Were 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) taxable Canadian property (TCP)?
In finding that the Solar Equipment consisted of fixtures and, thus, was TCP under para. (a) of the definition (referring to “real … property situated in Canada”), CRA first indicated:
The determination of whether or not an object has become a fixture requires consideration of the degree of annexation and the purpose of annexation. The Maple Ridge case [Royal Bank of Canada v. Maple Ridge Farmers Market Ltd., 1995 CanLII 896 (BC SC)] provided guidance for making the determination, which included the following:
- Any item which is unattached to the property, except by its own weight, and can be removed without damage or alterations to the fixtures or land that will need repair, is a chattel.
- Any item which is plugged in and can be removed without any damage or alteration is a chattel.
- Any item which is attached even minimally (i.e. it cannot simply be unplugged) is a fixture; an example given was that if an item requires the removal of screws, nails, bolts, detachment of plumbing, or the cutting and capping of hardwire, it will be a fixture.
- 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. In other words, the item will be a fixture if it loses its essential character because it is of no use unless attached to a permanent and substantial improvement to the premises of which it formed part. ...
- In very exceptional circumstances not covered by these rules the court should have resort to the purpose test. For example, a mobile home may be resting on the land by its own weight but it may be clearly established that it was intended to be a fixture. These circumstances should only arise rarely and in relation to very large or expensive items.
CRA then stated:
[A]ny 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) … .
The wind turbines also constituted fixtures and, thus, TCP. The above conclusions were obtained notwithstanding the requirement to remove the items upon termination of the leases.