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Legislative Assembly of New Brunswick
Status of Legislation - First Reading Bill
An Act to Amend the New Brunswick Income Tax Act
 
Legislature :
54
Session :
5
Bill No. :
62
Member :
Hon. Peter Mesheau
First Reading :
2003-4-8
Second Reading :
2003-4-9
Committee of the Whole :
2003-4-10
Amended :
Third Reading :
2003-4-10
Royal Assent :
2003-4-11
Download PDF :
  Bill 62         
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Text of Bill :
Her Majesty, by and with the advice and consent of the Legislative Assembly of New Brunswick, enacts as follows:



1                              Section 35 of the New Brunswick Income Tax Act, chapter N-6.001 of the Acts of New Brunswick, 2000, is repealed and the following is substituted:



35                              Section 121 of the Federal Act applies for the purposes of this Act, except that the reference to "2/3", or to the fraction that it is amended to read, in that section of the Federal Act shall be read as a reference to 18.5% for the purposes of this Act.



2                              Section 59 of the Act is amended



(a)               in subsection (1)



(i)         in the definition "eligible expenditure" by striking out ", without reference to paragraph (b) of that definition";



(ii)       by repealing the definition "research and development tax credit" and substituting the following:



"research and development tax credit" of a corporation at the end of a taxation year means



(a)               for eligible expenditures made before January 1, 2003, the amount, if any, by which the total of



(i)         an amount equal to 10% of the total of all amounts each of which is an eligible expenditure made by it in the year and before January 1, 2003, computed without reference to subsection 13(7.1) of the Federal Act,



(ii)       an amount equal to 10% of the total of all amounts each of which is an eligible expenditure made by it in any of the 7 taxation years preceding the year and before January 1, 2003, or the 3 taxation years following the year and before January 1, 2003, computed without reference to subsection 13(7.1) of the Federal Act,



(iii)    an amount equal to the total of all amounts each of which is an amount required by subsection (3) or (4) to be included in computing its research and development tax credit at the end of the year for eligible expenditures made in the year and before January 1, 2003, and



(iv)      the total of all amounts each of which is an amount required by subsection (3) or (4) to be included in computing its research and development tax credit at the end of any of the 7 taxation years preceding the year and before January 1, 2003, for eligible expenditures made in the preceding years and before January 1, 2003, or the 3 taxation years following the year and before January 1, 2003, for eligible expenditures made in the following years and before January 1, 2003,



exceeds the total of all amounts each of which is that portion of the amount deducted under subsection (2) from the tax otherwise payable under this Act by the corporation for a preceding taxation year that is in respect of an eligible expenditure made in the year or in any of the 7 taxation years preceding the year and before January 1, 2003, for eligible expenditures made in the preceding years and before January 1, 2003, or the 2 taxation years following the year and before January 1, 2003, for eligible expenditures made in the following years and before January 1, 2003, and



(b)               for eligible expenditures made after December 31, 2002, the amount which is the total of



(i)         an amount equal to 15% of the total of all amounts each of which is an eligible expenditure made by it in the year and after December 31, 2002, computed without reference to subsection 13(7.1) of the Federal Act, and



(ii)       an amount equal to the total of all amounts each of which is an amount required by subsection (3) or (4) to be included in computing its research and development tax credit at the end of the year for eligible expenditures made in the year and after December 31, 2002. (« crédit d'impôt pour la recherche et le développement »)



(b)               by adding after subsection (2) the following:



59(2.1)          The amount by which the research and development tax credit referred to in paragraph (b) of the definition "research and development tax credit" in subsection (1) exceeds the corporation's tax payable for the taxation year computed without reference to this section may be applied by the Minister of Finance to pay



(a)               any tax, interest or penalty owing by the corporation for that or any previous taxation year under this Act, the income tax statute of another agreeing province or the Federal Act,



(b)               any contribution, penalty or interest owing by the corporation for that or any previous taxation year as a result of payments required from the corporation under the Canada Pension Plan (Canada), and



(c)                any premium, interest or penalty owing by the corporation for that or any previous taxation year under the Employment Insurance Act (Canada).



59(2.2)          Any part of the amount not applied under subsection (2.1) shall be paid to the corporation.



59(2.3)                              Subsections (2.1) and (2.2) do not apply to a corporation that is exempt from tax under section 149 of the Federal Act.



59(2.4)          There shall be deemed to have been paid on account of tax payable under the Federal Act for a taxation year by a corporation, other than a corporation exempt from tax, on the balance-due day referred to in paragraph 157(1)(b) of the Federal Act on or before which the remainder of the taxes payable under this Part for the year by the corporation would be required to be paid if such a remainder were payable, the amount, if any, by which



(a)               the corporation's tax credit for the year computed under paragraph (b) of the definition "research and development tax credit" in subsection (1),



exceeds



(b)               the amount deducted under subsection (2) in computing the corporation's tax payable under this Part for the year.



(c)               in subsection (3) by striking out "paragraph (a) or (c) of the definition "research and development tax credit" in subsection (1)" and substituting "subparagraph (a)(i) or (b)(i) of the definition "research and development tax credit" in subsection (1)";



(d)               in subsection (4) by striking out "paragraph (a) or (c) of the definition "research and development tax credit" in subsection (1)" and substituting "subparagraph (a)(i) or (b)(i) of the definition "research and development tax credit" in subsection (1)";



(e)               by adding after subsection (8) the following:



59(9)                              Where



(a)               a corporation acquired a particular property from a person or partnership in a taxation year of the corporation or in any of the 4 preceding taxation years,



(b)               the cost of the particular property was an eligible expenditure to the corporation,



(c)                the cost of the particular property is included in an amount, a percentage of which may reasonably be considered to be included in computing the corporation's research and development tax credit at the end of the taxation year, and



(d)               in the year and after December 31, 2002, the corporation converts to commercial use, or disposes of without having previously converted to commercial use, the particular property or another property that incorporates the particular property,



there shall be added to the corporation's tax otherwise payable under this Part for the year the lesser of the amount that may reasonably be considered to be included in computing the corporation's research and development tax credit in respect of the particular property and the amount that is the percentage, described in paragraph (c), of



(e)                      where the particular property or the other property is disposed of to a person who deals at arm's length with the corporation, the proceeds of disposition of that property, and



(f)                in any other case, the fair market value of the particular property or the other property at the time of the conversion or disposition.



59(10)                              Where a corporation is a beneficiary under a trust that has received a research and development tax credit under subsection (3) at the end of a particular fiscal period and where



(a)               a particular property, the cost of which is an eligible expenditure, is acquired by the trust from a person or partnership in the particular fiscal period or in any of the 4 preceding fiscal periods of the trust,



(b)               the cost of the particular property is included in an amount, a percentage of which may reasonably be considered to have been included in computing the amount determined under subsection (3) in respect of the trust at the end of a fiscal period, and



(c)                in the particular fiscal period and after December 31, 2002, the trust converts to commercial use, or disposes of without having previously converted to commercial use, the particular property or another property that incorporates the particular property,



there shall be added to the corporation's tax otherwise payable under this Part at the end of the particular fiscal period the corporation's share of, as a beneficiary under the trust, the lesser of



(d)               the amount that may reasonably be considered to have been included in respect of the particular property in computing the amount determined under subsection (3) in respect of the trust, and



(e)                the percentage, described in paragraph (b), of



(i)               where the particular property or the other property is disposed of to a person who deals at arm's length with the trust, the proceeds of disposition of that property, and



(ii)       in any other case, the fair market value of the particular property or the other property at the time of the conversion or disposition.



59(11)                              Where a corporation is a member of a partnership that has received a research and development tax credit under subsection (4) at the end of a particular fiscal period and where



(a)               a particular property, the cost of which is an eligible expenditure, is acquired by the partnership from a person or partnership in the particular fiscal period or in any of the 4 preceding fiscal periods of the partnership,



(b)               the cost of the particular property is included in an amount, a percentage of which may reasonably be considered to have been included in computing the amount determined under subsection (4) in respect of the partnership at the end of a fiscal period, and



(c)                in the particular fiscal period and after December 31, 2002, the partnership converts to commercial use, or disposes of without having previously converted to commercial use, the particular property or another property that incorporates the particular property,



there shall be added to the corporation's tax otherwise payable under this Part at the end of the particular fiscal period the corporation's share of, as a member of the partnership, the lesser of



(d)               the amount that may reasonably be considered to have been included in respect of the particular property in computing the amount determined under subsection (4) in respect of the partnership, and



(e)                the percentage, described in paragraph (b), of



(i)               where the particular property or the other property is disposed of to a person who deals at arm's length with the partnership, the proceeds of disposition of that property, and



(ii)       in any other case, the fair market value of the particular property or the other property at the time of the conversion or disposition.



59(12)                              Where



(a)               a corporation acquired a particular property from a person or partnership in a taxation year or in any of the 4 preceding taxation years,



(b)               the cost of the particular property was an eligible expenditure to the corporation,



(c)                all or part of the eligible expenditure may reasonably be considered to have been the subject of an agreement made under subsection 127(13) of the Federal Act by the corporation and another corporation, in this subsection referred to as the "transferee", and



(d)               in the year and after December 31, 2002, the corporation converts to commercial use, or disposes of without having previously converted to commercial use, the particular property or another property that incorporates the particular property,



there shall be added to the corporation's tax otherwise payable under this Part for the year the lesser of



(e)                the amount that may reasonably be considered to have been included in computing the transferee's research and development tax credit in respect of the eligible expenditure that was the subject of the agreement, and



(f)                the amount determined by the formula



A ´ B – C



where



A                  is the percentage applied by the transferee in determining its research and development tax credit in respect of the eligible expenditure that was the subject of the agreement,



B                  is



(i)               where the particular property or the other property is disposed of to a person who deals at arm's length with the corporation, the proceeds of disposition of that property, and



(ii)       in any other case, the fair market value of the particular property or the other property at the time of the conversion or disposition, and



C                  is the amount, if any, added to the corporation's tax payable under subsection (9) in respect of the particular property.



59(13)            For the purpose of subsections (9) to (12), "cost of the particular property" to a corporation shall not exceed the amount paid by the corporation to acquire the particular property from a transferor of the particular property and, for greater certainty, does not include amounts paid by the corporation to maintain, modify or transform the particular property.



59(14)                              Subsections (9) to (12) and (15) to (17) do not apply to a corporation, trust or partnership, in this subsection referred to as the "transferor", that disposes of a property to a corporation, in this subsection and subsections (15) to (17) referred to as the "purchaser", that does not deal at arm's length with the transferor, if the purchaser acquired the property in circumstances described under subsection 127(33) of the Federal Act.



59(15)                              Where, at any particular time in a taxation year and after December 31, 2002, a purchaser converts to commercial use, or disposes of without having previously converted to commercial use, a property



(a)               that was acquired by the purchaser in circumstances described in subsection (14) or that is another property that incorporates a property acquired in such circumstances, and



(b)               that was first acquired, or that incorporates a property that was first acquired, by a corporation, in this subsection referred to as the "original user", with which the purchaser did not deal at arm's length at the time at which the purchaser acquired the property, in the original user's taxation year or fiscal period that includes the particular time, on the assumption that the original user had such a taxation year or fiscal period, or in any of the original user's 4 preceding taxation years or fiscal periods,



there shall be added to the purchaser's tax otherwise payable under this Part for the year the lesser of



(c)                the amount included, in respect of the property, in the research and development tax credit of the original user, and



(d)               the amount determined by applying the percentage that was applied by the corporation that was the original user in computing the research and development tax credit referred to in paragraph (c), to



(i)               where the property or the other property is disposed of to a person who deals at arm's length with the purchaser, the proceeds of disposition of that property, and



(ii)       in any other case, the fair market value of the property or the other property at the time of the conversion or disposition.



59(16)                              Where, at any particular time in a taxation year and after December 31, 2002, a purchaser converts to commercial use, or disposes of without having previously converted to commercial use, a property



(a)               that was acquired by the purchaser in circumstances described in subsection (14) or that is another property that incorporates a property acquired in such circumstances, and



(b)               that was first acquired, or that incorporates a property that was first acquired, by a trust, in this subsection referred to as the "original user", with which the purchaser did not deal at arm's length at the time at which the purchaser acquired the property, in the original user's taxation year or fiscal period that includes the particular time, on the assumption that the original user had such a taxation year or fiscal period, or in any of the original user's 4 preceding taxation years or fiscal periods,



there shall be added to the purchaser's tax otherwise payable under this Part for the year the lesser of



(c)                the amount that may reasonably be considered to have been included in respect of the property in computing the research and development tax credit under subsection (3) in respect of all the corporations that were beneficiaries of the original user, and



(d)               the amount determined by applying the product of



(i)         the percentage that was applied in computing the research and development tax credit referred to in paragraph (c), and



(ii)       the proportion that the research and development tax credit referred to in paragraph (c) that was utilized by the corporations that were beneficiaries of the original user was of the total research and development tax credit calculated as if the original user was a corporation,



to



(iii)               where the property or the other property is disposed of to a person who deals at arm's length with the purchaser, the proceeds of disposition of that property, and



(iv)      in any other case, the fair market value of the property or the other property at the time of the conversion or disposition.



59(17)                              Where, at any particular time in a taxation year and after December 31, 2002, a purchaser converts to commercial use, or disposes of without having previously converted to commercial use, a property



(a)               that was acquired by the purchaser in circumstances described in subsection (14) or that is another property that incorporates a property acquired in such circumstances, and



(b)               that was first acquired, or that incorporates a property that was first acquired, by a partnership, in this subsection referred to as the "original user", with which the purchaser did not deal at arm's length at the time at which the purchaser acquired the property, in the original user's taxation year or fiscal period that includes the particular time, on the assumption that the original user had such a taxation year or fiscal period, or in any of the original user's 4 preceding taxation years or fiscal periods,



there shall be added to the purchaser's tax otherwise payable under this Part for the year the lesser of



(c)                the amount that may reasonably be considered to have been included in respect of the property in computing the research and development tax credit under subsection (4) in respect of all the corporations that were members of the original user, and



(d)               the amount determined by applying the product of



(i)         the percentage that was applied in computing the research and development tax credit referred to in paragraph (c), and



(ii)       the proportion that the research and development tax credit referred to in paragraph (c) that was utilized by the corporations that were members of the original user was of the total research and development tax credit calculated as if the original user was a corporation,



to



(iii)               where the property or the other property is disposed of to a person who deals at arm's length with the purchaser, the proceeds of disposition of that property, and



(iv)      in any other case, the fair market value of the property or the other property at the time of the conversion or disposition.



59(18)                              Subsections (9) to (17) apply to an eligible expenditure made after December 31, 2002.



3(1)                              Subject to subsection (2), this Act shall be deemed to have come into force on January 1, 2003.



3(2)                              Subparagraph 2(a)(i) of this Act shall be deemed to have come into force on January 1, 2000.



EXPLANATORY NOTES



Section 1



The existing provision is as follows:



35                              Section 121 of the Federal Act applies for the purposes of this Act, except that the reference to "2/3", or to the fraction that it is amended to read, in that section of the Federal Act shall be read as a reference to,



(a)               for the 2000 taxation year, 39% for the purposes of this Act, and



(b)               for any subsequent taxation year, 38% for the purposes of this Act.



Section 2



(a)(i)         The existing definition is as follows:



"eligible expenditure" means an expenditure made by a corporation with a permanent establishment in New Brunswick in respect of scientific research and experimental development to be carried out in New Brunswick, that is a qualified expenditure as defined in subsection 127(9) of the Federal Act, without reference to paragraph (b) of that definition; (« dépense admissible »)



(a)(ii)       The existing definition is as follows:



"research and development tax credit" of a corporation at the end of a taxation year means the amount, if any, by which the total of



(a)               an amount equal to 10% of the total of all amounts each of which is an eligible expenditure made by it in the year, computed without reference to subsection 13(7.1) of the Federal Act,



(b)               an amount equal to 10% of the total of all amounts each of which is an eligible expenditure made by it in any of the 7 taxation years immediately preceding, or the 3 taxation years immediately following, the year, computed without reference to subsection 13(7.1) of the Federal Act,



(c)                an amount equal to the total of all amounts each of which is an amount required by subsection (3) or (4) to be included in computing its research and development tax credit at the end of the year, and



(d)               the total of all amounts each of which is an amount required by subsection (3) or (4) to be included in computing its research and development tax credit at the end of any of the 7 taxation years immediately preceding, or the 3 taxation years immediately following, the year,



exceeds the total of all amounts each of which is that portion of the amount deducted under subsection (2) from the tax otherwise payable under this Act by the corporation for a preceding taxation year that is in respect of an eligible expenditure made in the year or in the 7 taxation years immediately preceding, or the 2 taxation years immediately following, the year. (« crédit d'impôt pour la recherche et le développement »)



(b)               New provisions.



(c)                The existing provision is as follows:



59(3)                              Where, in a particular taxation year of a corporation that is a beneficiary under a trust, an amount would, if the trust were a corporation, be included, because of paragraph (a) or (c) of the definition "research and development tax credit" in subsection (1), in computing the research and development tax credit of the trust for its taxation year ending in that particular taxation year, the portion of that amount that may, having regard to all the circumstances including the terms and conditions of the trust, reasonably be considered to be the corporation's share of that amount shall be included in computing the research and development tax credit of the corporation at the end of that particular taxation year.



(d)               The existing provision is as follows:



59(4)                              Where, in a particular taxation year of a corporation that is a member of a partnership, an amount would, if the partnership were a corporation, be included, because of paragraph (a) or (c) of the definition "research and development tax credit" in subsection (1), in computing the research and development tax credit of the partnership for its taxation year ending in that particular taxation year, the portion of that amount that may reasonably be considered to be the corporation's share of that amount shall be included in computing the research and development tax credit of the corporation at the end of that particular taxation year.



(e)                New provisions.



Section 3



Commencement provision.

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Legend
* Private Bill
** Bill referred to Standing Committee on Law Amendments
+ Private Member's Public Bill
++ Motion for second reading defeated
+++ Debate at second reading adjourned
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