Principal Issues: Can individual condominium unit owners claim a home renovation tax credit (HRTC) on their portion of a 'special assessment' which they were notified of in February 2009. The Board of Directors of the condominium corporation signed a contract on November 14, 2008 to have the condominium's roof replaced.
Position: It is a question of fact whether expenditures are incurred pursuant to a particular contract. The stated contract date for the roof restoration project is November 14, 2008; as such, any expenditure incurred under this contract is not eligible for the HRTC.
Reasons: Proposed legislation states that qualifying expenditures do not include outlays or expenses made or incurred under the terms of an agreement entered into before the eligible period. The eligible period is the period that begins on January 28, 2009, and ends on January 31, 2010.
XXXXXXXXXX 2009-033096 W. King November 6, 2009
Dear XXXXXXXXXX :
Re: Home Renovation Tax Credit - Eligibility Period
This is in reply to your correspondence dated July 3, 2009, wherein you asked if condominium unit owners can claim the new home renovation tax credit (HRTC) on their portion of a special assessment levied against their condominium units to pay for a roof restoration project contracted for, by the condominium corporation's board of directors, on November 14, 2008. We apologize for this delayed reply.
The proposed HRTC will provide individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009, and before February 1, 2010, for agreements entered into after January 27, 2009. Taxpayers can claim this credit for the 2009 tax year on eligible expenditures exceeding $1,000, but not more than $10,000, which will result in a non-refundable tax credit of up to $1,350.
The legislation regarding the new HRTC was introduced in the House of Commons on September 30, 2009, by the Honourable James M. Flaherty, Minister of Finance. The proposed legislation states that expenditures will qualify if they are directly attributable to a renovation or an alteration of an eligible dwelling, including land that forms part of the eligible dwelling, and if the renovation or alteration is of an enduring nature and is integral to the eligible dwelling. Such expenditures will include the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits.
An eligible dwelling is a housing unit located in Canada that is owned by the individual at the time of the renovation, and ordinarily inhabited by the individual, his or her current or former spouse or current or former common-law partner, or his or her children at any time after January 27, 2009, and before February 1, 2010. Therefore, any housing unit that an individual owns and uses personally, including a home and a cottage, qualifies for the HRTC.
Expenditures incurred pursuant to an agreement entered into before January 28, 2009, are not eligible for the HRTC. The condominium corporation's board of directors, acting on behalf of the unit owners, signed the contract on November 14, 2008 to have the condominium's roof replaced; as such, the expenditures incurred under this contract are not eligible for the HRTC.
The fact the condominium unit owners were notified in February 2009 of their portion of a special assessment levied to cover the shortfall in the reserve fund does not alter the contract date for the replacement of the roof.
We trust that the information provided is helpful.
Yours truly,
Nerill Thomas-Wilkinson, CA
Acting Manager
for Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch