year; B is the amount determined by the formula D − (E + F) where D is the number of emissions allowances required to satisfy the particular emissions obligation in respect of the taxation year, E is the number of emissions allowances used by the taxpayer to settle the particular emissions obligation in the year, and F is the number of emissions allowances held by the taxpayer at the end of the taxation year that can be used to satisfy the particular emissions obligation in respect of the year; and C is the fair market value of an emissions allowance at the end of the taxation year that could be used to satisfy the particular emissions obligation in respect of the year. Income inclusion in following year (4) There shall be included in computing the income of a taxpayer for a taxation year as income from a business the amount deducted in respect of an emissions obligation referred to in subsection (3) for the immediately preceding taxation year to the extent that the emissions obligation was not settled in the immediately preceding taxation year. Proceeds of disposition (5) If a taxpayer surrenders an emissions allowance to settle an emissions obligation, the taxpayer’s proceeds from the disposition of the emissions allowance are deemed to be equal to the taxpayer’s cost of the emissions allowance. Loss restriction event (6) Notwithstanding subsection (1), each emissions allowance held at the end of the taxpayer’s taxation year that ends immediately before the time at which the taxpayer is subject to a loss restriction event is to be valued at the cost at which the taxpayer acquired the property, or its fair market value at the end of the year, whichever is lower, and after that time the cost at which the taxpayer acquired the p