43.9 (1) A corporation that is a qualifying corporation in respect of one or more eligible contracts for a taxation year and complies with the requirements of this section may deduct from its tax otherwise payable under this Part for the taxation year, after making all deductions claimed under sections 39, 40, 41, 43 and 43.2 to 43.8 for the taxation year, an amount not exceeding the amount of its Ontario business-research institute tax credit for the taxation year in respect of the contracts.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Same (2) A corporation referred to in subsection (1) that complies with the requirements of this section may deduct from its tax otherwise payable for the year under Parts III and IV an amount not exceeding the amount by which its Ontario business-research institute tax credit for the taxation year exceeds the maximum amount, if any, deductible by the corporation for the year under subsection (1).  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Amount of tax credit (3) Subject to subsection (20), the amount of a qualifying corporation’s Ontario business-research institute tax credit for a taxation year is the sum of all amounts, each of which is in respect of an eligible contract and is equal to 20 per cent of the amount calculated using the formula, A × B/C in which, “A” is the total of all qualified expenditures incurred during the taxation year and after May 6, 1997 under the contract by the corporation, to the extent that no tax credit has been claimed under this section for a prior taxation year in respect of the qualified expenditures, “B” is the number of days in the taxation year after May 6, 1997 that the corporation is not connected to the eligible research institute that entered into the eligible contract or to any other eligible research institute that carries out the scientific research and experimental development that is to be performed under the contract, and “C” is the number of days in the taxation year after May 6, 1997. 2004, c. 31, Sched. 9, s. 21 (1). Qualifying corporation (4) A corporation is a qualifying corporation for a taxation year in respect of an eligible contract with an eligible research institute if, (a) the corporation carries on business in Ontario in the taxation year through a permanent establishment in Ontario; and (b) the corporation or a partnership of which it is a member, but not a specified member, entered into the contract with the eligible research institute. (c)  Repealed:  2004, c. 31, Sched. 9, s. 21 (2). (d)  Repealed:  2004, c. 31, Sched. 9, s. 21 (2). 1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2); 2004, c. 31, Sched. 9, s. 21 (2). Corporation connected to an eligible research institute (5) For the purposes of this section, a corporation is connected to an eligible research institute at any time during a taxation year of the corporation if at that time, (a) the eligible research institute owned, directly or indirectly in any manner whatever, shares of the capital stock of the corporation that, (i) carry more than 10 per cent of the voting rights attached to voting securities, within the meaning of the Securities Act, of the corporation, or (ii) have a fair market value of more than 10 per cent of the fair market value of all of the issued shares of the capital stock of the corporation; (b) the eligible research institute and the corporation were members of the same partnership or did not deal at arm’s length; (c) a partnership of which the eligible research institute is a member owned, directly or indirectly in any manner whatever, any of the shares of the corporation; or (d) the corporation and the eligible research institute are connected under rules prescribed by the regulations.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2); 2004, c. 31, Sched. 9, s. 21 (3). Corporate partners (6) If a corporation is a member, other than a specified member, of a partnership at the end of a fiscal period of the partnership in which the partnership would qualify for an Ontario business-research institute tax credit if the partnership were a corporation whose fiscal period was its taxation year, and if the corporation would be a qualifying corporation in respect of the eligible contract if it instead of the partnership had entered into the contract, (a) the portion of the qualified expenditures in respect of which the partnership would calculate the tax credit for the taxation year that may reasonably be considered to be the corporation’s share of the qualified expenditures, (i) shall be deemed to have been incurred by the corporation and shall be included in determining the total amount of the corporation’s qualified expenditures in respect of the eligible contract for the taxation year in which the partnership’s fiscal period ends, and (ii) may be included in the determination of the amount of the corporation’s Ontario business-research institute tax credit for the taxation year in which the partnership’s fiscal period ends; and (b) the corporation’s share of the qualified expenditures shall be the portion of the qualified expenditures that corresponds to the corporation’s share of the income or loss of the partnership for the fiscal period of the partnership ending in the taxation year and, for the purpose of determining the corporation’s share of the tax credit if the partnership has no income or loss for that fiscal period, the partnership’s income for the fiscal period shall be deemed to be $1,000,000.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Eligible contract (7) For the purposes of this section, a contract entered into by a corporation or a partnership with an eligible research institute is an eligible contract if, (a) under the terms of the contract, the eligible research institute agrees to directly perform in Ontario scientific research and experimental development related to a business carried on in Canada by the corporation or partnership, as the case may be, and the corporation or partnership is entitled to exploit the results of the research and development carried out under the agreement; and (b) the contract is entered into after May 6, 1997 or, if the contract was entered into before May 7, 1997, the terms of the contract as they read on May 7, 1997 provide that the eligible research institute will continue to carry out scientific research and experimental development under the contract until a date after May 6, 1999.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Exception, substituted contract (8) Despite subsection (7), a contract entered into after May 6, 1997 that, but for this subsection, would be an eligible contract shall not be an eligible contract for the purposes of this section if the contract may reasonably be considered to require expenditures for scientific research and experimental development that were to be performed under a contract entered into before May 7, 1997 by the corporation or the partnership or by a person related to the corporation or partnership, as the case may be.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Qualified expenditure (9) Except as otherwise provided in this section, an expenditure incurred under an eligible contract with an eligible research institute by a corporation that is a qualifying corporation in respect of the contract is a qualified expenditure under the contract to the extent that, (a) the expenditure, when it is made, is a payment of money made by the corporation to the eligible research institute under the terms of the contract; (b) the expenditure is incurred by the corporation in respect of scientific research and experimental development carried on in Ontario directly by the eligible research institute; and (c) it is an expenditure referred to in subparagraph 37 (1) (a) (i), (i.1) or (ii) of the Income Tax Act, (Canada) that would be a qualified expenditure within the meaning of subsection 127 (9) of that Act, other than an expenditure, (i) that can reasonably be considered to fund the payment of salary or wages to an employee of the eligible research institute who is connected to the corporation making the expenditure, or (ii) that is prescribed under the rules prescribed by the regulations.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Advance ruling required (10) Despite subsection (9), an expenditure that would otherwise be a qualified expenditure of a corporation under this section shall be deemed not to be a qualified expenditure for the purposes of this section unless, before the corporation or partnership incurs the expenditure, (a) it has applied to the Minister in the manner and form approved by the Minister for a ruling with respect to the contract under which the expenditure is to be made, the proposed expenditures to be made under the contract and the arrangements between the parties to the contract and other persons; (b) it has provided all information specified by the Minister and any other relevant information and documentation that may be reasonably required by the Minister in connection with the application for the ruling; and (c) the Minister has given a ruling with respect to the contract, the proposed expenditures and whether the parties to the contract and other persons connected directly or indirectly to the arrangements in respect of the contract are considered to be conducting their business and affairs within the spirit and intent of this section at the time the ruling is given.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Expenditure under more than one contract (11) If an expenditure will be applied under more than one contract, a ruling under subsection (10) must be obtained with respect to each of the contracts.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Expenditure before ruling obtained (12) If a corporation or partnership incurs an expenditure under a contract before the Minister gives a ruling under subsection (10), and the Minister subsequently gives a favourable ruling, the expenditure shall be deemed, for the purposes of subsection (10) but not subsection (3), to have been made after the ruling was given if the corporation or partnership applies to the Minister for the ruling, (a) within 90 days after the later of, (i) the day on which the contract was entered into, and (ii) the day on which the Tax Credits to Create Jobs Act, 1997 receives Royal Assent; or (b) no later than three years after the day on which the contract was entered into, and the Minister is satisfied that the corporation or partnership was unable to apply for the ruling at an earlier time through no fault of its own for reasons that were beyond its control.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Minister may dispense with requirement for ruling (13) At any time after May 6, 2000, the Minister may give a direction that rulings no longer need to be obtained under this section in respect of contracts entered into after the date of the Minister’s direction, if the Minister is satisfied that corporations, their officers, directors and shareholders, partnerships and their members and eligible research institutes are conducting their business and affairs in a manner that meets the spirit and intent of this section, and, subject to subsection (14), subsections (10) to (12) will not apply to qualified expenditures made under contracts entered into after the date of the Minister’s direction.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Minister may reinstate ruling requirement (14) The Minister may, at any time after giving a direction under subsection (13), revoke the direction and give a new direction that subsections (10) to (12) shall apply to qualified expenditures made under contracts entered into after the date of the new direction.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Publication (15) The Minister shall publicize directions given under subsections (13) and (14), by bulletin or by any other means of communication that, in the opinion of the Minister, will bring the directions to the attention of those affected.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Reduction in amount of qualified expenditures (16) The total of all qualified expenditures incurred by a corporation under an eligible contract shall be reduced by any contribution that the corporation, any shareholder of the corporation, any partnership of which the corporation is a member, any partner in that partnership or any person not dealing at arm’s length with the corporation or a shareholder of the corporation has received, is entitled to receive or can reasonably be expected to receive from the eligible research institute that entered into the eligible contract, a person who performs scientific research and experimental development that is to be carried out under the contract or a person who does not deal at arm’s length with either of them.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Exception (17) Despite subsection (16), if under the terms of an eligible contract between an eligible research institute and a corporation or partnership, the eligible research institute directly funds part of the cost of performing the scientific research and experimental development that is to be carried out under the contract, the expenditures made by the institute in performing the scientific research and experimental development shall not be considered to be a contribution if, (a) the financial obligations of the corporation or partnership under the contract are not reduced by the amount of any expenditures made by the eligible research institute; (b) the expenditures made by the eligible research institute are not payments made to or at the direction of the corporation or partnership; and (c) there is an agreement in writing between the eligible research institute and all other persons who are parties to the eligible contract that provides the terms and conditions under which the eligible research institute would be entitled to recover the amount of its expenditures.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Same, transactions in the ordinary course of business (18) Subsection (16) does not apply in respect of the provision of goods and services in the ordinary course of a business carried on by the corporation or partnership if, (a) in the case where the corporation or partnership, or another person who does not deal at arm’s length with the corporation or partnership, acquires the goods or services, the price paid by the corporation, partnership or person for the goods or services is not less than their fair market value; and (b) in the case where the corporation or partnership, or another person who does not deal at arm’s length with the corporation or partnership, is providing the goods or services, (i) the price for the goods or services is not greater than their fair market value, and (ii) the expenditures made to acquire the goods or services do not form part of the expenditures made by the eligible research institute for scientific research and experimental development under the eligible contract.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Repayment of government assistance (19) The total of all qualified expenditures made by a corporation for a taxation year under an eligible contract may include an amount that may reasonably be considered to be a repayment of government assistance made by the corporation during the taxation year, to the extent that the amount, (a) has not been repaid in a prior taxation year; and (b) can reasonably be considered to have reduced the amount of a Ontario business-research institute tax credit that would otherwise have been allowed to the corporation under this section in respect of the eligible contract.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Limit on amount of qualified expenditures (20) The amount of qualified expenditures under an eligible contract with respect to which a corporation may claim a tax credit under this section shall not exceed the amount that may reasonably be considered to be the amount that would have been expended by the corporation if the corporation had carried out the scientific research and experimental development directly in the same circumstances and under the same conditions as the eligible research institute under the eligible contract.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Annual qualified expenditure limit (21) No tax credit may be claimed by a corporation under this section for a taxation year in respect of qualified expenditures that exceed the corporation’s qualified expenditure limit for the year as determined under the rules prescribed by the regulations.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Wholly owned and controlled non-profit subsidiaries of eligible research institutes (22) An eligible research institute is deemed for the purposes of this section to carry out scientific research and experimental development that is carried out by a corporation that is a wholly-owned and controlled non-profit subsidiary of the eligible research institute, if the scientific research and experimental development activities are required to be carried out under an eligible contract entered into by the eligible research institute.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Subcontracts (23) If an eligible research institute that has entered into an eligible contract with a corporation enters into a contract with another institute that is an eligible research institute or a specified person and under that second contract the other institute performs part of the scientific research and experimental development that is to be carried out under the eligible contract or the specified person carries out part of the work required to be carried out under the contract, the scientific research and experimental development carried out directly by the other institute or the work carried out by the specified person is deemed to be carried out directly by the eligible research institute under the eligible contract.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Deemed tax payment (24) A corporation shall be deemed to pay on account of its tax payable under this Act for a taxation year an amount claimed by the corporation, not exceeding the amount, if any, by which, (a) the corporation’s business research-institute tax credit for the taxation year, exceeds, (b) the maximum amount, if any, deductible by the corporation under subsections (1) and (2) in determining its tax payable under this Act for the taxation year.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Time of deemed tax payment (25) A corporation shall be deemed to make the payment referred to in subsection (24) and the Minister shall be deemed to apply the deemed payment on the day on or before which the corporation would be required under clause 78 (2) (b) to pay any balance of tax payable for the taxation year.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Same, taxation years ending before March 28, 2003 (25.1) Subsections (25.2) and (25.3) apply to a corporation that is entitled to a deduction under subsection (1) or (2) for a taxation year ending before March 28, 2003 if, (a) the corporation was connected to an eligible research institute at any time during the term of the eligible contract and before March 28, 2003; or (b) an employee of the eligible research institute was connected to the corporation at any time during the preceding taxation year, but was not connected to the corporation at any time during the taxation year.  2004, c. 31, Sched. 9, s. 21 (4). Same (25.2) For the purposes of calculating interest under subsection 79 (1) or (4), 82 (4) or 83 (1), the deduction under subsection (1) or (2) from tax otherwise payable for the taxation year and the payment under subsection (24) on account of tax otherwise payable for the taxation year shall be deemed to have been made on the later of, (a) March 28, 2003; and (b) the day the notice of assessment for the taxation year is issued by the Minister allowing the deduction from tax otherwise payable.  2004, c. 31, Sched. 9, s. 21 (4). Same (25.3) In the circumstances described in clause (25.1) (b), subsection (25.2) applies only to the portion of the Ontario business-research institute tax credit that relates to the salary or wages of that employee.  2004, c. 31, Sched. 9, s. 21 (4). When employee connected to corporation (26) For the purposes of this section, if an eligible research institute and a corporation have entered into an eligible contract, an employee of the eligible research institute is connected to the corporation in a taxation year if, at any time in the taxation year of the corporation, (a) the employee or a person who does not deal at arm’s length with the employee owned, directly or indirectly in any manner whatever, shares of the capital stock of the corporation that, (i) carry more than 10 per cent of the voting rights attached to voting securities, within the meaning of the Securities Act, of the corporation, or (ii) have a fair market value of more than 10 per cent of the fair market value of all of the issued shares of the capital stock of the corporation; or (b) the employee and the corporation are connected under rules prescribed by the regulations.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2); 2004, c. 31, Sched. 9, s. 21 (5). Same (27) For the purposes of subsections (5) and (26), subsection 256 (1.4) of the Income Tax Act
(Canada) applies with necessary modifications to determine the shares of the capital stock of a corporation that are deemed to be issued and outstanding and owned by a person and the person’s relation to control of the corporation.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Interpretation (28) For the purposes of determining if an expenditure would be a qualified expenditure within the meaning of subsection 127 (9) of the Income Tax Act (Canada) for the purposes of this section, (a) a tax credit under this section or under section 43.3 shall be deemed not to be government assistance; and (b) the reference to “contract payment” in subsection 127 (18) of the Income Tax Act (Canada) shall be deemed for the purposes of paragraph (h) of the definition of “qualified expenditure” in subsection 127 (9) of that Act to exclude payments prescribed by the regulations.  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Definitions (29) In this section, “contribution” means, in respect of an eligible contract, an amount that is not excluded by the rules prescribed by the regulations and that is, (a) a payment in money, a transfer of ownership of a property, an assignment of the use of property or of a right to use a property or any other benefit or advantage in any other form or manner, other than a property resulting from scientific research and experimental development undertaken under the eligible contract, (b) a former, present or future right in the proceeds of disposition of part or all of the intellectual property arising from the scientific research and experimental development undertaken under the eligible contract, (c) a reimbursement, compensation or guarantee, (d) a loan or loan guarantee, or (e) an amount that is of a type prescribed in the regulations; (“contribution”) “eligible research institute” means, (a) a university or college of applied arts and technology in Ontario, whose enrolment is counted for the purposes of calculating annual operating grants entitlements from the Government of Ontario, (b) an Ontario Centre of Excellence or a network of Centres of Excellence, (c) a non-profit organization that is prescribed by the regulations, is a member of a class of organizations that is prescribed by the regulations or meets the conditions prescribed by the regulations, or (d) a hospital research institute that meets the conditions prescribed by regulation; (“institut de recherche admissible”) “government assistance” has the same meaning as in section 127 of the Income Tax Act (Canada), except that a tax credit under this section or section 43.3 shall be deemed not to be government assistance; (“aide gouvernementale”) “specified person” means, in respect of a contract, a person who is a specified person under the rules prescribed by the regulations. (“personne déterminée”)  1997, c. 43, Sched. A, s. 23; 2004, c. 16, s. 2 (2). Section Amendments with date in force (d/m/y) 1997, c. 43, Sched. A, s. 23 - 07/05/1997 2004, c. 16, s. 2 (2)
- 01/01/2004; 2004, c. 31, Sched. 9, s. 21 (1-3, 5) - 07/05/1997; 2004, c. 31, Sched. 9, s. 21 (4) - 16/12/2004 CTS 3 NO 14 - 1