905. (1) For the purposes of this section, “Canadian-controlled corporation” means a corporation that is determined to be Canadian-controlled under sections 26 to 28 of the Investment Canada Act (Canada) for the purposes of that Act, and, in the application of those sections for the purposes of this definition, a reference to the Minister shall be read as a reference to the Minister of Finance; “Canadian group” means a group of musicians, vocalists or both, at least 75 per cent of whom are qualified Canadians; “government assistance” means assistance from a government or 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 43.12 of the Act; “master recording” means, in respect of a sound recording, the initial sound recording that is created and fully completed and from which all copies of the sound recording are made; “qualified Canadian” means an individual who is ordinarily resident in Canada and who is either a Canadian citizen as defined in the Citizenship Act (Canada) or a permanent resident within the meaning of the Immigration Act (Canada); “sound recording” means a recording of music, with or without lyrics, that is produced by analogue, digital or similar technology and that is, (a) on a vinyl record, compact disc, digital versatile disc or audio tape, if the recording is made before May 12, 2005, or (b) on a vinyl record, compact disc, digital versatile disc, audio tape or any other fixed medium from which a recording is capable of being played, if the recording is made after May 11, 2005.  O. Reg. 419/99, s. 1; O. Reg. 58/06, s. 1 (1, 2). (2) For the purposes of subsection 43.12 (3) of the Act, the amount of the variable “B” for a taxation year in respect of an eligible Canadian sound recording is calculated by adding one dollar to the amount of “A” for the taxation year in respect of the recording. O. Reg. 419/99, s. 1. (3) A corporation is an “eligible sound recording company” within the meaning of subsection 43.12 (12) of the Act for a taxation year in respect of an eligible Canadian sound recording if the following conditions are met: 1. The corporation carries on a sound recording business, primarily.  A sound recording business is a business in which the principal activities are managing artists, 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. 2. The corporation has carried on its sound recording business, i. throughout the period of 24 months that ends immediately before the beginning of the taxation year, if the taxation year ends before May 12, 2005, or ii. throughout the period of 12 months that ends immediately before the beginning of the taxation year, if the taxation year ends after May 11, 2005. 3. The corporation carries on the sound recording business primarily in Ontario at a permanent establishment in Ontario. 4. For a taxation year that commences before May 2, 2000, less than 50 per cent of the corporation’s taxable income for either the taxation year or the preceding taxation year is earned for the purposes of Part II of the Act in a jurisdiction other than Ontario. 4.1 For a taxation year that commences after May 1, 2000, less than 50 per cent of the corporation’s taxable income for the preceding taxation year is earned for the purposes of Part II of the Act in a jurisdiction other than Ontario. 5. The corporation is a Canadian-controlled corporation. 6.  Revoked:  O. Reg. 499/00, s. 2 (3). 7. 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. 8. Within 12 months before the start of the first taxation year for which the corporation claims a tax credit under section 43.12 of the Act in respect of the recording, the corporation has implemented a plan for the distribution of at least one sound recording.  The plan is considered by a person designated by the Minister of Citizenship, Culture and Recreation, to be appropriate for the commercial exploitation of the recording to which it relates.  O. Reg. 419/99, s. 1; O. Reg. 499/00, s. 2 (1-3); O. Reg. 58/06, s. 1 (3). (3.1) If a corporation (the “new corporation”) has been formed as a result of an amalgamation or merger of two or more corporations (the “predecessor corporations”), the new corporation shall be deemed, (a) to meet the condition described in paragraph 2 of subsection (3) for a taxation year, (i) if one of the predecessor corporations has carried on its sound recording business, (A) throughout the period of 24 months that ends immediately before the beginning of the taxation year, if the taxation year ends before May 12, 2005, or (B) throughout the period of 12 months that ends immediately before the beginning of the taxation year, if the taxation year ends after May 11, 2005, or (ii) if the new corporation plus one of the predecessor corporations have, in total, carried on a sound recording business, (A) throughout the period of 24 months that ends immediately before the beginning of the taxation year, if the taxation year ends before May 12, 2005, or (B) throughout the period of 12 months that ends immediately before the beginning of the taxation year, if the taxation year ends after May 11, 2005. (b) to meet the condition described in paragraph 4 or 4.1, as the case may be, of subsection (3) for the first taxation year of the new corporation if the predecessor corporations would be considered together to earn less than 50 per cent of their taxable income for the preceding taxation year in a jurisdiction other than Ontario; and (c) to meet the condition described in paragraph 8 of subsection (3) if the plan for the distribution of a sound recording is implemented within the period specified in that paragraph by at least one of the predecessor corporations.  O. Reg. 499/00, s. 2 (4); O. Reg. 58/06, s. 1 (4). (3.2) If a subsidiary controlled corporation is wound up into a corporation (the “parent corporation”), the parent corporation shall be deemed, (a) to meet the condition described in paragraph 2 of subsection (3) for a taxation year, (i) if the subsidiary controlled corporation has carried on its sound recording business, (A) throughout the period of 24 months that ends immediately before the beginning of the taxation year, if the taxation year ends before May 12, 2005, or (B) throughout the period of 12 months that ends immediately before the beginning of the taxation year, if the taxation year ends after May 11, 2005, or (ii) if the parent corporation and the subsidiary controlled corporation have, in total, carried on a sound recording business, (A) throughout the period of 24 months that ends immediately before the beginning of the taxation year, if the taxation year ends before May 12, 2005, or (B) throughout the period of 12 months that ends immediately before the beginning of the taxation year, if the taxation year ends after May 11, 2005. (b) if the winding-up occurred in the taxation year, to meet the condition described in paragraph 4 or 4.1, as the case may be, of subsection (3) for the taxation year if the parent corporation and the subsidiary controlled corporation would be considered together to earn less than 50 per cent of their taxable income for the preceding taxation year in a jurisdiction other than Ontario; and (c) to meet the condition described in paragraph 8 of subsection (3) if the plan for the distribution of a sound recording is implemented within the period specified in that paragraph by the subsidiary controlled corporation.  O. Reg. 499/00, s. 2 (4); O. Reg. 58/06, s. 1 (5). (3.3) The following rules apply for the purposes of paragraphs 2, 4, 4.1 and 8 of subsection (3): 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 shall be deemed to be a corporation for the period of time that he, she or it carried on the business before its incorporation and the corporation shall be deemed to be the same corporation as, and a continuation of, the deemed corporation. 2. If all or substantially all of the assets used in a sound recording business are transferred by a corporation (the “transferor”) to another corporation (the “transferee”) and if section 85 of the Income Tax Act (Canada) applies to the transfer, the transferee shall be deemed to be the same corporation as, and a continuation of, the transferor with respect to the operation of the business.  O. Reg. 499/00, s. 2 (4). (4) An individual or group, as the case may be, is an “emerging Canadian artist or group” within the meaning of subsection 43.12 (12) of the Act in the following circumstances: 1. An individual is an emerging Canadian artist, i. if he or she is a musician or a vocalist, ii. if he or she is a qualified Canadian, and iii. if neither the individual nor any musical group in which the individual is or has been a member has 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) in the United States of America and in one of Canada, the United Kingdom, France, Germany, Asia or Latin America. 2. A group is an emerging Canadian group if at least 75 per cent of its members are emerging Canadian artists.  O. Reg. 419/99, s. 1. (5) A sound recording is an “eligible Canadian sound recording” within the meaning of subsection 43.12 (12) of the Act if the music or the lyrics, if any, on the recording are performed by an emerging Canadian artist or group and if the following conditions are met: 1. The sound recording is not a recording described in subsection (6). 2. The recording has been produced by an eligible sound recording company. 3. The artist or group is an emerging Canadian artist or group when he, she or it entered into a contract with the eligible sound recording company for the production of the recording. 4. At least one of the following conditions is met: i. The music was composed primarily by one or more individuals or groups that, at the time it was composed, were qualified Canadians or Canadian groups. ii. The lyrics were written primarily by one or more individuals or groups that, at the time they were written, were qualified Canadians or Canadian groups. iii. Substantially all the activities carried out to produce the recording were performed in Ontario. 5. The eligible sound recording company has exclusive contractual control of the master tape of the recording for at least five years after the master tape is completed. 6. The eligible sound recording company meets the applicable condition described in subsection (7) or (7.1), whichever applies, with respect to the distribution of the recording.  O. Reg. 419/99, s. 1; O. Reg. 58/06, s. 1 (6). (6) A sound recording that meets any of the following conditions is not an eligible Canadian sound recording: 1. The recording is primarily of the spoken word or of wildlife or nature sounds. 2. The total playing time of the recording is, i. less than 40 minutes, if the master recording in respect of the recording is completed before May 12, 2005, or ii. less than 15 minutes, if the master recording in respect of the recording is completed after May 11, 2005. 3. The recording is produced for use as an instructional tool or for advertising or promotional purposes. 4. The recording is capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, sex, 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. 419/99, s. 1; O. Reg. 58/06, s. 1 (7). (7) For the purposes of paragraph 6 of subsection (5), an eligible sound recording company that claims a tax credit under section 43.12 of the Act in respect of a sound recording must meet the following conditions with respect to the distribution of the sound recording if the master recording for the sound recording is completed before May 12, 2005: 1. If the company is a small recording company (as described in subsection (8)) for the taxation year in which the credit is claimed, the company must have 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. 2. If the company is not a small recording company for the first taxation year in which credit is claimed for the recording, the company must enter into an arrangement no later than three months after the end of that taxation year to market copies of the recording through a person who has an established business of distributing sound recordings on a nation-wide basis.  O. Reg. 419/99, s. 1; O. Reg. 58/06, s. 1 (8, 9). (7.1) For the purposes of paragraph 6 of subsection (5), if the master recording for a sound recording is completed after May 11, 2005, the eligible sound recording company that claims a tax credit under section 43.12 of the Act in respect of the sound recording must have 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. 58/06, s. 1 (10). (8) An eligible sound recording company is a small recording company for a taxation year, (a) if the company’s gross revenue during the 12-month period before the beginning of the taxation year does not exceed $500,000; and (b) if the company has not claimed a tax credit under section 43.12 of the Act for a previous taxation year.  O. Reg. 419/99, s. 1. (9) Subject to subsection (10), each of the following expenditures is a “qualifying expenditure” within the meaning of subsection 43.12 (12) of the Act of an eligible sound recording company with respect to an eligible Canadian sound recording: 1. Expenditures incurred on account of property that is used primarily in Ontario and services that are provided primarily in Ontario for the production of the recording.  These expenditures include artists’ royalties and musicians’ session fees, graphics (including artwork, photography, layout and colour separations), software, digital scanning, programming and beta testing. 2. Expenditures incurred on account of property that is used primarily in Ontario and services that are provided primarily in Ontario for the production of a qualifying music video (as described in subsection (12)) for the recording.  These expenditures include rehearsal costs. 3. Expenditures incurred on account of property used primarily in Ontario and services performed primarily in Ontario for direct marketing of the recording.  These expenditures include fees for consultants and salaries and wages for employees whose primary function is public relations or marketing.  However, only the following launch costs for the recording are included: i. Rental costs for sound and light equipment and for facilities. ii. The amount of expenses for food, beverages and entertainment that is determined under section 67.1 of the Income Tax Act (Canada). iii. Event planning services. iv. The design, printing and mailing of invitations. v. Security. vi. Business location permits and licences. vii. Photography. viii. Promotional gifts and souvenirs. 4. 50 per cent of the expenditures that are not qualifying expenditures under paragraphs 2 and 3 solely 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 tax credit for the recording that would otherwise have been available to the recording company for a prior taxation year.  O. Reg. 419/99, s. 1. (10) The following expenditures are not qualifying expenditures in respect of an eligible Canadian sound recording: 1. An expenditure described in paragraphs 1 to 4 of subsection (9) that is incurred more than 24 months after the recording company incurs its first qualifying expenditure in respect of the recording. 2. An expenditure on account of touring costs incurred in connection with a concert or live performance.  O. Reg. 419/99, s. 1. (11) The total of all qualifying expenditures which may be claimed by an eligible sound recording company in a taxation year is determined using the formula, A – B in which, “A” is the sum of the qualifying expenditures of the company in the taxation year, and “B” is the amount of all government assistance in respect of the qualifying expenditures described by “A” that, when the company’s return is required to be delivered under section 75 of the Act for the taxation year, the company has received, is entitled to receive or may reasonably be expected to be entitled to receive. O. Reg. 419/99, s. 1. (12) A music video is a qualifying music video for the purposes of subsection (9) if the following conditions are met: 1. The music video is not one that is described in subsection (13). 2. The music video is produced by an eligible sound recording company in connection with an eligible Canadian sound recording produced by the company. 3. The primary purpose for producing and distributing the music video is to promote and sell the sound recording. 4. The principal performer in the audio component of the music video is the same emerging Canadian artist or group that recorded the sound recording. 5. 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. 6. The company has exclusive contractual control of the copyright of the original video for the music video for at least five years after the original video is completed.  O. Reg. 419/99, s. 1. (13) A music video that meets any of the following conditions is not a qualifying music video for the purposes of subsection (9): 1. The music video is capable of inciting hatred against an identifiable group, including a section of the public distinguished by colour, race, religion, sex, 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. 419/99, s. 1.