2.2 (1) This section applies with respect to an employer for a year before 2010 if an amount is deemed to be remuneration paid by the employer to an employee under subsection 2 (3.1), (3.2) or (3.3) during the year.  2004, c. 31, Sched. 12, s. 3 (1). Status of benefit (2) Despite any other provision of this Act, a benefit described in subsection 2 (3.1), (3.2) or (3.3) is not deemed to be remuneration paid by the employer to the employee during a year, (a) if the employee is entitled to the benefit by virtue of an eligible agreement described in subsection (3); (b) if the event giving rise to the benefit occurs after May 2, 2000; and (c) if the employer meets all of the conditions described in subsection (4) with respect to the year.  2000, c. 42, s. 45. Eligible agreement (3) An agreement between an employee and his or her employer or between an employee and a corporation with which his or her employer does not deal at arm’s length, within the meaning of section 251 of the Income Tax Act (Canada), is an eligible agreement referred to in clause (2) (a), (a) if they entered into the agreement in the course of, or because of, the employee’s employment relationship with the employer; (b) if the agreement entitles the employee to acquire a security of the employer or of a corporation with which the employer does not deal at arm’s length; (c) if the employee is entitled to deduct an amount under paragraph 110 (1) (d) or (d.1) of the Income Tax Act (Canada) in respect of a benefit relating to the agreement in computing his or her taxable income for a taxation year; and (d) if the agreement is entered into before May 18, 2004.  2000, c. 42, s. 45; 2001, c. 23, s. 73 (1); 2004, c. 16, Sched. D, Table; 2004, c. 31, Sched. 12, s. 3 (2). Preconditions (4) The following are the conditions referred to in clause (2) (c) that the employer must meet: 1. The employer must carry on business through a permanent establishment in Ontario in the taxation year of the employer preceding the taxation year that ends in the year (the “preceding taxation year”). 2. The employer must directly undertake scientific research and experimental development within the meaning of subsection 248 (1) of the Income Tax Act (Canada) at a permanent establishment in Ontario in the preceding taxation year. 3. The employer’s eligible expenditures for the preceding taxation year must not be less than $25 million or 10 per cent of the employer’s total expenses for that taxation year, whichever is less. 4. The employer’s specified eligible expenditures for the preceding taxation year must not be less than $25 million or 10 per cent of the employer’s adjusted total revenue for that taxation year, whichever is less.  2000, c. 42, s. 45; 2004, c. 16, Sched. D, Table. Interpretation, start-ups (5) For the purposes of subsection (4), if the taxation year of an employer that ends in the year referred to in subsection (2) is the first taxation year of the employer after it is incorporated or is the first taxation year in which the employer carries on business, references to the preceding taxation year are to be read as references to that first taxation year.  2000, c. 42, s. 45. Amalgamations (5.1) For the purposes of subsection (4), if the taxation year of an employer that ends in the year referred to in subsection (2) is the first taxation year of the employer ending after an amalgamation to which section 87 of the Income Tax Act (Canada) applies, references to the preceding taxation year are to be read as references to the taxation year of each of the predecessor corporations (as referred to in section 87 of that Act) that ended immediately before the amalgamation.  2001, c. 23, s. 73 (2). Interpretation, eligible expenditures (6) For the purposes of paragraph 3 of subsection (4) and subsection (9), the amount of an employer’s eligible expenditures for a taxation year is calculated using the formula, A + B – C in which, “A” is the total amount of the expenditures incurred by the employer in the taxation year at a permanent establishment in Ontario each of which would be a qualified expenditure under subsection 12 (1) of the Corporations Tax Act and is, (a) an amount described in subparagraph 37 (1) (a) (i) or 37 (1) (b) (i) of the Income Tax Act (Canada), or (b) a prescribed proxy amount of the employer for the taxation year referred to in paragraph (b) of the definition of “qualified expenditure” in subsection 127 (9) of the Income Tax Act
(Canada), “B” is the reduction, if any, in the amount of “A” required under subsections 127 (18) to (20) of the Income Tax Act (Canada) in respect of a contract payment, and “C” is the total of all amounts each of which is paid or payable by the employer in the taxation year that is included in the amount of “A” and that would be a contract payment as defined in subsection 127 (9) of the Income Tax Act (Canada) made to the recipient of the amount. 2000, c. 42, s. 45; 2004, c. 16, Sched. D, Table. Same (7) For the purposes of subsection (4), in determining the share of the eligible expenditures of a partnership to be attributed to a partner who is a specified member of the partnership within the meaning of subsection 248 (1) of the Income Tax Act (Canada), the eligible expenditures, total expenses and total revenue of the partnership shall be deemed to be nil.  2000, c. 42, s. 45; 2004, c. 16, Sched. D, Table. Interpretation, total expenses (8) For the purposes of paragraph 3 of subsection (4), the employer’s total expenses are as determined in accordance with generally accepted accounting principles, but they exclude expenses that are extraordinary items and the consolidation and equity methods of accounting are not to be used in determining the total expenses.  2000, c. 42, s. 45. Interpretation, specified eligible expenditures (9) For the purposes of paragraph 4 of subsection (4), the amount of an employer’s specified eligible expenditures for a taxation year is the amount that is the total of, (a) the employer’s eligible expenditures for the taxation year; (b) the employer’s proportionate share of any expenditures incurred by a partnership of which the employer is a member during a fiscal period of the partnership that ends in the taxation year that would be eligible expenditures if they had been incurred by the employer; and (c) all expenditures each of which is incurred by a corporation that is associated with the employer throughout the taxation year and that has a permanent establishment in Canada for any taxation year of the associated corporation that ends in the employer’s taxation year, including the associated corporation’s proportionate share of any expenditures incurred by a partnership of which the corporation is a member during a fiscal period of the partnership that ends in the associated corporation’s taxation year, that would be eligible expenditures if they had been incurred by the employer.  