Income Tax Regulations — 1104
ase may be, that property is deemed, for the purpose of that paragraph, to be operating in the manner required under that paragraph during the period of the deficiency, failing or shutdown, if the taxpayer makes all reasonable efforts to rectify the circumstances within a reasonable time. (15) For the purpose of subsection (14), a taxpayer’s system referred to in that subsection that has at any particular time operated in the manner required by paragraph (c) of Class 43.1, or paragraph (a) of Class 43.2, in Schedule II includes at any time after the particular time a property of another person or partnership if (a) the property would reasonably be considered to be part of the taxpayer’s system were the property owned by the taxpayer; (b) the property utilizes heat obtained from the taxpayer’s system; (c) the operation of the property is necessary for the taxpayer’s system to operate in the manner required by paragraph (c) of Class 43.1, or paragraph (a) of Class 43.2, in Schedule II, as the case may be; and (d) at the time that the taxpayer’s system first became operational, the deficiency, failing or shutdown in the operation of the property could not reasonably have been anticipated by the taxpayer to occur within five years after that time. (16) For the purpose of subsection (14), a district energy system is deemed to satisfy the requirements of paragraph (c) of Class 43.1, or paragraph (a) of Class 43.2, in Schedule II, as the case may be, if the electrical cogeneration equipment that produces the thermal energy used by the system is deemed by subsection (14) to meet the requirements of paragraph (c) of Class 43.1, or paragraph (a) of Class 43.2, in Schedule II, as the case may be. Environmental Compliance (17) A property that would otherwise be eligible for inclusion in Class 43.1 or Class 43.2 in Schedule II by a taxpayer is deemed not to be eligible for inclusion in either of those classes if, at the time the property becomes available for use, there is substantial non-compliance by the taxpayer with the requirements of any environmental law, by-law or regulation of Canada, a province, a municipality, or a municipal or public body performing a function of government in Canada that is applicable in respect of the property. Classes 1 and 47 — Liquefaction Property (18) For the purposes of paragraphs 1100(1)(a.3) and (yb), a taxpayer’s income for a taxation year from eligible liquefaction activities in respect of an eligible liquefaction facility of the taxpayer is determined as if (a) the taxpayer carried on a separate business (i) the only income of which is any combination of: (A) in the case of natural gas that is owned by the taxpayer at the time it enters the taxpayer’s eligible liquefaction facility, income from the sale by the taxpayer of the natural gas that has been liquefied, whether sold as liquefied natural gas or regasified natural gas, and (B) in any other case, income reasonably attributable to the liquefaction of natural gas at the taxpayer’s eligible liquefaction facility, and (ii) in respect of which the only permitted deductions in computing the separate business’ income are those deductions that are attributable to income described in subparagraph (i) and, in the case of income described in clause (i)(A), that are reasonably attributable to income derived after the natural gas enters the eligible liquefaction facility; and (b) in the case of income described in clause (a)(i)(A), the taxpayer acquired the natural gas that has been liquefied at a cost equal to the fair market value of the natural gas at the time it entered the eligible liquefaction facility. [NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] SOR/78-137, s. 3; SOR/78-502, s. 2; SOR/78-948, ss. 2, 3; SOR/79-426, s. 3; SOR/79-670, s. 3; SOR/80-418, s. 1; SOR/80-618, s. 2(F); SOR/80-926, s. 1; SOR/80-935, s. 1; SOR/80-942, s. 2; SOR/81-974, s. 1; SOR/81-1026, s. 1; SOR/82-265