Ontario business-research institute tax credit
 38. (1) For the purposes of clause 97 (4) (d) of the Act, an eligible research institute and a corporation are connected if the corporation is controlled directly or indirectly in any manner whatever by the institute and one or more other eligible research institutes or would be controlled directly or indirectly in any manner whatever if the institutes were to act in concert.  O. Reg. 37/09, s. 38 (1). (2) For the purposes of subclause 97 (8) (c) (ii) of the Act, each of the following types of expenditures is prescribed not to be a qualified expenditure: 1. An expenditure made to an entity that ceased to be an eligible research institute before the expenditure was incurred. 2. An expenditure made under the contract, i. if information provided to the Ontario Minister or the Minister of Revenue or any representation made to either of them for the purpose of or in connection with obtaining a ruling under subsection 97 (9) of the Act or subsection 43.9 (10) of the Corporations Tax Act in respect of the contract or the expenditure is not correct, and it is reasonable to believe that a favourable ruling would not have been given if the correct information had been provided or if the representation had not been made, ii. if any undertaking given in connection with an application for a ruling referred to in subparagraph i is not fulfilled, or iii. if information is not disclosed to the Ontario Minister or the Minister in connection with a ruling referred to in subparagraph i in respect of the contract or the expenditure, and it is reasonable to believe that a favourable ruling would not have been given if the information had been disclosed. 3. An expenditure made under an eligible contract to an eligible research institute that is prescribed by subsection (7) and is not a hospital research institute referred to in clause (8) (a), unless teaching staff, students or research fellows of an eligible research institute referred to in clause (a) of the definition of “eligible research institute” in subsection 97 (27) of the Act or a hospital research institute described in clause (8) (a) are significantly involved in carrying out the scientific research and experimental development activities required under the contract. 4. An expenditure made under an eligible contract for work described in paragraph (d) of the definition of “scientific research and experimental development” in subsection 248 (1) of the Federal Act that is clinical research in Phase IV, as described in Application Policy SR&ED 96-09R entitled Eligibility of Clinical Research in the Pharmaceutical Industry, dated May 17, 2001 and issued by the Canada Revenue Agency, unless the work is directly in support of work described in paragraph (a), (b) or (c) of that definition that is carried out, i. by the eligible research institute, ii. by a wholly-owned and controlled non-profit subsidiary of the eligible research institute, or iii. by another eligible research institute under a contract referred to in subsection 97 (23) of the Act with the eligible research institute.  O. Reg. 37/09, s. 38 (2); O. Reg. 70/10, s. 10 (1). (3) For the purposes of subsection 97 (21) of the Act, the qualified expenditure limit for a taxation year of a corporation that is not associated at any time in the year with another corporation is, (a) $20 million if the year is 51 weeks or more; or (b) $20 million multiplied by the ratio of the number of days in the year to 365 if the year is less than 51 weeks.  O. Reg. 37/09, s. 38 (3). (4) If two or more corporations are associated at any time in a calendar year, the qualified expenditure limit of each of them for each of their taxation years ending in the calendar year for the purposes of subsection 97 (21) of the Act is determined in accordance with the following rules: 1. Subject to paragraphs 3, if the associated corporations file with the Ontario Minister an agreement in a form acceptable to the Ontario Minister under which, for the purposes of section 97 of the Act, the corporations allocate an amount to one or more of them and the total amount allocated does not exceed $20 million for the calendar year, the qualified expenditure limit of each of them is the amount allocated to it. 2. If the Ontario Minister notifies any of the associated corporations in writing that an agreement referred to in paragraph 1 in respect of a calendar year is required to be filed and no agreement is filed within 30 days after the notice is sent, i. the Ontario Minister may allocate not more than $20 million among the associated corporations for the calendar year, and, subject to paragraph 3, the amount allocated to a corporation is its qualified expenditure limit for that taxation year, or ii. if the Ontario Minister does not make an allocation described in subparagraph i, the qualified expenditure limit of each associated corporation for the relevant year is nil. 3. If an associated corporation has more than one taxation year ending in a calendar year or only one taxation year ending in the calendar year and it has fewer than 51 weeks, its qualified expenditure limit for each taxation year ending in the calendar year shall not exceed the corporation’s qualified expenditure limit for the calendar year as otherwise determined under paragraph 1 or 2, multiplied by the ratio of the number of days in the taxation year to 365.  O. Reg. 37/09, s. 38 (4). (5) For the purposes of clause 97 (24) (b) of the Act, an employee of an eligible research institute is connected to a corporation if, (a) the employee and one or more persons each of whom is an employee of the same or another eligible research institute or each of whom is related to the employee or to another employee of the same or another eligible research institute control the corporation directly or indirectly in any manner whatever, or would control the corporation directly or indirectly in any manner whatever if they acted in concert; or (b) the employee was an employee of the corporation or of a corporation related to the corporation and there is an arrangement under which the employee will be employed by the corporation or a corporation related to the corporation after the completion of the contract.  O. Reg. 37/09, s. 38 (5). (6) For the purposes of clause (a) of the definition of “eligible research institute” in subsection 97 (27) of the Act, “university” includes all affiliated or federated colleges or universities of the university that are operated on a non-profit basis.  O. Reg. 37/09, s. 38 (6). (7) For the purposes of clause (c) of the definition of “eligible research institute” in subsection 97 (27) of the Act, a non-profit organization that meets the conditions in any of the following paragraphs is an eligible research institute: 1. A non-profit organization, i. that is exempt from tax under the Federal Act by reason of paragraph 149 (1) (f), (j) or (l) of that Act, ii. that is affiliated with a university or college referred to in clause (a) of the definition of “eligible research institute” in subsection 97 (27) of the Act and has entered into an exchange of information agreement with the university or college under which teaching staff, students and research fellows of the university or college may actively participate in and receive educational benefits from the scientific research and experimental development activities carried out by the non-profit organization, iii. that is capable of supporting and conducting scientific research and experimental development at its premises or the premises of the university or college through qualified employees who have sufficient expertise and experience and the use of appropriate facilities and services located at those premises, iv. that is not primarily funded by businesses or industries operating in the private sector, and v. of which no single member who is not exempt from tax under Division H of Part I of the Federal Act, if the non-profit organization is constituted without share capital, has more than 10 per cent of the votes that may be cast by members or, if the organization is incorporated with share capital, no single shareholder who is not exempt from tax under Division H of Part I of the Federal Act holds, directly or indirectly, shares that carry more than 10 per cent of the voting rights attached to voting securities, within the meaning of the Securities Act, of the non-profit organization. 2. A non-profit organization, i. that is exempt from tax under the Federal Act by reason of paragraph 149 (1) (j) of that Act, ii. that makes all of its expenditures on account of scientific research and experimental development by way of payments to one or more eligible research institutes, each of which is a university or college referred to in clause (a) of the definition of “eligible research institute” in subsection 97 (27) of the Act, an Ontario Centre of Excellence, a network of Centres of Excellence or a hospital research institute referred to in clause (d) of that definition, iii. the board of directors of which may be appointed or elected only by the eligible research institutes referred to in subparagraph ii to which the non-profit organization makes all of its expenditures on account of scientific research and experimental development, and iv. all of the shares of which, if the non-profit organization is incorporated with share capital, are held by the eligible research institutes referred to in subparagraph ii.  O. Reg. 37/09, s. 38 (7). (8) For the purposes of clause (d) of the definition of “eligible research institute” in subsection 97 (27) of the Act, a hospital research institute is an eligible research institute if, (a) it is a hospital described in clause 1 (1) (a), (d), (h) or (l) of Regulation 964 of the Revised Regulations of Ontario, 1990 (Classification of Hospitals), made under the Public Hospitals Act, and has been assigned to Group A, D, H or L in the list of public hospitals maintained under section 32.1 of that Act; or (b) it is a corporation, (i) that is exempt from tax under the Federal Act by reason of paragraph 149 (1) (f), (j) or (l) of that Act, (ii) that is affiliated with a hospital referred to in clause (a) and has entered into an agreement with the hospital under which teaching staff from the hospital and students in the health professions may actively participate in and receive educational benefits from the scientific research and experimental development activities carried out by the corporation, (iii) that is capable of supporting and conducting scientific research and experimental development at its premises or the premises of the hospital with which it is affiliated, through qualified employees who have sufficient expertise and experience and the use of appropriate facilities and services at those premises, and (iv) that is not primarily funded by businesses or industries operating in the private sector.  O. Reg. 37/09, s. 38 (8). (9) For the purposes of subsections (7) and (8), the following types of payments made to a non-profit organization or corporation shall not be considered to be funding of the organization or corporation: 1. An unconditional donation or gift. 2. An amount that is an expenditure to the payer described in paragraph 37 (1) (a) of the Federal Act or subparagraph 37 (1) (b) (i) of that Act. 3. An amount advanced as a loan if, under all arrangements that reasonably relate to the loan, the lender has the right to receive only payments on account of principal and interest at a commercially reasonable rate.  O. Reg. 37/09, s. 38 (9). (10) Despite subsections (7) and (8), a non-profit organization or hospital research institute is not an eligible research institute for the purposes of section 97 of the Act until it is designated an eligible research institute by the Minister of Finance under subsection (11); however, a non-profit organization or hospital research institute that was designated an eligible research institute under subsection 1101 (15) of Regulation 183 of the Revised Regulations of Ontario, 1990 (General), made under the Corporations Tax Act, is an eligible research institute for the purposes of section 97 of the Act if the designation is not revoked.  O. Reg. 37/09, s. 38 (10). (11) A non-profit organization or hospital research institute may apply to the Minister of Finance to be designated and shall be designated by the Minister of Finance to be an eligible research institute if, (a) in the case of a non-profit organization, it is an eligible research institute under subsection (7); or (b) in the case of a hospital research institute, it is an eligible research institute under subsection (8).  O. Reg. 37/09, s. 38 (11). (12) The Minister of Finance may designate a non-profit organization or hospital research institute to be an eligible research institute under subsection (11) effective as of a date that is before or after the day on which the Minister of Finance authorizes the designation.  O. Reg. 37/09, s. 38 (12); O. Reg. 70/10, s. 10 (2). (13) The Minister of Finance may revoke the designation of a non-profit organization or hospital research institute granted under subsection (11) or under section 1101 of Regulation 183 of the Revised Regulations of Ontario, 1990 (General), made under the Corporations Tax Act, if the organization or institute no longer qualifies as an eligible research institute under subsection (7) or (8).  O. Reg. 37/09, s. 38 (13); O. Reg. 70/10, s. 10 (3). (14) Despite subsections (7) and (8), a non-profit organization or hospital research institute that has been designated an eligible research institute continues to be an eligible research institute for the purposes of section 97 of the Act after it ceases to qualify under subsection (7) or (8) until the effective date of revocation of the designation.  O. Reg. 37/09, s. 38 (14). (15) The Minister of Finance may revoke a designation under subsection (13) effective as of a date that is before or after the day on which the Minister of Finance authorizes the revocation of the designation, except that the effective date may not be before the date on which the non-profit organization or hospital research institute ceased to qualify as an eligible research institute under subsection (7) or (8).  O. Reg. 37/09, s. 38 (15); O. Reg. 70/10, s. 10 (4). (16) The Minister of Finance shall publicize designations granted under subsection (11), revocations of designations made under subsection (13) and the effective date of each designation and revocation by bulletin or by any other means of communication that, in the opinion of the Minister of Finance, will bring these matters to the attention of those affected.  O. Reg. 37/09, s. 38 (16). 39. Omitted (provides for coming into force of provisions of this Regulation).  O. Reg. 37/09, s. 39.