203. (1) In this section, “Class 12” means Class 12 of Schedule II to the Federal Regulations; “eligible cost” means, in respect of a qualifying intellectual property of a taxpayer, the total of all amounts included in the capital cost of the property that were incurred by the taxpayer after August 31, 1997 and, (a) that are included in the amount of the undepreciated capital cost of the property, if the property is included by the taxpayer for the purposes of the Federal Act in Class 14 or 44 of Schedule II to the Federal Regulations, or (b) that are included by the taxpayer in computing its eligible capital expenditures for the purposes of the Federal Act; “Federal Act” means the Income Tax Act (Canada); “Federal Regulations” means the regulations made under the Federal Act; “intellectual property transfer” means a transaction in which a taxpayer acquires intellectual property that is knowledge in the form of know-how, techniques, processes or formulas from a person not related to the taxpayer, if the taxpayer acquires the property primarily for the purpose of implementing in Ontario an innovation or invention in a business of the taxpayer that is carried on in Ontario; “qualifying intellectual property” means, in respect of a taxpayer, a Canadian or foreign patent, know-how, a commercial secret or other similar property constituting knowledge, including a licence or permit in respect of the property, but does not include, (a) a trade mark, industrial design, copyright or other similar property constituting the expression of knowledge, or (b) a property acquired or used primarily to earn rents, royalties or similar payments from the leasing or licensing of the property; “taxpayer” means a corporation or a partnership other than a limited partnership. (2) For the purposes of the Act, a taxpayer may include the eligible cost of a qualifying intellectual property in the capital cost of a depreciable property of Class 12, but not Class 14 or 44 of Schedule II to the Federal Regulations, (a) if the property is acquired after August 31, 1997 by the taxpayer in an intellectual property transfer carried out under the terms of a contract that was entered into by the taxpayer after May 6, 1997; (b) if the property is first used by the taxpayer in carrying on the taxpayer’s business within a reasonable time following acquisition and continues to be used during the entire period of time in which the innovation or invention for which the property was acquired is used in carrying on the taxpayer’s business; and (c) if the cost of the property is included by the taxpayer, for the purposes of the Federal Act, (i) in Class 14 or 44 of Schedule II to the Federal Regulations, or (ii) in computing its eligible capital expenditures for purposes of that Act. (3) A separate class is prescribed in respect of each qualifying intellectual property whose undepreciated capital cost is included in Class 12 under this section. (4) Despite subsection (2), the total of all amounts included in a taxation year by a taxpayer in the capital cost of depreciable properties whose undepreciated capital cost is included in Class 12 under this section shall not exceed the taxpayer’s expenditure limit for that year. (5) If a taxpayer’s expenditure limit for a year is less than the amount that would otherwise be added to the undepreciated capital cost in respect of a qualifying intellectual property whose undepreciated capital cost is included in Class 12 under this section, the amount of the difference may be included in the same Class to Schedule II to the Federal Regulations or in the taxpayer’s eligible capital expenditures for the purposes of the Act, as applicable, depending on the treatment by the taxpayer of the cost of the property for the purposes of the Federal Act. (6) A taxpayer’s expenditure limit for a taxation year is $20 million if the taxpayer is not associated at any time in the year with any other taxpayer. (7) If a taxpayer is associated in a taxation year with another taxpayer, the taxpayer’s expenditure limit is determined in accordance with the following rules: 1. If all of the taxpayers 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 this section, 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 expenditure limit for the year of each taxpayer shall be, subject to paragraph 4 and subsections (8) and (9), the amount allocated to it. 2. If the Minister notifies in writing any of the taxpayers 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 this section, allocate an amount to each of the taxpayers, and the total of all amounts allocated by the Minister to the taxpayers shall not exceed $20 million, and ii. except as otherwise provided in paragraph 4 or subsection (8) or (9), the expenditure limit for the year of each of the taxpayers is the amount allocated by the Minister to it. 3. If no agreement referred to in paragraph 1 is filed by the taxpayers with the Minister, and the Minister does not make an allocation under paragraph 2, the expenditure limit of each of the taxpayers for the taxation year shall be deemed to be nil. 4. If a taxpayer (in this paragraph referred to as the “first taxpayer”) 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 taxpayer that has a taxation year ending in that calendar year, the expenditure limit of the first taxpayer for each taxation year that ends in the calendar year, that is a taxation year in which it is associated with the other taxpayer 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 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 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. (8) Despite subsections (6) and (7), if a taxpayer has a taxation year that is less than 51 weeks and paragraph 4 of subsection (7) does not apply, the taxpayer’s expenditure limit for the taxation year shall be the amount otherwise determined under this section, before the application of the rule in subsection (9) if it applies, multiplied by the ratio of the number of days in the taxation year to 365. (9) Despite subsections (6) and (7), if a taxpayer’s taxation year commences before May 7 1997, its expenditure limit for the taxation year 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. (10) Taxpayers shall be deemed to be associated with each other in a taxation year for the purposes of determining their expenditure limits for the year if on the application of the following rules they would be associated in the taxation year under section 256 of the Federal Act: 1. A partnership shall be deemed to be a corporation having only one class of issued shares which have full voting rights under all circumstances, and each member of the partnership shall be deemed to own the proportion of the number of issued shares of the capital stock of the corporation as that member’s proportionate share of the income or loss of the partnership. 2. Two partnerships shall be deemed to be associated if each member of one partnership is a member of the other partnership or is related to at least one member of the other partnership. 3. A taxpayer that is deemed to be associated with another taxpayer shall be deemed to be associated with every corporation and partnership that is deemed to be associated with the other taxpayer. (11) The rules in subsection 13 (26) of the Federal Act and in subsection 1100 (2) of the Federal Regulations do not apply in respect of property whose undepreciated capital cost is included in Class 12 under this section. (12) For the purposes of subsection 13.1 (1) of the Act, a prescribed depreciable property in respect of a taxpayer is a qualifying intellectual property of the taxpayer whose undepreciated capital cost is included in Class 12 under this section that is used by the taxpayer exclusively in Ontario to implement the innovation or invention for which the property was acquired. (13) A property whose undepreciated capital cost is included in Class 12 under this section, or is included in Class 12 by operation of subsection 1102 (14) of the Federal Regulations and was included in Class 12 under this section by a prior taxpayer, is a depreciable property of a prescribed class for the purposes of section 11.1 of the Act. (14) A property whose undepreciated capital cost was included in Class 12 under this section by a partnership and was transferred to a corporation that did not deal at arm’s length with the partnership at the time of the transfer shall be deemed to be depreciable property of a prescribed class of the corporation for the purposes of section 11.1 of the Act. (15) Subject to section 80 of the Act, a property acquired by a taxpayer shall be deemed for the purposes of this section never to have been a qualifying intellectual property and the total of all amounts deductible for any taxation year by the taxpayer, by a partner of the taxpayer (if the taxpayer is a partnership) or by a person related to the taxpayer, as capital cost allowance or as a deduction under section 13.1 of the Act shall not exceed the maximum amount that would have been deductible if the property had never been qualifying intellectual property if, (a) the property has not been used by the taxpayer or by the related person (if the property was transferred to the related person) to implement in Ontario the innovation or invention for which the property was acquired by the taxpayer; or (b) the property has been used by the taxpayer or by the related person (if the property was transferred to the related person) primarily to earn rents, royalties or similar payments from the leasing or licensing of the property.  O. Reg. 298/98, s. 1. Electricity Generation and Conservation