1998/99 Legislative Session: 3rd Session, 36th Parliament
FIRST READING


The following electronic version is for informational purposes only.
The printed version remains the official version.


HONOURABLE JOY K. MacPHAIL
MINISTER OF FINANCE AND
CORPORATE RELATIONS

BILL 41 -- 1998

INCOME TAX AMENDMENT ACT (No. 3), 1998

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of British Columbia, enacts as follows:

1 The Income Tax Act, R.S.B.C. 1996, c. 215, is amended by adding the following section:

Mining exploration tax credit

25.1 (1) In this section:

"assistance" in relation to a taxpayer means an amount, other than an amount deemed to have been paid under this section, that would be included under section 12 (1) (x) of the federal Act in computing the income of the taxpayer for any taxation year if that section were read without reference to subparagraphs (v) to (vii) of that section 12 (1) (x);

"eligible taxpayer" means

(a) an individual subject to tax under section 2 (1) (a), or

(b) a corporation that is subject to tax under section 2 (2), other than a corporation that

(i) is exempt from tax under section 27,

(ii) is controlled directly or indirectly in any manner whatever by one or more persons all or part of whose taxable income is exempt from tax under section 27 of this Act or under Part 1 of the federal Act,

(iii) is prescribed, under the federal Act, to be a labour-sponsored venture capital corporation for the purpose of section 127.4 of that Act,

(iv) has registered an employee share ownership plan under section 2 of the Employee Investment Act,

(v) is an employee venture capital corporation registered under section 8 of the Employee Investment Act, or

(vi) is a small business venture capital corporation registered under section 3 of the Small Business Venture Capital Act;

"excluded expense" of a taxpayer for a taxation year means

(a) a Canadian development expense within the meaning of section 66.2 (5) of the federal Act,

(b) an expense that may reasonably be considered to be related to a mine that has come into production in reasonable commercial quantities or to a potential or actual extension of such a mine,

(c) a Canadian exploration and development overhead expense within the meaning of the federal regulations,

(d) an outlay or expense described in paragraph (j) or (l) of the definition of "Canadian exploration expense" in section 66.1 (6) of the federal Act,

(e) a cost of, or for the use of, seismic data referred to in section 66 (12.6) (b.1) of the federal Act,

(f) an expense incurred in drilling or completing an oil or gas well, in building a temporary access road to an oil or gas well or in preparing a site in respect of an oil or gas well,

(g) the taxpayer's share of any outlay or expense incurred by a partnership, or

(h) any other outlay or expense prescribed under subsection (8);

"mineral resource" means a mineral resource within the meaning of section 248 (1) of the federal Act;

"qualified mining exploration expense" of a taxpayer means any expense incurred by the taxpayer after July 31, 1998 and before August 1, 2003 for the purpose of determining the existence, location, extent or quality of a mineral resource in British Columbia, including any expense incurred during that period in the course of

(a) prospecting,

(b) carrying out geological, geophysical or geochemical surveys,

(c) drilling by rotary, diamond, percussion or other methods, or

(d) trenching, digging test pits and preliminary sampling,

but does not include an excluded expense.

(2) Subject to subsection (3), an eligible taxpayer who has incurred qualified mining exploration expenses in a taxation year may claim a mining exploration tax credit under this section for the taxation year.

(3) An eligible taxpayer who has made a deduction in accordance with section 17 for a taxation year must not claim a tax credit under this section for the same taxation year.

(4) The amount of the tax credit that may be claimed by an eligible taxpayer for a taxation year under this section is 20% of the amount by which

(a) the total of the qualified mining exploration expenses incurred by the taxpayer in the taxation year

exceeds

(b) all amounts of assistance that can reasonably be considered to be in respect of amounts included in the total referred to in paragraph (a) and that, at the time of filing of the taxpayer's return of income for the taxation year,

(i) the taxpayer has received or is entitled to receive or can reasonably be expected to receive,

(ii) have not been repaid under a legal obligation to do so, and

(iii) have not otherwise reduced the total referred to in paragraph (a);

(5) A taxpayer that has claimed and is eligible for a mining exploration tax credit under this section for a taxation year is deemed to have paid, at the time referred to in section 156.1 (4) or 157 (1) (b) of the federal Act, as the applicable section relates to the taxation year for the taxpayer, the amount of the tax credit on account of the taxpayer's tax payable under this Act.

(6) A taxpayer who wishes to claim a mining exploration tax credit under this section for a taxation year must file, with the taxpayer's return of income under section 29 for the taxation year, an application for the tax credit in the form, and containing the information and records required by the Commissioner of Income Tax.

(7) A taxpayer is not entitled to a mining exploration tax credit in respect of a taxation year unless, within 36 months after the end of the taxation year, the taxpayer files the information and records required under subsection (6) with respect to the tax credit.

(8) The Lieutenant Governor in Council may make regulations prescribing outlays or expenses as excluded expenses for the purposes of this section.

2 Section 42 (2) (c) is repealed and the following substituted:

(c) in the case of an individual or a corporation, to the determination of

(i) the tax payable for a taxation year based on the application of section 19, or

(ii) the amount of the tax credit for a taxation year that, under section 25.1 (4), the taxpayer is deemed to have paid on account of the tax payable by that taxpayer for that taxation year under this Act, .

3 Section 79 is amended

(a) in subsection (1) by adding the following definitions:

"accredited BC labour expenditure" of an accredited production corporation for a taxation year in relation to an accredited production means the amount that would be the corporation's BC labour expenditure for the taxation year in relation to the production, to the extent that the amounts referred to in the definition of "BC labour expenditure" did not and do not form part of the accredited BC labour expenditure of any other corporation, if

(a) the references to March 31, 1998 in that definition were read as references to May 31, 1998, and

(b) the only amounts that could be included in determining the corporation's BC labour expenditure for the taxation year in relation to the production were in respect of services rendered in British Columbia;

"accredited production" means a film or video production, other than an excluded production, for which the total expenditures included in the cost of producing the production, incurred in the 24 month period beginning when principal photography begins, other than any amounts determined by reference to profits or revenues, are

(a) greater than $100 000, in the case of a production that is an episode, or a pilot for an episode, with a running time of less than 30 minutes,

(b) greater than $200 000, in the case of a production that is an episode, or a pilot for an episode, with a running time of 30 minutes or more, or

(c) greater than $1 million, in any other case;

"accredited production corporation", in relation to an accredited production for a taxation year, means

(a) a corporation

(i) that is a BC-based corporation during the taxation year,

(ii) the activities of which throughout the taxation year are primarily the carrying on of

(A) a film or video production business, or

(B) a film or video production services business, and

(iii) that owns the copyright in the production throughout the period during which the production is produced in British Columbia, or

(b) if there is no accredited production corporation within the meaning of paragraph (a) in relation to the production, a corporation that

(i) meets the criteria established by paragraph (a) (i) and (ii), and

(ii) has contracted directly with the owner of the copyright in the production to render production services in respect of the production,

but does not include a corporation described in any of paragraphs (a) to (f) of the definition of "eligible production corporation";

"accredited qualified BC labour expenditure" of an accredited production corporation for a taxation year in relation to an accredited production means the amount, if any, by which

(a) the total of the corporation's accredited BC labour expenditure for the taxation year or each of the preceding taxation years in relation to the production

exceeds

(b) the total of the following:

(i) all amounts of assistance that can reasonably be considered to be in respect of amounts included in the total referred to in paragraph (a) in respect of the production and that, at the time of filing of the corporation's return of income for the taxation year,

(A) the corporation or any other person or partnership has received or is entitled to receive or can reasonably be expected to receive,

(B) has not been repaid under a legal obligation to do so, and

(C) has not otherwise reduced the total referred to in paragraph (a);

(ii) all amounts that are the accredited qualified BC labour expenditure of the corporation in respect of the production for each of the preceding taxation years before the end of which principal photography of the production began;

(iii) all amounts included in the total referred to in paragraph (a) for which reimbursement is to be or has been provided to the corporation, as a parent within the meaning of paragraph (c) of the definition of "BC labour expenditure", in respect of the accredited production under an agreement referred to in that paragraph;

"episode" means an episode of a film or video production intended for television broadcast as a series; , and

(b) by repealing subsection (2) and substituting the following:

(2) If a film or video production is intended for television broadcast as a series,

(a) for the purposes of a tax credit under section 80, 81 or 82, all the episodes constituting one cycle of the series are to be considered a single production, and

(b) for the purposes of a tax credit under section 82.1, each episode is to be considered a separate production.

4 The following section is added:

Production services tax credit

82.1 (1) Subject to subsections (3) and (4), a corporation is eligible for a production services tax credit for a taxation year in respect of an accredited production if

(a) principal photography for the production begins

(i) before the end of the taxation year,

(ii) after May 31, 1998, and

(iii) before June 1, 2003,

(b) the corporation is an accredited production corporation in respect of the production for the taxation year,

(c) the corporation has obtained an accreditation certificate issued under section 87.1 in respect of the production, and

(d) the corporation applies for the tax credit in accordance with section 85.

(2) The amount of the tax credit that may be claimed by an accredited production corporation under this section is 11% of the accredited qualified BC labour expenditure of the corporation for the taxation year in respect of the accredited production.

(3) A corporation may not claim a tax credit in respect of an accredited production

(a) under this section, if an amount is deemed to have been paid under section 84 in relation to a tax credit under one or more of sections 80, 81 and 82 in respect of the production, or

(b) under one or more of sections 80, 81 and 82, if an amount is deemed to have been paid under this section in respect of the production.

(4) Without limiting subsection (3), if an amount is deemed to have been paid under section 84 in relation to a tax credit under one or more of sections 80, 81 and 82 in respect of any or all of the episodes of a cycle referred to in section 79 (2) (a), no tax credit may be claimed under this section in respect of any episode of that cycle.

5 Section 85 (1) is repealed and the following substituted:

(1) A corporation that wishes to claim a tax credit under this Part in respect of a taxation year must file the following with its return of income under section 29 for that taxation year:

(a) in the case of a claim for a tax credit under section 80, 81 or 82,

(i) the eligibility certificate issued to the corporation under section 86 that is appropriate to

(A) the tax credit, and

(B) the film or video production in respect of which the claim is made, and

(ii) if the tax credit is claimed in respect of the taxation year in which the production is completed, the completion certificate issued to the corporation in respect of the production under section 87;

(b) in the case of a claim for a tax credit under section 82.1, the accreditation certificate under section 87.1 that is appropriate to the film or video production in respect of which the claim is made;

(c) in all cases, an application for the tax credit in the form, and containing the information and records, required by the Commissioner of Income Tax.

6 Section 87 (1) is amended by striking out "a tax credit under this Part" and substituting "a tax credit under section 80, 81 or 82".

7 The following section is added:

Accreditation certificate

87.1 (1) A corporation may apply to the certifying authority for an accreditation certificate in respect of a film or video production for the purposes of claiming a tax credit referred to in section 82.1.

(2) A corporation referred to in subsection (1) must, with its application,

(a) pay an application fee to a person prescribed by the Lieutenant Governor in Council, and

(b) provide the information and records that the certifying authority requires in respect of the production.

(3) On receiving an application under this section, the certifying authority must issue to the applicant corporation an accreditation certificate in respect of a production if the certifying authority is satisfied, on the basis of the information provided by the corporation and any other information available to the certifying authority, that the production is an accredited production.

8 Section 88 (1) (a) is amended by striking out "section 86 or 87," and substituting "section 86, 87 or 87.1,".

9 Section 89 is repealed and the following substituted:

Notice of refusal or revocation

89 (1) If the certifying authority refuses to issue a certificate for which application is made under section 86, 87 or 87.1, the certifying authority must promptly give notice of that refusal, together with reasons for the refusal, to the applicant corporation.

(2) If the certifying authority revokes a certificate issued under section 86, 87 or 87.1, the certifying authority must promptly give notice of that revocation, together with reasons for the revocation, to the applicant corporation and the Provincial minister.

(3) If the Provincial minister revokes a certificate issued under section 86, 87 or 87.1, that minister must promptly give notice of that revocation, together with reasons for the revocation, to the applicant corporation and the certifying authority.

10 Section 90 is amended

(a) by striking out "or" at the end of paragraph (c), and

(b) by adding the following paragraph:

(c.1) an accreditation certificate issued under section 87.1 in respect of the production is revoked without another accreditation certificate having been issued in replacement, or .

Commencement

11 (1) Sections 1 and 2 come into force on August 1, 1998.

(2) Sections 3 to 10 are deemed to have come into force on June 1, 1998 and are retroactive to the extent necessary to give them effect on and after that date.

 

 
Explanatory Notes

SECTION 1: [Income Tax Act, enacts section 25.1] establishes a new mining exploration tax credit.

SECTION 2: [Income Tax Act, amends section 42] provides for appeals respecting the amount of the proposed mining exploration tax credit.

SECTION 3: [Income Tax Act, amends section 79]

SECTION 4: [Income Tax Act, enacts section 82.1] establishes a film production services tax credit equal to 11% of the accredited qualified BC labour expenditure for a production.

SECTION 5: [Income Tax Act, amends section 85] requires a corporation claiming the proposed production services tax credit to file an accreditation certificate with its income tax return.

SECTION 6: [Income Tax Act, amends section 87] limits the requirement for a completion certificate to productions other than those for which the proposed production services tax credit is claimed.

SECTION 7: [Income Tax Act, enacts section 87.1] establishes the requirements for corporations to obtain accreditation certificates required to apply for a production services tax credit.

SECTION 8: [Income Tax Act, amends section 88] allows the revocation of accreditation certificates.

SECTION 9: [Income Tax Act, re-enacts section 89] requires a corporation to be given notice of the revocation or refusal of an accreditation certificate.

SECTION 10: [Income Tax Act, amends section 90] requires repayment of production services tax credits if the related accreditation certificate has been revoked.


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