Investment Tax Credit Rates

From: Canada Revenue Agency

IC

INVESTMENT TAX CREDIT RATES

78-4R3 November 14, 1986

This circular cancels and replaces Information Circular 78-4R2 dated February 11, 1983.

1. The circular is intended to inform taxpayers of the Investment Tax Credit rates applicable to certain localities. The information contained in this circular does not include the changes proposed in the Federal Budget of February 26, 1986.

History of the credit

2. The following is a brief history of the Investment Tax Credit: (a) The credit was first introduced for the period June 24, 1975 to March 31, 1977, with a basic rate of 5% allowed on acquisitions of qualified property; (b) For the period April 1, 1977 to November 16, 1978, there were three possible rates of credit, 5%, 71/2%, and 10%, and the credit was extended to include qualified expenditures for scientific research; (c) For the period after November 16, 1978 (i) for acquisitions of qualified property, the three rates of credit were increased to 7%, 10% and 20%; (ii) for qualified expenditures there were two rates, 10% and 20%, with a third rate of 25% allowed to Canadian-controlled private corporations qualifying for the small business deduction in the year the expenditure was made; and (iii) the credit coverage was further extended to allow a 7% rate introduced for qualified transportation equipment; (d) For qualified expenditures made in a taxation year that ends after October 31, 1983 and before January 1, 1985 the rates in (c)(ii) above were increased to 20%, 30% and 35% depending on specified conditions. (e) For qualified expenditures made in 1985 and subsequent taxation years, further restrictions apply for certain corporations to be eligible for a 35% credit. (f) For certified property acquired primarily for use in a prescribed area after October 28, 1980 and before January 1, 1987, a special investment tax credit rate of 50% is in effect. This credit for certified property is further extended to property acquired before January 1, 1988 where the property is: (i) a building that was under construction before January 1, 1987 and for, (ii) machinery and equipment ordered in writing before January 1, 1987. (g) An investment tax credit of 7% was introduced for qualified construction equipment acquired after April 19, 1983. (h) For the period after May 23, 1985 to December 31, 1992, an investment tax credit rate of 60% is in effect in respect of approved project property acquired for an approved purpose in an approved project for use in Cape Breton. (see paragraph 19).

3. The rates of credit mentioned in 2(a) to (e) and (g) for acquisitions of qualified property and for scientific research expenditures vary according to the prescribed designated region in Canada where the qualified property is primarily used or the scientific research is carried out. The regionalized groupings are as follows: (a) the Atlantic provinces and the Gaspe Peninsula (see paragraph 11); (b) regions in Canada which are designated regions under the Regional Development Incentives Act (RDIA) other than a region described in (a) above (see paragraphs 12 to 17); and (c) all other locations in Canada.

4. The rate allowed on acquisitions of qualified transportation equipment and qualified construction equipment are constant throughout Canada.

5.(a) The special investment tax credit of 50% for certified property mentioned in 2(f) above is allowable for all acquisitions that are part of a facility as defined for the purposes of the RDIA and that were acquired by a taxpayer primarily for use in a prescribed area. (b) "A facility" referred to in (a) is defined in section 2 of the RDIA as follows: "facility" means the structures, machinery and equipment that constitute the necessary components of a manufacturing or processing operation other than an initial processing operation in a resource-based industry." The terms "manufacturing or processing operation", "initial processing operation" and "resource-based industry" are defined in subsection 2(2) of the Regional Development Incentives Regulations. (c) See paragraph 18 for prescribed areas for purposes of certified property acquisitions. See Appendix C for areas to which the special investment tax credit for certified property is in effect.

Schedule of Rates

6. The maximum rate for qualified expenditures made by a Canadian-controlled private corporation which is eligible for the small business deduction varies according to the date the qualified expenditure is made. (a) For expenditures made after November 16, 1978 and before a taxation year that includes November 1, 1983 the rate for such corporations is 25%. (b) For expenditures made in a taxation year that ends after October 31, 1983 and before January 1, 1985 the rate for such corporations, depending on specified conditions, may be 25% or 35%. (c) For 1985 and subsequent taxation years further restrictions may limit the rate by certain corporations from 35% to 20%.

7. When a location becomes a prescribed designated region or a prescribed area, the higher rate applies only to acquisitions and expenditures made after the date it became a prescribed designated region or a prescribed area.

8. The Schedule of Investment Tax Credit Rates (Appendix A) takes into account the time of acquisition or expenditure, the type of acquisition or expenditure and the region or area where the property is primarily used or the research carried out.

9. The areas of each province that are prescribed designated regions for the purposes of qualified property acquired or scientific research expenditures made are described in paragraphs 12 to 17 below. The areas of each province that are prescribed areas for purposes of certified property acquisitions are described in paragraph 18 below.

10. For general reference purposes, Appendix B contains maps showing the prescribed designated regions of the provinces of Quebec, Ontario, Alberta and British Columbia, and Appendix C contains maps showing the prescribed areas in each province of Canada for purpose of the special investment tax credit for certified property.

Quebec

11. The Gaspe Peninsula is defined as that portion of the Gaspe region of the Province of Quebec that extends to the western border of Kamouraska County and includes the Magdalen Islands. This takes in the counties of Bonaventure, Gaspe East, Gaspe West, Kamouraska, Matane, Matapedia, Rimouski, Rivi re-du-Loup and Temiscouata.

12. The following areas of the province of Quebec are prescribed designated regions: (a) The counties of: Abitibi Arthabaska Beauce Bellechasse Champlain Charlevoix East Charlevoix West Chicoutimi Compton Dorchester Drummond Frontenac Labelle Lac St. Jean East Lac St. Jean West Levis L'Islet Lotbini re Maskinonge Megantic Montmagny Montmorency No. 1 Montmorency No. 2 Nicolet Pontiac Portneuf Quebec Richmond Saguenay (including Anticosti Island) Sherbrooke Stanstead St. Maurice Temiscamingue Wolfe Yamaska (b) The District of Abitibi and the District of Mistassini; (c) That part of Gatineau County lying north of a line commencing at the Gatineau County-Papineau County boundary and the southern boundary of the surveyed township of Hincks running westerly along the southern boundary of the surveyed townships of Hincks and Aylwin to the boundary of Gatineau and Pontiac counties, (refer to page 11, Appendix B). (d) That part of Berthier County lying north of a line running through the surveyed township of Provost, the said line being the continuation of a line running from the point of intersection of the boundary between Montcalm and Terrebonne counties and the southern boundary of Rolland, then easterly along the southern boundary of the surveyed townships of Rolland, Cousineau, Forbes, Gouin and Brassard to the boundary between Berthier and Maskinonge, (refer to page 14, Appendix B), and (e) All the remaining territory lying north of the fifty-first parallel.

Ontario

13. The prescribed designated region in the province of Ontario is all that portion lying north of a line commencing at the northeastern corner of the township of McNab, following west along the southern boundary of the township of Horton to the point of intersection with the township of Bagot;

then, west along the southern boundary of the township of Horton to the point of intersection with the township of Admaston;

then, west along the southern boundary of the township of Admaston to the point of intersection with the township of Brougham;

then, north along the eastern boundary of Brougham to the point of intersection with the township of Grattan;

then, west along the southern boundary of the township of Grattan to the point of intersection with the township of Griffith;

then, north along the eastern boundary of the township of Griffith to the point of intersection with the township of Sebastopol;

then, west along the southern boundary of the township of Sebastopol to the point of intersection with the township of Lyndoch;

then, north along the western boundary of the township of Sebastopol to the point of intersection with the township of South Algona;

then, north along the western boundary of the townships of South Algona, North Algona and Fraser to the point of intersection with the township of McKay;

then, west along the southern boundaries of the townships of Master, Cuthrie, Clancy, Preston, Sproule, Canisbay, Peck and Finlayson and north along the west boundary of Finlayson township to the Bethune township line;

then, west along the southern boundaries of Bethune, Perry, McMurrick and Monteith townships;

then, south along the western boundary of the township of Cardwell to the northeast corner of the township of Medora, and continuing west along the northern boundaries of the townships of Medora and Freiman to the Georgian Bay shore. (Refer to pages 15 and 16, Appendix B).

Manitoba and Saskatchewan

14. The whole of the provinces of Manitoba and Saskatchewan are prescribed designated regions.

Alberta

15. In the province of Alberta, the prescribed designated region is that portion of the province lying north of a line commencing at the point of intersection of the British Columbia border along the southern boundary of Improvement District 16 to the western boundary of Improvement District 15;

then, along the southern and eastern boundaries of Improvement District 15 to its point of intersection with Improvement District 17 and Municipal District 92;

then, east along the northern boundary of Municipal District 92 to its point of intersection with counties 7 and 12;

then, east along the northern boundaries of counties 7 and 13 to the Gold Fish Lake Indian Reserve;

then, south along the western boundaries of the Gold Fish Lake Indian Reserve, county 19 and the Saddle Lake Indian Reserve;

then, east along the southern boundaries of the Saddle Lake Indian Reserve, county 19 and the most southern boundary of Improvement District 18 to the Saskatchewan border. (Refer to page 17, Appendix B.)

British Columbia

16. In the province of British Columbia, the prescribed designated regions are: (a) the Regional District of Bulkley-Nechako; (b) the Regional District of Fraser-Fort George; (c) the Regional District of Kitimat-Stikine; (d) the Peace River-Liard Regional District; (e) the Skeena-Queen Charlotte Regional District; (f) the Stikine Region (Unincorporated) bounded on the east by the Peace River-Liard Regional District, on the south by the Regional District of Bulkley-Nechako, on the west by the Regional District of Kitimat-Stikine and the international boundary between Canada and the U.S.A., and on the north by the 60th parallel of latitude; (g) the Cariboo Regional District; and (h) the Central Coast Regional District. (Refer to page 18, Appendix B.)

Northwest Territories and the Yukon

17. The whole of the Northwest Territories is a prescribed designated region as of June 30, 1977, and the whole of the Yukon Territory is a prescribed designated region as of July 1, 1978.

Certified property acquisitions

18. Prescribed areas for the purposes of certified property acquisitions are as follows: (a) in the province of Newfoundland, census divisions 2, 3, 4, 7, 8, 9 and 10; (b) in the province of Prince Edward Island, census division 1; (c) in the province of Nova Scotia, census divisions 13, 15, 16, 17 and 18; (d) in the province of New Brunswick, census divisions 8, 9, 13, 14 and 15; For subparagraphs (a), (b), (c) and (d) refer to page 19, Appendix C. (e) in the province of Quebec the area north of the 50th parallel (excluding area within the city limits of Sept-Iles) plus (refer to page 20, Appendix C): (i) in the Gaspe region, census divisions 2, 3, 4, 5, 6, 7, 8 and 9, (excluding the urban area of Rimouski); and (ii) the Magdalen Islands (01); (f) in the province of Ontario, the area north of the 50th parallel; (refer to page 21, Appendix C); (g) in the province of Manitoba, census divisions 19, 21, 22 and 23 (excluding the urban area of Thompson); (h) in the province of Saskatchewan, census division 18; (i) in the province of Alberta, census division 15, (excluding the urban area of Grande Prairie); (j) in the province of British Columbia, census division 55; and (k) all of the Yukon and Northwest Territories.

For subparagraphs (g), (h), (i), (j) and (k) refer to page 22 Appendix C.

19. The area for the purpose of the investment tax credit rate of 60% in respect of approved project property in Cape Breton is described as follows: "Cape Breton", means Cape Breton Island and that portion of the Province of Nova Scotia within the following described boundary:

beginning at a point on the southwesterly shore of Chedabucto Bay near Red Head, said point being S70 degrees E (Nova Scotia grid meridian) from Geodetic Station Sand,

then in a southwesterly direction to a point on the northwesterly boundary of highway 344, said point being southwesterly 240' from the intersection of King Brook with said highway boundary,

then northwesterly to Crown post 6678,

then continuing northwesterly to Crown post 6679,

then continuing northwesterly to Crown post 6680,

then continuing northwesterly to Crown post 6681,

then continuing northwesterly to Crown post 6632,

then continuing northwesterly to Crown post 6602,

then northerly to Crown post 8575;

then northerly to Crown post 6599,

then continuing northerly to Crown post 6600,

then northwesterly to the southwest angle of the Town of Mulgrave,

then along the westerly boundary of the Town of Mulgrave and a prolongation thereof northerly to the Antigonish-Guysborough county line,

then along said county line northeasterly to the southwesterly shore of the Strait of Canso,

then following the southwesterly shore of the Strait of Canso and the northwesterly shore of Chedabucto Bay southeasterly to the place of beginning.

SCHEDULE OF INVESTMENT TAX CREDIT RATES Appendix A

QUALIFIED PROPERTY ACQUIRED

1977 April 1, 1977 to Nov. 16, 1978 inclusive After Nov. 16, 1978 April 1, 1977 to Nov. 16, 1978 inclusive
Nfld., P.E.I., N.S. and N.B. 10% 20% 10%
Newfoundland Census Divisions 2, 3, 4, 7, 8, 9 and 10      
Prince Edward Island - Kings Census Division (01)      
Nova Scotia - Census Divisions Cape Breton (17) Guysborough (13) Inverness (15) Richmond (16) Victoria (18)      
New Brunswick - Census Divisions Gloucester (15) Kent (08) Madawaska (13) Northumberland (09) Restigouche (14)      
Quebec - Gaspe Region 10% 20% 10%
RDIA designated region 7 1/2% 10% 7 1/2%
Other Areas 5% 7% 5%
North of 50th parallel (excluding urban area of Sept-Iles) Gaspe Region census divisions 2, 3, 4, 5, 6, 7, 8 and 9 and the Magdalen Islands (excluding urban area of Rimouski)      
Ontario-RDIA designated region 7 1/2% 10% 7 1/2%
Other Areas 5% 7% 5%
North of 50th parallel      
Manitoba - Census divisions, 19, 21, 22 and 23 (excluding urban area of Thompson)      
Saskatchewan
Census division 18 (Northern Saskatchewan)
7 1/2% 10% 7 1/2%
Alberta - RDIA      
designated region 7 1/2% 10% 7 1/2%
Other Areas 5% 7% 5%
Census division 15, Peace River (excluding urban area of Grande Prairie)      
B.C. - RDIA      
designated region 7 1/2% 10% 7 1/2%
Other Areas 5% 7% 5%
Census division of Peace River-Liard (55)      
Northwest Territories (1) 7 1/2% 10% (1) 7 1/2%
Yukon Territory (2) 7 1/2% 10% (2) 7 1/2%

QUALIFIED EXPENDITURES

  After Nov. 16, 1978 and before a taxation year that includes Nov. 1, 1983 (3) Taxation Years ending after Oct. 31, 1983 and before Jan. 1, 1985 (4) 1985 and subsequent taxation years (5)
Nfld., P.E.I., N.S. and N.B. 20% 30% 30%
Newfoundland Census Divisions 2, 3, 4, 7, 8, 9 and 10      
Prince Edward Island - Kings Census Division (01)      
Nova Scotia - Census Divisions Cape Breton (17) Guysborough (13) Inverness (15) Richmond (16) Victoria (18)      
New Brunswick - Census Divisions Gloucester (15) Kent (08) Madawaska (13) Northumberland (09) Restigouche (14)      
Quebec - Gaspe Region 20% 30% 30%
RDIA designated region 10% 20% 20%
Other Areas 10% 20% 20%
North of 50th parallel (excluding urban area of Sept-Iles) Gaspe Region census divisions 2, 3, 4, 5, 6, 7, 8 and 9 and the Magdalen Islands (excluding urban area of Rimouski)      
Ontario-RDIA designated region 10% 20% 20%
Other Areas 10% 20% 20%
North of 50th parallel      
Manitoba - Census divisions, 19, 21, 22 and 23 (excluding urban area of Thompson) 10% 20% 20%
Saskatchewan Census division 18 (Northern Saskatchewan) 10% 20% 20%
Alberta - RDIA designated region 10% 20% 20%
Other Areas 10% 20% 20%
Census division 15, Peace River (excluding 20% urban area of Grande Prairie)      
B.C. - RDIA designated region 10% 20% 20%
Other Areas 10% 20% 20%
Census division of Peace River-Liard (55)      
Northwest Territories 10% 20% 20%
Yukon Territory 10% 20% 20%
  QUALIFIED TRANSPORTATION EQUIPMENT After Nov. 16, 1978 CERTIFIED PROPERTY After Oct. 28, 80 to Dec. 31, 86 QUALIFIED CONSTRUCTION EQUIPMENT After April 19, 83
Nfld., P.E.I., N.S. and N.B. 7%   7%
Newfoundland Census Divisions 2, 3, 4, 7, 8, 9 and 10   50%  
Prince Edward Island - Kings Census Division (01)   50%  
Nova Scotia - Census Divisions Cape Breton (17) Guysborough (13) Inverness (15) Richmond (16) Victoria (18)      
New Brunswick - Census
Divisions Gloucester (15)
     
Kent (08) Madawaska (13)   50%  
Northumberland (09)      
Restigouche (14)   50%  
Quebec - Gaspe Region 7%   7%
RDIA designated region 7%   7%
Other Areas 7%   7%
North of 50th parallel (excluding urban area of Sept-Iles)      
Gaspe Region census divisions 2, 3, 4, 5, 6, 7, 8 and 9   50%  
and the Magdalen Islands (excluding urban area of Rimouski)   50%  
Ontario-RDIA designated region 7%   7%
Other Areas 7%   7%
North of 50th parallel   50%  
Manitoba - Census divisions, 19, 21, 22 and 23 7%   7%
(excluding urban area of Thompson)   50%  
Saskatchewan Census division 18 7%   7%
(Northern Saskatchewan)   50%  
Alberta - RDIA designated region 7%   7%
Other Areas Census division 15, Peace River (excluding 7% 7% urban area of Grande Prairie) 7%   7%
B.C. - RDIA designated region 7%   7%
Other Areas 7%   7%
Census division of Peace River-Liard (55)   50%  
Northwest Territories 7% 50% 7%
Yukon Territory 7% 50% 7%

(1) Effective June 30, 1977, prior rate 5%

(2) Effective July 1, 1978, prior rate 5%

(3) For Canadian-controlled private corporations eligible for the small business deduction, in the areas identified below the rate is 25%

(4) For Canadian-controlled private corporations eligible for the small business deduction in the areas identified below the rate may be 25% or 35%

(5) For Canadian-controlled private corporations eligible for the small business deduction in the areas identified below the rate may be limited from 35% to 20%

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