| February 19, 1992 | |
| Audit Technical Support Services | Business and General |
| Division | Division |
| J.G. Pearson, Chief | Glen Thornley |
| Avoidance Services | (613) 957-2101 |
| 920072 |
Subject: Public Utilities Income Tax Transfer Act
This is in reply to your memorandum of January 6, 1992 with attached memorandum from the Vancouver District Office concerning the privatization of Provincial Crown corporations including a "privately owned utility". During the course of an audit it was discovered that federal taxes paid by a "privately owned utility" are returned to the province involved. You have asked that we clarify that this type of arrangement exists.
As discussed with Brian Dorward of the Vancouver District Office (Wheeler-Dorward) such arrangements do exist and they are covered under the Public Utilities Income Tax Transfer Act, R.S.C. 1970, Chapter P-37, as amended.("PUITTA")
The Finance and Adminstration Branch of Revenue Canada, Taxation and in particular the Revenue Reporting and Tax Analysis Division are responsible for checking related calculations under the PUITTA. However, as we understand it, no audit action takes place. It is merely the mathematical calculation that is checked.
Mr. S. Bradden, Interdepartmental Settlement Control Officer (telephone number, 613-957-7557) confirmed the above arrangement and supplied the following list of British Columbia corporations subject to PUITTA:
24(1)
Under PUITTA a "designated corporation" is a corporation whose gross revenue for a taxation year from
(a) the distribution and sale to the public in Canada, or the generation and sale in Canada for distribution to the public, of electrical energy or steam, or
(b) the distribution and sale of gas to the public in Canada
is more than one-half its total gross revenue other than exempt income and dividends received by it.
The amount that may be paid to a province under PUITTA in respect of a taxation year of a designated corporation is 95% of that part of the aggregate of the taxes paid under Parts I and I.3 of the Income Tax Act by the corporation for the year that is attributable to its gross revenue for the year from
(a) the distribution and sale to the public in a province, or the generation and sale in a province for distribution to the public, of electrical energy or steam, or
(b) the distribution and sale of gas to the public in the province.
24(1)
If additional information is required please contact the writer at 957-2101.
E. WheelerSection ChiefBusiness and Property Income and ExemptOrganizations SectionBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch