Canadian-managed funds purchased from time to time, from non-residents, Canadian-situs solar electric power generating projects (consisting of a leasehold interest, solar panels, steel racks and metal posts, and wires, inverters and transformers, collectively the “Solar Equipment”) and wind electric power generating projects (consisting of a leasehold interest, foundation. and wind turbine including tower).
After indicating that “[w]hether the components of a Wind Project or a Solar Project are fixtures, and therefore are considered “real or immovable” property for the purpose of the definition of TCP, can be informed by the application of the guidance provided in the Maple Ridge case [Royal Bank of Canada v. Maple Ridge Farmers Market Ltd., 1995 CanLII 896 (BC SC)], CRA found that both the wind turbine and Solar Equipment were fixtures and, thus, taxable Canadian property (TCP) under para. (a) of the definition thereof, stating:
Although each component part of a Wind Turbine may be removed without damage to the land upon which the Wind Turbine is located and may have marketable value, all of the component parts are attached and are necessary for the Wind Turbine to function for its intended purpose. Further, a Wind Turbine cannot function for its intended purpose without being attached to the concrete foundation. Consequently, Wind Turbines and their concrete foundations are fixtures … .
[A]ll components of the Solar Equipment would be required to function effectively in order to provide power generation and transmission. As noted in the Maple Ridge case, any item which is attached even minimally (such as with screws or bolts) is a fixture and if a piece of equipment is attached to a structure, a part of which could be removed but which would be useless without the attached part, then the entire piece of equipment is a fixture. Solar panels would not lose their essential character nor be useless without the racking system however, they could not effectively function in the context of utility-scale power generation without the racking, which itself serves no purpose unless used with the attached framed solar panels. As all components of the Solar Equipment are attached to the land on which they are situated, it is our view that the Solar Equipment is described in paragraph (a) … .
CRA further indicated that the above conclusions obtained notwithstanding the requirement to remove the items upon termination of the leases.
CRA declined to comment on whether contracts entitling the project owner to a fixed purchase price for the electrical energy generated by the projects for a fixed number of years (usually 20) were TCP.