Principal Issues: Can a corporation file a waiver of tax credit under subsection 96(14) of the Taxation Act, 2007 (TA) to waive all or part of its Ontario Innovation Tax Credit (OITC) after the deadline for the filing of its income tax return for the year?
Position: Yes. Generally, a corporation can file a waiver of tax credit under subsection 96(14) of the TA to waive all or part of its OITC for a taxation year until the expiration of the normal reassessment period for that taxation year.
Reasons: Subsection 96(14) of the TA allows a corporation to waive its eligibility for all or a portion of OITC for a taxation year by delivering a written waiver with its original income tax return which is required to be delivered within six months after the end of the taxation year, or with an amended return for that taxation year which is required to be delivered within the normal reassessment period which is 3 or 4 years from the date of mailing of an original notice of assessment.
June 8, 2009
Legislative Policy Directorate Income Tax Rulings Directorate Legislative Policy and Regulatory Ontario Corporate Tax Division Affairs Branch Ananthy Mahendran
Attention: Ron Kerr, Senior Policy Analyst 905-721-5204 Provincial Legislative Affairs
2008-029429Deadline for Filing a Waiver of Tax Credit for Purposes of Ontario Innovation Tax Credit
This is in response to your e-mail dated September 23, 2008 wherein you asked us when a corporation, eligible to claim an Ontario Innovation tax Credit (OITC), can deliver a waiver under subsection 96(14) of the Taxation Act, 2007 (TA) to waive all or part of its OITC.
Subsection 96(14) of the TA states that "A corporation may waive its eligibility for a tax credit, or a portion of a tax credit, under this section for a taxation year by delivering a written waiver with its return required to be delivered under this Act for the year or in an amended return for that year." This subsection allows a corporation which is eligible for the OITC to file a waiver of the tax credit with its income tax return to renounce that credit on or before the deadline for the filing of its original return or in an amended return for the year.
In order to claim the OITC a corporation must be a qualifying corporation. A corporation is considered to be a qualifying corporation if, among other things, it has, with respect to a qualified expenditure made by the corporation in the year, filed a prescribed form under section 127 of the Income Tax Act (Canada) (ITA). In accordance with paragraph 127(9)(m) of the ITA, the prescribed form containing the prescribed information must be filed on or before the day that is 12 months after the corporation's filing due date for the year in which the expenditure was incurred. In accordance with paragraph 150(1)(a) of the ITA, as made applicable by subsection 111(1) of the TA, a corporation is required to file an income tax return within six months after the end of its taxation year. Therefore, the corporation will have 18 months after the end of its taxation year to file the prescribed forms containing the prescribed information.
In order to deliver a waiver to waive all or part of its OITC with the corporation's original return the corporation must have also filed the prescribed form required under section 127 of the ITA within this six month period. Otherwise, the waiver may be delivered with the amended return provided the corporation has met the prescribed form filing requirements.
The ITA does not specify a deadline for filing an amended tax return other than certain specific situations such as a loss carry back under subsection 152(6) of the ITA. To amend other items, if the 90-day period for filing a notice of objection has not expired, the return may be amended by filing a notice of objection. However, the CRA's application policy set out in SR&ED 2004-02R, regarding "Filing Requirements for SR&ED Claims - Revision", dated December 19, 2008, allows a corporation to file an amended return, after the reporting deadline to file a SR&ED claim, for a taxation year in which the SR&ED expenditure was incurred, if the corporation filed the SR&ED claim forms within the reporting deadline. Generally, an amended return for a taxation year will be reassessed provided it is filed within the normal reassessment period. Therefore, in order to amend or correct the information on a tax return, a corporation should file an amended return with the CRA before the expiry of the normal reassessment period.
Subsection 152(3.1) of the ITA, which is applicable for the purposes of sections 112 to 114 of the TA, defines the normal reassessment period as three years from the date of mailing of the original notice of assessment or a notification that no tax is payable for a particular year of a Canadian-controlled private corporation (CCPC). A non-CCPC and a mutual fund trust can be reassessed within four years from the date of mailing of the original notice of assessment or notification that no tax is payable.
Therefore, in accordance with subsection 96(14) of the TA, a corporation is allowed to waive its eligibility for all or a portion of its OITC for a taxation year by delivering a written waiver with its original income tax return or with an amended return for that taxation year. The amended return is required to be delivered within the normal reassessment period which is 3 or 4 years from the date of mailing of an original notice of assessment, depending on whether the corporation is a CCPC or a non-CCPC. In both cases the corporation must have filed the prescribed forms containing the prescribed information with the original return or within 18 months from the end of its taxation year.
We hope that these comments will be of assistance to you. If you have any questions or comments, please feel free to contact us.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Customs and Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer.
Yours truly,
Lita Krantz
Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate