INCOME TAX AMENDMENT ACT, 2007 (First Reading)

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(3rd session, 38th Parliament)]

BILL
NUMBER

TITLE

DATE
INTRODUCED

INCOME TAX AMENDMENT ACT, 2007
(First Reading)

Feb. 20/07

Explanatory Notes

SECTION 1: [Income Tax Act, section 4.1] reduces for the 2007 taxation year the personal income tax rates applied to the 4 lowest taxable income ranges.

SECTION 2: [Income Tax Act, section 4.1] reduces for the 2008 and subsequent taxation years the personal income tax rates applied to the 4 lowest taxable income ranges.

SECTION 3: [Income Tax Act, section 4.2] is consequential to the repeal of section 19 of the Act.

SECTION 4: [Income Tax Act, section 4.301] reduces for the 2007 taxation year the rate at which the BC tax reduction credit is reduced for individuals.

SECTION 5: [Income Tax Act, section 4.301] reduces for the 2008 and subsequent taxation years the rate at which the BC tax reduction credit is reduced for individuals.

SECTION 6: [Income Tax Act, section 4.33] establishes a tax credit for adoption expenses.

SECTION 7: [Income Tax Act, section 4.52] clarifies that the indexing of amounts expressed in dollars in section 4.1 (1) of the Act is not affected by other changes to that section.

SECTION 8: [Income Tax Act, section 4.62] changes provisions relating to unused tuition and education tax credits, consequential to the reduction of the personal income tax rates.

SECTION 9: [Income Tax Act, section 4.65] provides for the deduction of the adoption expense credit in determining the amount an individual may deduct in relation to unused credits transferred by a spouse or common-law partner.

SECTION 10: [Income Tax Act, section 4.66] provides for the deduction of the adoption expense credit in determining the tuition and education tax credits transferred by a person to an individual.

SECTION 11: [Income Tax Act, section 4.69] adopts an enhanced tax credit for eligible dividends as defined in the federal Income Tax Act.

SECTION 12: [Income Tax Act, section 4.7] is consequential to the repeal of section 19 of the Act.

SECTION 13: [Income Tax Act, section 4.71]

allows an individual to claim a foreign tax credit when the individual's tax payable is determined under section 4.8 of the Act;
removes the minimum tax payable under section 4.8 of the Act from the computation of the foreign tax credit.

SECTION 14: [Income Tax Act, section 4.74] restricts the amount of the adoption expense credit that can be claimed in the year of bankruptcy.

SECTION 15: [Income Tax Act, section 4.76] restricts the amount of the adoption expense credit that may be claimed by an individual who is not resident in Canada for part of the taxation year.

SECTION 16: [Income Tax Act, section 4.78] provides for the deduction of the adoption expense credit when computing the tax payable by an individual in a separate return of income for a particular period.

SECTION 17: [Income Tax Act, section 4.79]

(a) provides for the adoption expense credit within the order in which tax credits may be deducted;

(b) is consequential to the repeal of section 19 of the Act.

SECTION 18: [Income Tax Act, section 4.8] uses the full amount determined under section 120.2 (3) of the Income Tax Act (Canada) for the purpose of determining the minimum tax payable under section 4.8 of the Income Tax Act (British Columbia).

SECTION 19: [Income Tax Act, section 8] excludes amounts received or repaid under the Universal Child Care Benefit Act (Canada) from the computation of adjusted income for the purposes of determining the amount of the sales tax credit.

SECTION 20: [Income Tax Act, section 16] adds a definition, with the effect of preventing a corporation from computing its Provincial income tax using the small business tax rate if the corporation elected to not be eligible for the small business deduction under the federal Income Tax Act.

SECTION 21: [Income Tax Act, section 18.1] is consequential to the repeal of section 19 of the Act.

SECTION 22: [Income Tax Act, section 19] repeals the royalty and deemed income rebate for individuals and corporations.

SECTION 23: [Income Tax Act, section 25.1] provides for an additional 10% mining exploration tax credit in respect of expenses incurred in a prescribed area after February 20, 2007 and before January 1, 2017.

SECTION 24: [Income Tax Act, section 29] provides for the assessment and reassessment of the amounts deemed to have been paid in respect of the training tax credits under Part 9 of the Act.

SECTION 25: [Income Tax Act, section 38] applies the penalty provisions of the Income Tax Act (Canada) in respect of misleading statements and omissions to information provided in an application for the training tax credits under Part 9 of the Income Tax Act (British Columbia).

SECTION 26: [Income Tax Act, section 42] provides for an appeal from an assessment in respect of the determination of the amount of a corporation's book publishing tax credit.

SECTION 27: [Income Tax Act, section 42] provides for an appeal from an assessment in respect of the determination of the amount of a training tax credit under Part 9 of the Act.

SECTION 28: [Income Tax Act, section 47] provides that the time period for claiming the training tax credits under Part 9 of the Act must not be extended.

SECTION 29: [Income Tax Act, section 65] adds a reference to information referred to in section 130 of the Act.

SECTION 30: [Income Tax Act, section 69] provides that the federal minister is not authorized to use, perform or exercise the powers, duties or discretions of the Provincial minister respecting the collection and sharing of information under section 130 of the Act.

SECTION 31: [Income Tax Act, section 82] renames a tax credit.

SECTION 32: [Income Tax Act, section 97]

extends the British Columbia Scientific Research and Experimental Development Tax Credit by 5 years;
adds definitions.

SECTION 33: [Income Tax Act, section 97.1] adds a rule respecting the application of specified sections of the Act to a partnership.

SECTION 34: [Income Tax Act, section 99] adds amounts in respect of a partnership of which a qualifying corporation was a member in a taxation year to the qualifying corporation's annual non-refundable tax credit for the taxation year.

SECTION 35: [Income Tax Act, section 99.1] provides for the determination of the appropriate portion of the amount that a qualifying corporation may claim in respect of a partnership.

SECTION 36: [Income Tax Act, section 100] clarifies that a qualifying corporation may not renounce that part of its annual non-refundable tax credit that is in respect of a partnership.

SECTION 37: [Income Tax Act, section 102.11] provides for the recapture of amounts when qualifying property of a partnership is converted to commercial use or is disposed of in arm's length transfers after February 20, 2007.

SECTION 38: [Income Tax Act, section 102.2] provides that the recapture rules do not apply in respect of specified non-arm's length transfers involving a partnership.

SECTION 39: [Income Tax Act, section 102.3] provides for the recapture of tax credits under Part 6 of the Act by a qualifying corporation when qualifying property is converted to commercial use or is disposed of after it was acquired from a partnership in a non-arm's length transfer.

SECTION 40: [Income Tax Act, sections 102.4 to 102.6]

provides, in section 102.4, for the recapture of amounts when qualifying property of a partnership is converted to commercial use or is disposed of after it was acquired in a non-arm's length transfer;
provides, in section 102.5, for the recapture of tax credits under Part 6 of the Act by a qualifying corporation in relation to a partnership of which the corporation is a member;
provides, in section 102.6, for the amount to be recaptured under section 102.11 in specified circumstances.

SECTION 41: [Income Tax Act, section 103] removes unnecessary wording.

SECTION 42: [Income Tax Act, section 111] extends the book publishing tax credit by 5 years.

SECTION 43: [Income Tax Act, Part 9] provides refundable tax credits for individuals and eligible employers in relation to training programs under the Industry Training Authority Act. In particular, Part 9 does the following:

establishes, in sections 118 and 119, tax credits for completing levels established by regulation for prescribed programs;
establishes, in section 120, a tax credit for an individual who may claim a tax credit under section 118 or 119 and who may claim a tax credit for mental or physical impairment or is a registered Indian;
establishes, in sections 122 to 124, tax credits for eligible employers who employ an employee during the first 24 months of an employee's industry training agreement or in a taxation year in which the employee completes a level established by regulation for a prescribed program;
provides, in sections 125 and 126, restrictions on the credits that may be claimed by an eligible employer if there are multiple employers or the employer is a partnership;
makes, in section 127, the tax credits refundable;
sets out, in section 128, the requirements with which a taxpayer must comply if the taxpayer wishes to claim a tax credit under this Part;
provides, in section 129, the Commissioner of Income Tax with audit powers;
provides, in section 130, for the collection and sharing of information;
provides, in section 131, for regulations for the purpose of this Part, including regulations that may be made retroactive.

SECTION 44: [Income Tax Act, section 120] provides for a $500 tax credit to an individual who is an eligible apprentice and has received a federal apprenticeship incentive grant.

SECTION 45: [Income Tax Act, section 124.1] establishes a tax credit for eligible employers who employ an eligible apprentice in a taxation year.

SECTION 46: [Income Tax Act, section 126] is consequential to section 124.1 of the Act added by this Bill.

International Financial Activity Act

SECTION 47: [International Financial Activity Act, section 19.1]

is consequential to the repeal of section 19 of the Income Tax Act;
provides for the deduction of amounts deemed to have been paid under section 127 of the Income Tax Act when determining a corporation's net tax payable for the purposes of the International Financial Activity Act.

SECTION 48: [International Financial Activity Act, section 22]

is consequential to the repeal of section 19 of the Income Tax Act;
provides for the deduction of amounts deemed to have been paid under section 127 of the Income Tax Act when determining an eligible individual's tax refund under the International Financial Activity Act.

SECTION 49: [Transitional -- repeal of section 19 of the Income Tax Act] provides for the continued application of specified sections of the Income Tax Act and International Financial Activity Act for the remainder of a taxation year that includes but does not end on December 31, 2006.

SECTION 50: [Transitional -- authority to make retroactive regulations under the Income Tax Act] authorizes an area to be prescribed for the purposes of section 25.1 of the Income Tax Act retroactive to February 21, 2007.

BILL 3 – 2007
INCOME TAX AMENDMENT ACT, 2007

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of British Columbia, enacts as follows:

1 Section 4.1 (1) of the Income Tax Act, R.S.B.C. 1996, c. 215, is amended

(a) by striking out "2001 and subsequent taxation years" and substituting "2007 taxation year",

(b) in paragraph (a) by striking out "6.05%" and substituting "5.7%",

(c) in paragraph (b) (ii) by striking out "9.15%" and substituting "8.65%",

(d) in paragraph (c) (ii) by striking out "11.7%" and substituting "11.1%", and

(e) in paragraph (d) (ii) by striking out "13.7%" and substituting "13%".

2 Section 4.1 (1) is amended

(a) by striking out "2007 taxation year" and substituting "2008 and subsequent taxation years",

(b) in paragraph (a) by striking out "5.7%" and substituting "5.35%",

(c) in paragraph (b) (ii) by striking out "8.65%" and substituting "8.15%",

(d) in paragraph (c) (ii) by striking out "11.1%" and substituting "10.5%", and

(e) in paragraph (d) (ii) by striking out "13%" and substituting "12.29%".

3 Section 4.2 (3) is amended

(a) by striking out "19 (2) and (7),", and

(b) in paragraph (b) by striking out "sections 4.1, 4.8 to 4.83 and 19 (3)" and substituting "sections 4.1 and 4.8 to 4.83".

4 Section 4.301 is amended by striking out "3.6%" and substituting "3.4%".

5 Section 4.301 is amended by striking out "3.4%" and substituting "3.2%".

6 The following section is added:

Adoption expense credit

4.33 For the purpose of computing the tax payable under this Act for a taxation year by an individual who was resident in British Columbia on the last day of the taxation year and who is entitled to a deduction under section 118.01 of the federal Act for the year, there may be deducted the amount determined by the formula

A x		B

		C

where

A is the amount deducted by the individual under section 118.01 of the federal Act for the year,

B is the appropriate percentage for the year, and

C is the appropriate percentage for the year as defined in section 248 (1) of the federal Act.

7 Section 4.52 is amended by adding the following subsection:

(8) The adjustment under this section of an amount expressed in dollars in section 4.1 (1) is not affected by the following:

(a) a change to the taxation years specified or referred to in section 4.1 (1);

(b) a change to a percentage specified in section 4.1 (1).

8 Section 4.62 is amended

(a) in subsection (2) by striking out "subsections (3) to (5)," and substituting "subsections (3) and (4),",

(b) in subsection (3) by striking out "2001" and substituting "2006", by striking out "if the percentage applied" and substituting "if the appropriate percentage applied" and by striking out "been 6.05% instead of the appropriate percentage as defined in that Act." and substituting "been the appropriate percentage as defined in section 4 of this Act instead of the appropriate percentage as defined in the federal Act.", and

(c) by repealing subsections (4) and (5) and substituting the following:

(4) For the purpose of determining the amount that may be deducted under subsection (1) in computing the tax payable for a taxation year by an individual who was resident in British Columbia on the last day of the preceding taxation year, if the appropriate percentage for the taxation year is different from the appropriate percentage for the preceding taxation year, the individual's unused tuition and education tax credits at the end of the preceding taxation year are deemed to be the amount determined by the following formula:

amount =	A	x C

	B

where

A = the appropriate percentage for the taxation year;

B = the appropriate percentage for the preceding taxation year;

C = the amount of the individual's unused tuition and education tax credits at the end of the preceding taxation year.

9 Section 4.65 is amended in paragraph (b) (ii) of the description of "C" by adding "4.33 [adoption expense credit]," after "4.32 [pension credit],".

10 Section 4.66 (a) is amended in the description of "B" by adding "4.33 [adoption expense credit]," after "4.32 [pension credit],".

11 Section 4.69 is repealed and the following substituted:

Dividend tax credit

4.69 For the purpose of computing the tax payable under this Act for a taxation year by an individual who was resident in British Columbia on the last day of the taxation year, there may be deducted the total of the following:

(a) 25.5% of any amount that is required by section 82 (1) (b) (i) of the federal Act to be included in computing the individual's income for the year under that Act;

(b) 38 2/3% of any amount that is required by section 82 (1) (b) (ii) of the federal Act to be included in computing the individual's income for the year under that Act.

12 Section 4.7 is amended in the description of "B" by striking out "19 (2), (3) and (7),".

13 Section 4.71 is amended

(a) in subsection (1) by adding "and" at the end of paragraph (a), by striking out ", and" at the end of paragraph (b) and by repealing paragraph (c), and

(b) by adding the following subsection:

(2.1) In subsection (2) (b), "tax otherwise payable under this Act", in relation to an individual for a taxation year, does not include the amount of tax payable under section 4.8 [minimum tax] by the individual for the taxation year.

14 Section 4.74 (a) is amended by adding "4.33 [adoption expense credit]," after "4.32 [pension credit],".

15 Section 4.76 (1) (b) (i) is amended by adding "4.33 [adoption expense credit]," after "4.32 [pension credit],".

16 Section 4.78 (2) is amended by adding the following paragraph:

(c.1) section 4.33 [adoption expense credit]; .

17 Section 4.79 is amended

(a) in subsection (1) by adding the following paragraph:

(d.1) section 4.33 [adoption expense credit]; , and

(b) by repealing subsection (3) (c) and (d).

18 Section 4.8 (1) is amended by repealing the description of "A" and substituting the following:

A is the amount determined under section 120.2 (3) of the federal Act for the individual for the year, .

19 Section 8 (1) is amended by repealing the definition of "adjusted income" and substituting the following:

"adjusted income", in relation to an eligible individual for a taxation year, means the total of all amounts each of which would be the income for the year of the individual or the individual's qualified relation if, in computing that income, no amount

(a) were included under section 56 (6) [universal child care benefit] of the federal Act,

(b) were included in respect of any gain from a disposition of property to which section 79 [surrender of property by debtor] of the federal Act applies, and

20 Section 16 (5) is amended by adding the following definition:

"Canadian-controlled private corporation" does not include, in relation to a taxation year, a corporation that has in effect a valid election under section 89 (11) of the federal Act for the taxation year; .

21 Section 18.1 (c) and (d) is repealed.

22 Section 19 is repealed.

23 Section 25.1 is amended

(a) in subsection (2) by striking out "for a taxation year equal to the total of" and substituting "for a taxation year equal to the total of the following:", by striking out "subsection (4), and" at the end of paragraph (a) and substituting "subsection (4);" and by adding the following paragraphs:

(d) the amount equal to the total of all amounts each of which is an appropriate portion determined under subsection (4.4) in respect of a partnership of which the taxpayer was a member in the taxation year as provided for in that subsection. ,

(b) in subsection (4.2) by striking out "and" at the end of paragraph (b), by adding ", and" at the end of paragraph (c) and by adding the following paragraph:

(d) the appropriate portion is that portion that may reasonably be considered to be the eligible taxpayer's share of 20% of the amount determined under subsection (4.1). , and

(c) by repealing subsection (4.3) and substituting the following:

(4.3) An eligible taxpayer may claim for a taxation year 10% of the amount by which

(a) the total of the qualified mining exploration expenses incurred in a prescribed area by the taxpayer in the taxation year

exceeds

(b) all amounts of assistance that can reasonably be considered to be in respect of amounts included in the total referred to in paragraph (a) and that, at the time of filing of the taxpayer's return of income for the taxation year,

(i) the taxpayer has received or is entitled to receive or can reasonably be expected to receive,

(ii) have not been repaid under a legal obligation to do so, and

(iii) have not otherwise reduced the total referred to in paragraph (a).

(4.4) If in a taxation year an eligible taxpayer is a member of a partnership, other than a specified member as defined in section 248 (1) of the federal Act, the eligible taxpayer may claim for the taxation year the appropriate portion of 10% of the amount by which

(a) the total of the qualified mining exploration expenses incurred in a prescribed area by the partnership for its taxation year ending in the taxation year of the taxpayer

exceeds

(b) all amounts of assistance that can reasonably be considered to be in respect of amounts included in the total referred to in paragraph (a) and that, on or before the filing-due date for the taxation year of the partnership,

(i) the partnership has received or is entitled to receive or can reasonably be expected to receive,

(ii) have not been repaid under a legal obligation to do so, and

(iii) have not otherwise reduced the total referred to in paragraph (a).

(4.5) For the purpose of determining the amount under subsection (4.3) or (4.4), in subsection (1), in the definition of "qualified mining exploration expense",

(a) the reference to "July 31, 1998" in paragraph (b) must be read as "February 20, 2007", and

(b) the reference to "British Columbia" in paragraph (c) must be read as "a prescribed area".

(4.6) For the purpose of determining the amount under subsection (4.4) in respect of a partnership, the following rules apply:

(a) in subsection (1), in the definitions of "assistance", "excluded expense" and "qualified mining exploration expense", the references to "taxpayer" must be read as "partnership";

(b) in subsection (1), in the definition of "qualified mining exploration expense", the phrase "another person" must be read as "another person other than an eligible taxpayer that is a member of the partnership";

(i) the partnership were a person,

(ii) its fiscal period were its taxation year, and

(iii) its filing-due date were its filing-due date for the year if it were a corporation;

(d) the appropriate portion is that portion that may reasonably be considered to be the eligible taxpayer's share of 10% of the amount determined under subsection (4.4).

24 Section 29 is amended

(a) in subsection (2) by adding the following subparagraph in paragraph (b):

(viii) section 127 [training tax credits]. , and

(b) in subsection (3) by striking out "or" at the end of paragraph (d) (i) (D) and by adding the following clause in paragraph (d) (i):

(E) section 127 [training tax credits], or .

25 Section 38 (1) is amended

(a) by striking out "(2) (a), (c)" and substituting "(2) (a), (c), (c.2)", and

(b) by adding the following paragraph:

(a.1) in section 163 (2) (c.2) of the federal Act,

(i) the references to "subsection 122.51 (2)" were to section 127 of this Act, and

(ii) the reference to "the information provided in the return" were to "the information provided in the application filed for the year under section 128 of this Act", .

26 Section 42 (2) (b) (iii) is amended by striking out "section 84 or 98," and substituting "section 84, 98 or 113,".

27 Section 42 (2) (c) is amended by striking out "or" at the end of subparagraph (i.2), by adding ", or" at the end of subparagraph (ii) and by adding the following subparagraph:

(iii) the amount of the tax credit for a taxation year that, under section 127, the taxpayer is deemed to have paid on account of the tax payable by that taxpayer for that taxation year under this Act.

28 Section 47 (3) is amended by striking out "110 (2) and 114 (2)" and substituting "110 (2), 114 (2) and 128 (2)".

29 Section 65 (1) is amended in paragraph (b) of the definition of "information-sharing agreement" by striking out "77.1 or 95 (2)" and substituting "77.1, 95 (2) or 130".

30 Section 69 (5) (c) is amended by striking out "77.1 and 95 (2)" and substituting "77.1, 95 (2) and 130".

31 Section 82 (1) is amended by adding "film" before "training tax credit" in both places.

32 Section 97 is amended

(a) in paragraph (b) of the definition of "BC qualified expenditure" by striking out "September 1, 2009," and substituting "September 1, 2014,", and

(b) by adding the following definitions:

"partnership amount" means the amount referred to in section 99.1 (1) (a);

"permanent establishment", in relation to a partnership, has the same meaning as in section 8201 of the Income Tax Regulations (Canada) except that section is to be read without reference to the text after paragraph (e); .

33 The following section is added:

Interpretation -- taxation year of partnerships

97.1 Sections 102.11, 102.4 and 102.6 apply to a partnership as if the partnership's fiscal period were its taxation year.

