1101. (1) For the purposes of clause 43.9 (5) (d) of the Act, an eligible research institute and a corporation that have entered into an eligible contract 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 if the institutes were to act in concert. (2) For the purposes of clause 43.9 (9) (a) of the Act, a payment that is a contract payment within the meaning of subsection 127 (9) of the Income Tax Act
(Canada) made by a person other than a qualifying corporation is considered to be a payment made by a qualifying corporation to an eligible research institute under the terms of an eligible contract if, (a) the contract payment is made to the eligible research institute by the person in consideration for the eligible research institute performing in Ontario scientific research and experimental development for or on behalf of the qualifying corporation; and (b) the qualifying corporation, the eligible research institute and the person are all parties to the eligible contract. (3) For the purposes of subclause 43.9 (9) (c) (ii) of the Act, the following expenditures are prescribed: 1. Subject to subsection (4), an expenditure made under the eligible contract after the contract is amended, unless, before the expenditure is made, the Minister gives a favourable ruling under subsection 43.9 (10) of the Act with respect to the contract and the expenditure. 2. An expenditure made to an entity that ceases to be an eligible research institute before the expenditure is incurred. 3. An expenditure made under the contract, i. if information provided to the Minister or any representation made to the Minister for the purpose of or in connection with obtaining a favourable ruling under subsection 43.9 (10) of the Act in respect of the contract or the expenditure is not correct, and it is reasonable to believe that the Minister would not have given the favourable ruling if the correct information had been provided or if the representation had not been made, ii. if any undertaking given in connection with the application for the ruling is not fulfilled, or iii. if information is not disclosed to the Minister and it is reasonable to believe that, if the information had been disclosed, the Minister would not have given a favourable ruling with respect to the contract or the expenditure. 4. An expenditure under an eligible contract that is made to an eligible research institute that is prescribed by subsection (11) and that is not a hospital research institute referred to in clause (12) (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 43.9 (29) of the Act or a hospital research institute described in clause (12) (a) are significantly involved in carrying out the scientific research and experimental development activities required under the contract. 5. An expenditure under an eligible contract with an eligible research institute for work described in paragraph (d) of the definition of “scientific research and experimental development” in subsection 248 (1) of the Income Tax Act
(Canada) that is clinical research in Phase IV, as described in Application Policy 96-09 dated September 4, 1996, issued by the Tax Incentive Audit Section and Scientific Research Section of Revenue Canada, 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 43.9 (23) of the Act with the eligible research institute. (4) Subsection 43.9 (12) of the Act applies with necessary modifications to an expenditure referred to in paragraph 1 of subsection (3). (5) For the purposes of subsection 43.9 (21) of the Act, a corporation’s qualified expenditure limit for a taxation year is $20 million if the corporation is not associated at any time in the year with any other corporation. (6) If a corporation is associated in a taxation year with another corporation, the corporation’s qualified expenditure limit for the purposes of section 43.9 of the Act is determined in accordance with the following rules: 1. If all of the corporations that are associated with each other in the taxation year have filed with the Minister an agreement in a form acceptable to the Minister under which, for the purposes of section 43.9 of the Act, they allocate an amount to one or more of them for the taxation year, and the total of all amounts allocated to one or more of them does not exceed $20 million, the qualified expenditure limit for the year of each corporation shall be, subject to paragraph 4 and subsections (7) and (8), the amount allocated to it. 2. If the Minister notifies in writing any of the corporations that are associated with each other in a taxation year that an agreement referred to in paragraph 1 is required to be filed and no agreement is filed within 30 days after the notification is sent by the Minister, i. the Minister may, for the purposes of section 43.9 of the Act, allocate an amount to each of the corporations, and the total of all amounts allocated by the Minister to the corporations shall not exceed $20 million, and ii. except as otherwise provided in paragraph 4 or subsection (7) or (8), the qualified expenditure limit for the year of each of the corporations is the amount allocated by the Minister to it. 3. If no agreement referred to in paragraph 1 is filed by the corporations with the Minister, and the Minister does not make an allocation under paragraph 2, the qualified expenditure limit of each of the corporations for the taxation year shall be deemed to be nil. 4. If a corporation (the “first corporation”) has more than one taxation year ending in the same calendar year and it is associated in two or more of those taxation years with another corporation that has a taxation year ending in that calendar year, the qualified expenditure limit of the first corporation for each taxation year that ends in the calendar year, that is a taxation year in which it is associated with the other corporation and that is a taxation year that ends after its first taxation year ending in that calendar year, shall not exceed an amount equal to the lesser of, i. its qualified expenditure limit as otherwise determined under paragraph 1, 2 or 3 for its first taxation year ending in the calendar year, multiplied by the ratio of the number of days in the taxation year to 365, and ii. its qualified expenditure limit as otherwise determined under paragraph 1, 2 or 3 for the particular taxation year ending in the calendar year, multiplied by the ratio of the number of days in the taxation year to 365. (7) Despite subsections (5) and (6), if a corporation has a taxation year that is less than 51 weeks and paragraph 4 of subsection (6) does not apply, the corporation’s qualified expenditure limit for the taxation year for the purposes of section 43.9 of the Act shall be the amount otherwise determined under this section, before the application of the rule in subsection (8) if it applies, multiplied by the ratio of the number of days in the taxation year to 365. (8) Despite subsections (5) and (6), if a corporation’s taxation year commences before May 7, 1997, its qualified expenditure limit for the taxation year for the purposes of section 43.9 of the Act shall not exceed the amount otherwise determined under this section, multiplied by the ratio of the number of days in the year ending after May 6, 1997 to the total days in the taxation year. (9) For the purposes of clause 43.9 (26) (b) of the Act, an employee of an eligible research institute that has entered into an eligible contract with a corporation is connected to that 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 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 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. (10) For the purposes of the definition of “eligible research institute” in subsection 43.9 (29) of the Act, a university referred to in clause (a) of that definition shall be deemed to include all non-profit organizations that are affiliated or federated colleges or universities of the university.  O. Reg. 76/99, s. 5 (11) For the purposes of clause (c) of the definition of “eligible research institute” in subsection 43.9 (29) of the Act, a non-profit organization that meets the conditions in one of the following paragraphs is an eligible research institute: 1. A non-profit organization, i. that is exempt from tax under the Act and the Income Tax Act (Canada) by reason of paragraph 149 (1) (f), (j) or (l) of that Act, ii. that is affiliated with an eligible research institute referred to in clause (a) of the definition of that term in subsection 43.9 (29) of the Act and has entered into an exchange of information agreement with the institution under which teaching staff, students and research fellows of the institute 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 eligible research institute with which it is affiliated, through qualified employees who have sufficient expertise and experience, and who have 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 Income Tax Act (Canada), if the 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 of the organization who is not exempt from tax under Division H of Part I of the Income Tax Act (Canada) 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 Act and the Income Tax Act (Canada) 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 an eligible research institute referred to in clause (a) or (b) of the definition of “eligible research institute” in subsection 43.9 (29) of the Act or a hospital research institute described in clause (12) (a), 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. 76/99, s. 5; O. Reg. 558/99, s. 3 (1). (12) For the purposes of clause (d) of the definition of “eligible research institute” in subsection 43.9 (29) of the Act, a hospital research institute is an eligible research institute in respect of a qualifying corporation if, (a) it is a hospital listed in Group A, D, H or L in the Schedule to Regulation 964 of the Revised Regulations of Ontario, 1990, (“Classification of Hospitals”) made under the Public Hospitals Act or in 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 Act and the Income Tax Act (Canada) 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 who have 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. 76/99, s. 5; O. Reg. 558/99, s. 3 (2). (13) For the purposes of subsections (11) and (12), 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 that is described in paragraph 37 (1) (a) of the Income Tax Act (Canada) 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. (14) Despite subsections (11) and (12), a non-profit organization or hospital research institute is not an eligible research institute until it is designated an eligible research institute by the Minister. (15) A non-profit organization or hospital research institute may apply to the Minister to be designated and shall be designated by the Minister to be an eligible research institute if, (a) in the case of a non-profit organization, it is an eligible research institute under subsection (11); or (b) in the case of a hospital research institute, it is an eligible research institute under subsection (12). (16) The Minister may designate a non-profit organization or hospital research institute to be an eligible research institute under subsection (15) effective as of a date that is before or after the day on which the Minister authorizes the designation. (17) The Minister may revoke the designation of a non-profit organization or hospital research institute under subsection (15) if the organization or institute no longer qualifies as an eligible research institute under subsection (11) or (12). (18) Despite subsections (11) and (12), a non-profit organization or hospital research institute that has been designated an eligible research institute under subsection (15) shall be deemed to continue to be an eligible research institute for the purposes of section 43.9 of the Act until the Minister revokes its designation. (19) The Minister may revoke a designation under subsection (17) effective as of a date that is before or after the day on which the Minister 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 (11) or (12). (20) The Minister shall publicize designations under subsection (15), revocations of designations under subsection (17) 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, will bring these matters to the attention of those affected.  O. Reg. 76/99, s. 5. PART XII   ONTARIO COMPUTER ANIMATION AND SPECIAL EFFECTS TAX CREDIT