| Department of Finance | |
| Business and Resource Tax | |
| Analysis Division | 5-1907 |
| 140 O'Connor Street | R. Albert |
| L'Esplanade Laurier | (613) 957-2098 |
| 16th Floor East Tower | |
| Ottawa, Ontario | |
| K1A 0G5 |
Attention: Mr. David HollandDirector
November 30, 1990
Dear Mr. Holland:
Re: Ontario Scientific Research and Experimental Development ("SR&ED") Superallowance (the "Superallowance")
We are writing in reply to your letter of September 1, 1989 wherein you requested an interpretation as to whether the proposed Superallowance qualifies as "government assistance" as defined in subsection 127(9) of the Income Tax Act. As you noted, this question has implications for the pool of qualified expenditures under subsection 37(1) and far the base upon which federal investment tax credits are earned under paragraph 127(11.1) (c). Our response to your query has been delayed because the draft legislation was not released until June, 1990 and a subsequent Departmental review of the issue was undertaken. The "Superallowance has not yet been passed into law.
The Ontario Budget of April 20, 1988 introduced the Superallowance which is provided for current and capital expenditures made on SR&ED in Ontario. The Superallowance is a deduction in calculating taxable income, set at 35% for small businesses and 25% for other corporations. The Superallowance also contains an additional deduction for incremental SR&ED expenditures which exceed the average over the three preceding years. The Superallowance is provided in addition to the 10% provincial deduction for qualifying SR&ED expenditures.
In our opinion, neither the proposed Superallowance nor the related provincial tax savings constitutes government assistance as defined in subsection 127(9).
We trust that these comments will be of assistance.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch