Notice to the reader: This publication was archived and kept for historical purposes. Use caution when you refer to it, since it reflects the law in force at the time it was released and may no longer apply.
Information Notice
6018
Published: February 2007
Content last reviewed: November 2010
ISBN:
978-1-4249-3570-3 (PDF), 978-1-4249-3569-7 (HTML)
Publication Archived
About this Notice:
This notice provides information on amendments to Regulations 162/01 and 207/99 of the Electricity Act, 1998 filed February 9, 2007. The amendments impact the calculation of payments in lieu of federal and provincial corporate tax (PIL's) and apply to municipal electricity utilities (MEU's), Ontario Power Generation Inc., Hydro One Inc. and their subsidiaries.
PIL's and Gifts to Municipalities
The amendment to Regulation 162/01 implements the 2006 Budget announcement disallowing the deduction of the value of gifts made to an Ontario municipality. It applies to gifts made by MEU's in taxation years ending after March 22, 2006.
The amendment maintains a level playing field between public and private sector electricity utilities and their shareholders. In the absence of this restriction, an MEU could make a donation to its municipal shareholder and deduct this amount when computing its taxable income for PIL purposes. Generally, a private sector utility cannot deduct the amount of a gift made to its shareholder when calculating taxable income.
PILs and Tax Shelters
Technical amendments to Regulations 162/01 and 207/99 ensure that the federal rules in subsection 237.1(6) of the Income Tax Act (Canada) apply to restrict the deduction of amounts incurred in respect of unregistered tax shelters. The amendments apply to MEU's, Ontario Power Generation Inc., Hydro One Inc., and their subsidiaries, which are effective for taxation years ending after February 9, 2007.
The adoption of this federal restriction is consistent with the principle that payments in lieu of corporate tax under the Electricity Act, 1998 should approximate the amount of tax that would be payable under federal and provincial corporate tax legislation by a private sector utility.