2000, c. 42, s. 45; 2004, c. 16, Sched. D, Table. Interpretation, adjusted total revenue (10) For the purposes of paragraph 4 of subsection (4), the adjusted total revenue of an employer for a taxation year is the amount that is the total of, (a) the employer’s total revenue for the taxation year; (b) the employer’s proportionate share of the total revenue of a partnership of which the employer is a member during a fiscal period of the partnership that ends in the taxation year; and (c) the total revenue of each corporation that is associated with the employer throughout the taxation year and that has a permanent establishment in Canada for any taxation year of the associated corporation that ends in the employer’s taxation year, including the associated corporation’s share of the total revenue of any partnership of which the corporation is a member for a fiscal period of the partnership ending in the associated corporation’s taxation year.  2000, c. 42, s. 45; 2004, c. 16, Sched. D, Table. Same, total revenue (11) For the purposes of clauses (10) (a) and (c), an entity’s total revenue for a taxation year is the amount that would be its gross revenue for the taxation year, as determined in accordance with generally accepted accounting principles (except that the consolidation and equity methods must not be used), if the gross revenue excluded revenue from transactions with, (a) corporations that are associated with the entity throughout the taxation year and that have a permanent establishment in Canada in the taxation year; or (b) partnerships in which the entity or a corporation described in clause (a) is a member.  2000, c. 42, s. 45; 2004, c. 16, Sched. D, Table. Same (12) For the purposes of clauses (10) (b) and (c), the total revenue of a partnership for a fiscal period is the amount that would be the gross revenue of the partnership for the fiscal period, as determined in accordance with generally accepted accounting principles (except that the equity method must not be used), if the gross revenue excluded revenue of the partnership from transactions with, (a) the employer; or (b) corporations that are associated with the employer throughout the employer’s taxation year in which the fiscal period ends and that have a permanent establishment in Canada in that taxation year.  2000, c. 42, s. 45; 2004, c. 16, Sched. D, Table. Short or multiple taxation years (13) In determining the amount of an employer’s eligible expenditures, total expenses and total revenue for a taxation year for the purposes of this section, the following rules apply: 1. If the taxation year is less than 51 weeks and is the only taxation year ending in a calendar year, the eligible expenditures, total expenses and total revenue for the taxation year are the amounts otherwise determined, multiplied by the ratio of 365 to the number of days in the taxation year. 2. If the taxation year is not the only taxation year of the employer ending in the same calendar year, the amount of the employer’s eligible expenditures, total expenses and total revenue for the taxation year is the total of those amounts for all taxation years ending in that calendar year, as otherwise determined, multiplied by the ratio of 365 to the total number of days in those taxation years. 3. If the taxation year of a corporation that is associated with the employer is less than 51 weeks and is the only taxation year of the associated corporation ending in the employer’s taxation year, the corporation’s eligible expenditures, total expenses and total revenue for that taxation year are the amounts otherwise determined, multiplied by the ratio of 365 to the number of days in the taxation year. 4. If a fiscal period of a partnership of which the employer or the associated corporation is a member is less than 51 weeks and is the only fiscal period of the partnership ending in the taxation year of the employer or the associated corporation, as the case may be, the eligible expenditures, total expenses and total revenue of the partnership for that fiscal period are the amounts otherwise determined, multiplied by the ratio of 365 to the number of days in the fiscal period. 5. If a corporation who is associated with the employer has two or more taxation years ending in the employer’s taxation year, the eligible expenditures, total expenses and total revenue of the associated corporation for the taxation year ending in the employer’s taxation year are the total of those amounts for all of its taxation years ending in the employer’s taxation year, as otherwise determined, multiplied by the ratio of 365 to the total number of days in all of those taxation years. 6. If a partnership of which the employer or the associated corporation is a member has two or more fiscal periods ending in the taxation year of the employer or the associated corporation, as the case may be, the eligible expenditures, total expenses and total revenue for the fiscal period of the partnership ending in the taxation year of the employer or the associated corporation, as the case may be, are those amounts for all of its fiscal periods ending in the taxation year, as otherwise determined, multiplied by the ratio of 365 to the total number of days in all of the fiscal periods.  2000, c. 42, s. 45; 2004, c. 16, Sched. D, Table. Associated corporation (14) For the purposes of this section, an employer and a corporation are associated if they would be associated for the purposes of the Income Tax Act (Canada).  2000, c. 42, s. 45; 2004, c. 16, Sched. D, Table. Interpretation (15) In this section, “fiscal period” means, in respect of a partnership, its fiscal period for the purposes of the Income Tax Act (Canada); (“exercice”) “security” has the meaning assigned by subsection 7 (7) of the Income Tax Act (Canada); (“titre”) “taxation year” means, in respect of an employer or a corporation, the employer or corporation’s taxation year for the purposes of the Income Tax Act (Canada). (“année d’imposition”)  2000, c. 42, s. 45; 2001, c. 23, s. 73 (3); 2004, c. 16, Sched. D, Table. Section Amendments with date in force (d/m/y) 2000, c. 42, s. 45 - 03/05/2000 2001, c. 23, s. 73 (1-3) - 03/05/2000 2004, c. 16, Sched. D, Table - 01/01/2004; 2004, c. 31, Sched. 12, s. 3 (1, 2) - 16/12/2004