Ontario sound recording tax credit
 36. (1) This section applies for the purposes of section 94 of the Act.  O. Reg. 37/09, s. 36 (1). (2) In this section, “amalgamated corporation” means a corporation formed on the amalgamation or merger of two or more corporations; “Canadian-controlled corporation” means a corporation that would be a Canadian-controlled entity for the purposes of the Investment Canada Act (Canada) if references to the Minister in sections 26 to 28 of that Act were read as references to the Ontario Minister; “Canadian group” means a group of musicians, vocalists or both, at least 75 per cent of whom are qualified Canadians; “government assistance” means, in respect of a corporation, assistance that the corporation has received, is entitled to receive or may reasonably be expected to receive from a government, municipality or other public authority in any form, including a grant, subsidy, forgivable loan, deduction from tax and investment allowance, but not including an Ontario sound recording tax credit under section 94 of the Act or section 43.12 of the Corporations Tax Act; “master recording” means, in respect of a sound recording, the initial fully completed sound recording from which all copies of the sound recording are made; “parent corporation” means, in respect of a subsidiary corporation, the corporation that controls the subsidiary corporation; “predecessor corporation” means a corporation that amalgamates or merges with one or more other corporations to form an amalgamated corporation; “qualified Canadian” means an individual ordinarily resident in Canada who is described in paragraph (a) of the definition of “Canadian” in subsection 1106 (1) of the Federal regulations; “small eligible sound recording company” means, in respect of a taxation year of the company, an eligible sound recording company that has never claimed a tax credit for a previous taxation year and whose gross revenue for the 12-month period immediately before the beginning of the taxation year does not exceed $500,000; “sound recording business” means a business in which the principal activities are managing musicians or vocalists or both, publishing music, producing sound recordings, marketing and distributing sound recordings or a combination of those activities, carried out under contract with musicians, vocalists or copyright holders; “subsidiary corporation” means a corporation that is controlled by another corporation.  O. Reg. 37/09, s. 36 (2). (3) In section 94 of the Act, “emerging Canadian artist” means a qualified Canadian, (a) who is a musician, vocalist or both, (b) who has never had a gold sound recording (as determined by the Canadian Recording Industry Association, the Recording Industry Association of America, the International Federation of the Phonographic Industry or a successor of any of them) both in the United States of America and in Canada, the United Kingdom, France, Germany, Asia or Latin America, and (c) who has never been a member of a musical group that has had a gold sound recording described in clause (b); “emerging Canadian group” means a Canadian group that has never had a gold sound recording described in clause (b) of the definition of “emerging Canadian artist” and of which at least 75 per cent of the members are emerging Canadian artists; “sound recording” means a recording of music, with or without lyrics, (a) that is produced by analog, digital or similar technology, and (b) that is, (i) on a vinyl record, compact disc, digital versatile disc or audiotape, if the recording is made before May 12, 2005, or (ii) on a vinyl record, compact disc, digital versatile disc, audiotape or any other fixed medium from what a recording is capable of being played, if the recording is made after May 11, 2005.  O. Reg. 37/09, s. 36 (3). (4) For the purposes of section 94 of the Act, a corporation is an eligible sound recording company for a taxation year in respect of an eligible Canadian sound recording if the following conditions are satisfied: 1. The corporation is a Canadian-controlled corporation that carries on a sound recording business during the year as its primary activity. 2. The corporation carried on a sound recording business throughout the 12-month period ending immediately before the taxation year. 3. The corporation carries on its sound recording business primarily at a permanent establishment in Ontario. 4. The corporation’s Ontario allocation factor for its previous taxation year is at least one-half. 5. The corporation bears the financial risks associated with its sound recording business or is related to a Canadian-controlled corporation that bears the financial risks. 6. Within the 12-month period ending immediately before the first taxation year for which the corporation claimed a tax credit in respect of the sound recording, i. the corporation implemented a plan for the distribution of at least one sound recording, and ii. a person designated by the Minister of Culture considered the plan to be appropriate for the commercial exploitation of the sound recording.  O. Reg. 37/09, s. 36 (4); O. Reg. 70/10, s. 9 (1). (5) An amalgamated corporation is deemed to satisfy, (a) the condition described in paragraph 2 of subsection (4) for a taxation year if, throughout the 12-month period ending immediately before the taxation year, the amalgamated corporation and any of its predecessor corporations carried on a sound recording business; (b) the condition described in paragraph 4 of subsection (4) for its first taxation year after amalgamation or merger if the Ontario allocation factor of its predecessor corporations would be at least one-half for their last taxation years ending before the amalgamation or merger if that Ontario allocation factor were determined as if the predecessor corporations were a single corporation; and (c) the condition described in paragraph 6 of subsection (4) for its first taxation year after amalgamation or merger if the plan for distribution described in that paragraph is implemented by at least one of its predecessor corporations.  O. Reg. 70/10, s. 9 (2). (6) If a subsidiary corporation is wound up into its parent corporation, the parent corporation, (a) is deemed to satisfy the condition described in paragraph 2 of subsection (4) for a taxation year if, throughout the 12-month period ending immediately before the year, either or both of the subsidiary corporation and the parent corporation carried on a sound recording business; (b) is deemed, if the winding-up occurred in the taxation year, to satisfy the condition described in paragraph 4 of subsection (4) for the year if the Ontario allocation factor of the parent corporation and the subsidiary corporation would be at least one-half for their last taxation years ending before the winding-up if that Ontario allocation factor were determined as if both corporations were a single corporation; and (c) is deemed to satisfy the condition described in paragraph 6 of subsection (4) if the plan for distribution described in that paragraph is implemented within the period specified in that paragraph by the subsidiary corporation.  O. Reg. 37/09, s. 36 (6); O. Reg. 70/10, s. 9 (3). (7) The following rules apply for the purposes of paragraphs 2, 4 and 6 of subsection (4): 1. If a sound recording business carried on by a corporation was previously carried on by a sole proprietor or by a partnership, the sole proprietor or partnership is deemed to be a corporation for the period of time that he, she or it carried on the business before the corporation was incorporated, and that corporation is deemed to be the same corporation as, and a continuation of, the corporation that is deemed to have existed. 2. If all or substantially all of the assets used in a sound recording business are transferred by one corporation to another corporation and section 85 of the Federal Act applies to the transfer, the transferee corporation is deemed to be the same corporation as, and a continuation of, the transferor corporation with respect to the operation of the business.  O. Reg. 37/09, s. 36 (7). (8) Subject to subsection (9), a sound recording is an eligible Canadian sound recording for the purposes of section 94 of the Act if the following conditions are satisfied: 1. The recording is produced by an eligible sound recording company. 2. The music or the lyrics to the music, if there are lyrics, are performed on the recording by an individual or group that was an emerging Canadian artist or emerging Canadian group both when the contract was entered into with the eligible sound recording company for the production of the recording and when the master recording was made. 3. At least one of the following conditions is satisfied: i. The music was composed primarily by one or more individuals or groups that were qualified Canadians or Canadian groups when they composed the music. ii. If there are lyrics, the lyrics were written primarily by one or more individuals or groups that were qualified Canadians or Canadian groups when they wrote the lyrics. iii. Substantially all of the activities carried out to produce the recording were performed in Ontario. 4. The eligible sound recording company retains the right to exclusive control of the master recording for at least five years after the master recording is completed. 5. The eligible sound recording company that claims a tax credit in respect of the sound recording has a plan for the distribution of the recording that a person designated by the Minister of Culture considers to be appropriate for the commercial exploitation of the recording.  O. Reg. 37/09, s. 36 (8). (9) A sound recording is not an eligible Canadian sound recording if any of the following applies: 1. The sound recording is primarily of the spoken word or of wildlife or nature sounds. 2. The total playing time of the sound recording is less than 15 minutes. 3. The sound recording is produced for use as an instructional tool or for advertising or promotional purposes. 4. The sound recording can be reasonably considered to be capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, gender, sexual orientation or ethnic origin. 5. The dominant characteristic of any lyrics on the recording is the undue exploitation of sex or of sex and one or more of crime, horror, cruelty or violence. 6. Public financial support for the recording is contrary to public policy.  O. Reg. 37/09, s. 36 (9). (10) The amount of an eligible sound recording company’s qualifying expenditures in respect of an eligible Canadian sound recording for a taxation year for the purposes of section 94 of the Act is the sum of any of the following expenditures that are incurred by the corporation during the year and not excluded under subsection (11), less the sum of all government assistance in respect of the expenditures: 1. Expenditures incurred for the production of the sound recording that are on account of property used primarily in Ontario or services provided primarily in Ontario, including artists’ royalties, musicians’ session fees, graphics, artwork, photography, layout and colour separations, software, digital scanning, programming and beta testing. 2. Expenditures incurred for the production of a qualifying music video for the sound recording that are on account of property used primarily in Ontario or services provided primarily in Ontario, including rehearsal costs. 3. Expenditures incurred for direct marketing of the sound recording that are on account of property used primarily in Ontario or services performed primarily in Ontario, including fees for consultants and salaries and wages for employees whose primary function is public relations or marketing, but excluding launch costs for the recording other than, i. rental costs for sound and light equipment and physical facilities, ii. the portion of the cost of food beverages and entertainment determined under section 67.1 of the Federal Act, iii. the cost of event planning services, iv. the cost of designing, printing and mailing invitations, v. the cost of security services, vi. the cost of business location permits and licences, vii. the cost of photography, and viii. the cost of promotional gifts and souvenirs. 4. 50 per cent of the expenditures that are not qualifying expenditures under paragraphs 2 and 3 only because they are expenditures on account of property used outside Ontario or services provided outside Ontario. 5. Expenditures for the repayment of government assistance to the extent that the assistance reduced the amount of the Ontario sound recording tax credit for the recording that would otherwise have been available to the recording company for a previous taxation year.  O. Reg. 37/09, s. 36 (10). (11) The following expenditures in respect of an eligible Canadian sound recording are excluded from the calculation of an eligible sound recording company’s qualifying expenditures for the sound recording for a taxation year for the purposes of section 94 of the Act: 1. Any expenditure other than an expenditure described in paragraph 5 of subsection (10) that is incurred more than 24 months after the eligible sound recording company incurs its first qualifying expenditure in respect of the sound recording. 2. Expenditures for touring costs incurred in connection with a concert or live performance.  O. Reg. 37/09, s. 36 (11). (12) A music video is a qualifying music video for the purposes of paragraph 2 of subsection (10) if all the following conditions are met: 1. The music video is produced by an eligible sound recording company in connection with an eligible Canadian sound recording produced by the company. 2. The primary purpose for producing and distributing the music video is to promote and sell the sound recording. 3. The principal performer in the audio component of the music video is the same emerging Canadian artist or emerging Canadian group that is the principal performer on the sound recording. 4. The director of the video component of the music video is a qualified Canadian, or the production facility at which the video component is filmed and produced is located in Ontario. 5. The eligible sound recording company has exclusive contractual control of the copyright for the music video for at least five years after production of the music video is completed.  O. Reg. 37/09, s. 36 (12). (13) Despite subsection (12), a music video that meets any of the following conditions is not a qualifying music video for the purposes of paragraph 2 of subsection (10): 1. The music video is capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, gender, sexual orientation or ethnic origin. 2. The dominant characteristic of the material in the music video is the undue exploitation of sex or of sex and one or more of crime, horror, cruelty or violence. 3. Public financial support for the music video is contrary to public policy.  O. Reg. 37/09, s. 36 (13). Ontario Book Publishing Tax Credit