34 Section 99 is amended

(a) by repealing subsection (1), and

(b) by adding the following subsection:

(3.1) A qualifying corporation's annual non-refundable tax credit for a taxation year is the amount by which the total of

(a) 10% of the corporation's SR&ED qualified BC expenditure in the taxation year, and

(b) the amount equal to the total of all amounts each of which is an appropriate portion determined under section 99.1 in respect of a partnership of which the corporation was a member in the taxation year as provided for in that section,

exceeds the total of

(d) any amount renounced under section 100 for that year by the corporation.

35 The following section is added:

Credit amount in respect of a partnership

99.1 (1) If in a taxation year a qualifying corporation is a member of a partnership, other than a specified member as defined in section 248 (1) of the federal Act, the qualifying corporation may claim for the taxation year the appropriate portion of the amount by which

(a) the amount equal to 10% of the SR&ED qualified BC expenditure of the partnership for its taxation year ending in the taxation year of the corporation

exceeds the total of

(b) the amount equal to the total of all amounts each of which is an amount determined under section 102.11 (2) for the partnership for its taxation year ending in the taxation year of the corporation, and

(c) the amount equal to the total of all amounts each of which is an amount determined under section 102.4 (2) for the partnership for its taxation year ending in the taxation year of the corporation.

(2) For the purpose of determining the amount that a qualifying corporation may claim under subsection (1) in respect of a partnership, the following rules apply:

(a) in section 97 [definitions], in the definitions of "BC qualified expenditure", "eligible repayment" and "SR&ED qualified BC expenditure",

(i) the references to "qualifying corporation" and "corporation" are to be read as "partnership", and

(ii) the references to "corporation's" are to be read as "partnership's";

(b) in section 97, in the definition of "BC qualified expenditure",

(i) the reference in paragraph (b) to "August 31, 1999" is to be read as "February 20, 2007", and

(ii) paragraph (d) is to be read without reference to "by a partnership or";

(i) the partnership were a person,

(ii) its fiscal period were its taxation year, and

(iii) its filing-due date were its filing-due date for the year if it were a corporation;

(d) the appropriate portion is that portion that may reasonably be considered to be the qualifying corporation's share of the amount determined under subsection (1);

(e) if the qualifying corporation is at any time in a taxation year a member of a particular partnership that is a member of another partnership,

(i) the qualifying corporation is deemed to be a member of the other partnership, and

(ii) despite paragraph (d), the qualifying corporation's appropriate portion of the amount determined under subsection (1) for the other partnership is deemed to equal that portion that may reasonably be considered to be that share of the amount determined under subsection (1) to which the qualifying corporation is directly or indirectly entitled.

36 Section 100 (1) is amended by striking out "tax credit under section 99" and substituting "annual non-refundable tax credit under section 99 (3.1) (a)".

37 The following section is added:

Recapture of amounts -- partnership

102.11 (1) This section applies to a partnership if

(a) the partnership acquired a particular property and the cost of the property was a BC qualified expenditure of the partnership in a taxation year,

(b) the cost of the property is an amount that was included in computing the partnership amount in respect of the partnership for the taxation year referred to in paragraph (a), and

(c) in the taxation year and after February 20, 2007, and within 10 taxation years of the acquisition described in paragraph (a), the partnership converts to commercial use, or disposes of without having previously converted to commercial use, that property or another property that incorporates that property.

(2) For the taxation year in which the conversion or disposition described in subsection (1) (c) occurs, the amount determined for the partnership for the purpose of section 99.1 (1) (b) is, subject to section 102.6 (2), the lesser of the following:

(a) the amount included in respect of the property in computing the partnership amount referred to in subsection (1) (b) of this section;

(b) an amount equal to,

(i) if that property or the property that incorporates that property is disposed of to a person who deals at arm's length with the partnership, the proceeds of disposition of that property multiplied by the percentage that was applied in computing the partnership amount referred to in subsection (1) (b) of this section, or

(ii) in any other case, the fair market value at the time of conversion or disposition of that property or the property that incorporates that property multiplied by the percentage that was applied in computing the partnership amount referred to in subsection (1) (b) of this section.

(3) The cost of the property under subsection (1) (a) and (b)

(a) must not exceed the amount paid by the partnership to acquire that property from a transferor, and

(b) must not include any amounts paid by the partnership to maintain, modify or transform that property.

38 Section 102.2 is amended

(a) by striking out "Sections 102.1 and 102.3" and substituting "Sections 102.1, 102.11, 102.3 and 102.4",

(b) by striking out "qualifying corporation" in both places and substituting "qualifying corporation or partnership", and

(c) by striking out "section 102.3," and substituting "sections 102.3 and 102.4,".

39 Section 102.3 is amended

(a) in subsection (1) by striking out "a purchaser if," and substituting "a purchaser that is a qualifying corporation if,",

(b) in subsection (1) (b) by adding "or partnership" after "by a corporation",

(c) by repealing subsection (2) (a) and substituting the following:

(a) the amount,

(i) if the original user is a qualifying corporation, included in the original user's tax credit under this Part in respect of the property, or

(ii) if the original user is a partnership, included in computing the original user's partnership amount in respect of the property; , and

(d) in subsection (2) (b) (i) by striking out "corporation" and substituting "purchaser".

40 The following sections are added:

Recapture of amounts from non-arm's
length purchasers -- partnerships

102.4 (1) This section applies to a purchaser that is a partnership if, at any particular time in a taxation year and after February 20, 2007, the purchaser converts to commercial use, or disposes of without having previously converted to commercial use, a property

(a) that

(i) was acquired by the purchaser in circumstances described in section 102.2, or

(ii) incorporates other property acquired by the purchaser in those circumstances, and

(b) that was first acquired, or that incorporates other property that was first acquired, by a corporation or partnership (in this section, the "original user") with which the purchaser did not deal at arm's length at the time at which the purchaser acquired the property, in the original user's taxation year that includes the particular time, assuming that the original user had such a taxation year, or in any of the original user's 10 preceding taxation years.

(2) In respect of the partnership that is the purchaser under subsection (1), for the purpose of section 99.1 (1) (c), the amount determined for the partnership for the taxation year is the lesser of the following:

(a) the amount,

(i) if the original user is a qualifying corporation, included in the original user's tax credit under this Part in respect of the property, or

(ii) if the original user is a partnership, included in computing the original user's partnership amount in respect of the property;

(b) an amount equal to,

(i) if that property or the property that incorporates that property is disposed of to a person who deals at arm's length with the purchaser, the proceeds of disposition of that property multiplied by the percentage applied by the original user,

(A) if the original user is a qualifying corporation, in computing its tax credit under this Part, or

(B) if the original user is a partnership, in computing its partnership amount, or

(A) if the original user is a qualifying corporation, in computing its tax credit under this Part, or

(B) if the original user is a partnership, in computing its partnership amount.

Recapture of tax credit by corporation
in respect of a partnership

102.5 (1) This section applies to a qualifying corporation for a taxation year if

(a) the corporation is a member of a partnership in the taxation year, and

(b) the total of

(i) the amount equal to the total of all amounts each of which is an amount determined under section 102.11 (2) in respect of a property of the partnership, and

(ii) the amount equal to the total of all amounts each of which is an amount determined under section 102.4 (2) in respect of a property of the partnership,

exceeds the amount computed as the partnership amount in respect of the partnership.

(2) The qualifying corporation must add to its tax otherwise payable for the taxation year the portion of the excess under subsection (1) (b) that can reasonably be considered to be the qualifying corporation's share of the excess.

Recapture of amounts -- tiered partnership

102.6 (1) This section applies to a partnership for a taxation year if

(a) a qualifying corporation is a member of the partnership,

(b) section 102.11 applies to the partnership for the taxation year,

(d) an amount would be added to the partnership's tax payable under section 102.5 for the taxation year if the partnership were a qualifying corporation.

(2) The amount referred to in subsection (1) (d) is deemed to be the lesser of the amounts described in section 102.11 (2) (a) and (b) in respect of a property of the partnership for the taxation year.

41 Section 103 (2) is amended by striking out "in relation to its SR&ED qualified BC expenditure in a taxation year" and substituting "in respect of a taxation year".

42 Section 111 (1) is amended in the definition of "BPIDP contribution" by striking out "April 1, 2007" and substituting "April 1, 2012".

43 The following Part is added:

Part 9 -- Training Tax Credits

Division 1 -- Definitions

Definitions

116 In this Part:

"eligible employer", in relation to a taxation year, means

(a) an individual subject to tax under section 2 (1) (a) for the taxation year, or

(b) a corporation that is subject to tax under section 2 (2), other than a corporation

(i) all or part of whose taxable income is at any time in the taxation year exempt from tax under Part I of the federal Act, or

(ii) that, at any time in the taxation year,

(A) is exempt from tax under section 27, or

(B) is controlled directly or indirectly in any manner whatever by one or more persons all or part of whose taxable income is exempt from tax under section 27 of this Act or under Part I of the federal Act;

"eligible recognized program" means a program prescribed under section 131 (1) (b);

"eligible training program" means a program prescribed under section 131 (1) (c);

"industry training agreement" has the same meaning as in the Industry Training Authority Act;

"level 1 requirements" means the requirements established by regulation under section 131 (1) (d) for an eligible recognized program;

"level 2 requirements" means the requirements established by regulation under section 131 (1) (e) for an eligible recognized program;

"level 3 requirements" means the requirements established by regulation under section 131 (1) (f) for an eligible training program;

"level 4 or higher requirements" means the requirements established by regulation under section 131 (1) (g) for an eligible training program.

Division 2 -- Tax Credits for Individuals

Application of this Division

117 This Division applies to taxation years beginning after December 31, 2006 and ending before January 1, 2012.

Basic tax credit for individuals

118 (1) This section applies to an individual for a taxation year if the individual meets the following requirements:

(a) the individual was resident in British Columbia at the end of December 31 of the taxation year;

(b) the individual was registered in an eligible recognized program in the taxation year;

(c) the individual completed, in the taxation year, the level 1 requirements or the level 2 requirements for the program referred to in paragraph (b);

(d) any other prescribed requirements.

(2) An individual may claim a tax credit of $1 000 for the taxation year for each of the level 1 requirements or level 2 requirements completed by the individual in the taxation year.

Completion tax credit for individuals

119 (1) This section applies to an individual for a taxation year if the individual

(a) was resident in British Columbia at the end of December 31 of the taxation year,

(b) was registered in an eligible training program in the taxation year, and

(c) completed, in the taxation year, the level 3 requirements or the level 4 or higher requirements for the eligible training program.

(2) An individual may claim a tax credit for the taxation year in the amount that is the total of the following:

(a) if the individual completed in the taxation year the level 3 requirements for an eligible training program, $2 000;

(b) if the individual completed in the taxation year one or more of the level 4 or higher requirements for an eligible training program, $2 500 for each of the level 4 or higher requirements completed in the taxation year.

Enhanced tax credit for individuals

120 (1) This section applies to an individual for a taxation year if

(a) the individual may claim a tax credit under section 118 or 119 for the taxation year, and

(b) the individual

(i) is entitled to a deduction under section 118.3 (1) of the federal Act for the taxation year, or

(ii) is registered as an Indian under the Indian Act (Canada).

(2) An individual who has claimed a tax credit under section 118 for a taxation year may claim a tax credit of $500 for the taxation year.

(3) An individual who has claimed a tax credit under section 119 for a taxation year may claim a tax credit for the taxation year in the amount that is the total of the following:

(a) if the individual completed in the taxation year the level 3 requirements for an eligible training program, $1 000;

(b) if the individual completed in the taxation year one or more of the level 4 or higher requirements for an eligible training program, $1 250 for each of the level 4 or higher requirements completed in the taxation year.

Division 3 -- Tax Credits for Employers

Definitions for this Division

121 In this Division:

"applicable period" means the period beginning on January 1, 2007 and ending on December 31, 2011;

"government assistance" means assistance from a government, municipality or other public authority, whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance, but does not include an amount deemed to have been paid under section 127;

"non-government assistance" has the same meaning as in section 127 (9) of the federal Act.

Basic tax credit for employers

122 (1) In this section:

"eligible period", in relation to an employee employed by an eligible employer in a taxation year of the eligible employer, means that part of the taxation year that

(a) is within 24 months after the date the employee entered into the industry training agreement, and

(b) is in the applicable period;

"employee" means an individual who is registered in an eligible recognized program.

(2) This section applies to an eligible employer for a taxation year in respect of an employee if

(a) the employee is employed in a position that

(i) is in a business carried on in British Columbia in the taxation year by the eligible employer, and

(ii) relates to the eligible recognized program in which the employee is registered in the taxation year, and

(b) the employee has an eligible period in the taxation year.

(3) An eligible employer may claim a tax credit for the taxation year in respect of the employee in the amount that is the lesser of

(a) $2 000, and

(b) 10% of the amount determined by the following formula:

amount = salary and wages - designated assistance

where
designated assistance	=	the total of all amounts of government assistance and non-government assistance that can reasonably be considered to be in respect of the salary and wages payable in the eligible period to the employee and that, at the time of filing of the eligible employer's return of income for the taxation year,
		(i)	the eligible employer has received or is entitled to receive or can reasonably be expected to receive,
		(ii)	have not been repaid under a legal obligation to do so, and
		(iii)	have not otherwise reduced the salary and wages;
salary and wages	=	the amount of salary and wages payable by the eligible employer in the eligible period to the employee in respect of the employment referred to in subsection (2) (a), other than remuneration that is the following:
		(i)	profits;
		(ii)	bonuses;
		(iii)	amounts described in section 6 or 7 of the federal Act;
		(iv)	amounts deemed to be incurred under section 78 (4) of the federal Act.

Completion tax credit for employers

123 (1) In this section:

"completion date", in respect of an employee, means the date on which the employee completed the level 3 requirements or the level 4 or higher requirements for an eligible training program;

"eligible period", in relation to an employee completing the level 3 requirements or the level 4 or higher requirements for an eligible training program, means the period that

(a) ends at any time in the month that includes the employee's completion date for that level,

(b) does not exceed 12 months, and

"employee" means an individual who is registered in an eligible training program.

(2) This section applies to an eligible employer for a taxation year in respect of an employee if

(a) the employee is employed in a position that

(i) is in a business carried on in British Columbia in the taxation year by the eligible employer, and

(ii) relates to the eligible training program in which the employee is registered in the taxation year, and

(b) the employee's completion date is in the taxation year and in the applicable period.

(3) An eligible employer may claim a tax credit for the taxation year in respect of the employee in the amount that is the total of the following:

(a) if the employee completed in the taxation year the level 3 requirements for an eligible training program, the lesser of

(i) $2 500, and

(ii) 15% of the amount determined under subsection (4);

(b) if the employee completed in the taxation year the level 4 or higher requirements for an eligible training program, the lesser of

(i) $3 000, and

(ii) 15% of the amount determined under subsection (4).

(4) The amount for the purpose of subsection (3) (a) (ii) or (b) (ii) is the amount determined by the following formula:

amount = salary and wages - designated assistance

where
designated assistance	=	the total of all amounts of government assistance and non-government assistance that can reasonably be considered to be in respect of the salary and wages payable in the eligible period to the employee and that, at the time of filing of the eligible employer's return of income for the taxation year,
		(a)	the eligible employer has received or is entitled to receive or can reasonably be expected to receive,
		(b)	have not been repaid under a legal obligation to do so, and
		(c)	have not otherwise reduced the salary and wages;
salary and wages	=	the amount of salary and wages payable by the eligible employer in the eligible period to the employee in respect of the employment referred to in subsection (2) (a), other than remuneration that is the following:
		(a)	profits;
		(b)	bonuses;
		(c)	amounts described in section 6 or 7 of the federal Act;
		(d)	amounts deemed to be incurred under section 78 (4) of the federal Act.

Enhanced tax credit for employers

124 (1) In this section, "employee" means an employee, as defined in section 122 or 123, who

(a) is entitled to a deduction under section 118.3 (1) of the federal Act for the taxation year, or

(b) is registered as an Indian under the Indian Act (Canada).

(2) An eligible employer may claim a tax credit for a taxation year in respect of an employee in the amount of 50% of the total of the following:

(a) the amount the eligible employer may claim as a tax credit for the taxation year under section 122 [basic tax credit for employers] in respect of the employee;

(b) the amount the eligible employer may claim as a tax credit for the taxation year under section 123 [completion tax credit for employers] in respect of the employee.

Restrictions on credits: multiple employers

125 (1) If 2 or more eligible employers who are not dealing with each other at arm's length may claim a tax credit under this Division for a particular period in respect of an employee, the total of all amounts claimed under this Division may not exceed the maximum amount that would be claimed under this Division for the particular period by any one of those eligible employers for that employee if that eligible employer were the only employer entitled to claim a tax credit under this Division for the particular period.

(2) The Commissioner of Income Tax may fix the portions of a tax credit claimed under this Division if the eligible employers referred to in subsection (1) cannot agree as to what portion of the tax credit each may claim.

Restrictions on credits: partnership

126 (1) If in a taxation year an eligible employer is a member of a partnership, other than a specified member, as defined in section 248 (1) of the federal Act, the eligible employer may claim a tax credit under section 122, 123 or 124 for the taxation year in the amount that is the appropriate portion of the amount determined under section 122, 123 or 124 for the partnership for its taxation year ending in the taxation year of the eligible employer.

(2) In determining, for the purpose of subsection (1), the amount under section 122, 123 or 124 for a partnership for a taxation year, the following rules apply:

(a) in this Division, the references to "eligible employer" are to be read as "partnership";

(b) in sections 122 (3) (b) and 123 (4), in the descriptions of "designated assistance", the reference to "at the time of filing of the eligible employer's return of income for the taxation year" is to be read as "on or before the filing-due date of the partnership for the taxation year";

(i) the partnership were a person,

(ii) its fiscal period were its taxation year, and

(iii) its filing-due date were its filing-due date for the year if it were a corporation;

(d) the appropriate portion is that portion that may reasonably be considered to be the eligible employer's share of the amount determined under section 122, 123 or 124.

Division 4 -- Administration

Deemed payment

127 A taxpayer that has claimed and is eligible for a tax credit under this Part for a taxation year is deemed to have paid, at the time referred to in section 156.1 (4) or 157 (1) (b) of the federal Act, as the applicable section relates to the taxation year of the taxpayer, the amount of the tax credit on account of the taxpayer's tax payable under this Act.

Filing requirements

128 (1) A taxpayer who wishes to claim a tax credit under this Part in respect of a taxation year must file, with the taxpayer's return of income filed under section 29 for the taxation year,

(a) an application for the tax credit in the form, and containing the information, required by the Commissioner of Income Tax, and

(b) other records required by the Commissioner of Income Tax.

(2) A taxpayer is not entitled to a tax credit under this Part in respect of a taxation year unless, within 36 months after the end of the taxation year, the taxpayer files the form containing the information required under subsection (1).

Powers of audit

129 Without limiting any provision of this Act or the federal Act, for the purpose of determining eligibility for a tax credit under this Part, the Commissioner of Income Tax has powers equivalent to the federal minister under sections 230 (3), 231, 231.1 and 233 of the federal Act, and for that purpose those sections apply.

Collection and sharing of information

130 Without limiting any provision of this or any other enactment, the Provincial minister, the federal minister, if a collection agreement is in effect, the minister charged with the administration of the Industry Training Authority Act and the Industry Training Authority may

(a) collect any information that is relevant to an application for a tax credit being claimed or already claimed under this Part, and

(b) share with each other, in accordance with an information-sharing agreement entered into in accordance with section 65, any information respecting an application, an applicant or any other person if the information is relevant to a tax credit being claimed or already claimed under this Part.

Power to make regulations

131 (1) Without limiting section 48 (1) and (2), the Lieutenant Governor in Council may make regulations as follows:

(a) defining any word or expression used in this Part;

(b) prescribing as an eligible recognized program a program that is a recognized program, as defined in the Industry Training Authority Act;

(c) prescribing as an eligible training program a program that is an industry training program, as defined in the Industry Training Authority Act;

(d) for the purposes of this Part, establishing requirements for an eligible recognized program as level 1 requirements;

(e) for the purposes of this Part, establishing requirements for an eligible recognized program as level 2 requirements;

(f) for the purposes of this Part, establishing requirements for an eligible training program as level 3 requirements;

(g) for the purposes of this Part, establishing requirements for an eligible training program as level 4 requirements or requirements for a higher level;

(h) prescribing requirements for the purposes of section 118 (1) (d).

(2) In making regulations under subsection (1) (d) to (g), the Lieutenant Governor in Council may do one or more of the following:

(a) establish different requirements for different eligible recognized programs and different eligible training programs;

(b) define classes of eligible recognized programs and eligible training programs and make different regulations for different classes of eligible recognized programs and eligible training programs;

(c) adopt a level of requirements established by the Industry Training Authority for an eligible recognized program or eligible training program

(i) in whole, in part or with any changes considered appropriate, and

(ii) as it stands at a specific date, as it stands at the time of adoption or as amended from time to time.

(3) Regulations made under subsection (1) may be made retroactive to January 1, 2007 or a later date, and if made retroactive are deemed to have come into force on the specified date.

44 Section 120 is amended

(a) by repealing subsection (1) (a) and substituting the following:

(a) the individual

(i) may claim a tax credit under section 118 or 119 for the taxation year, or

(ii) was an eligible apprentice, as defined in section 127 (9) of the federal Act, in the taxation year and resident in British Columbia at the end of December 31 of the taxation year, and , and

(b) by repealing subsection (2) and substituting the following:

(2) An individual referred to in subsection (1) may claim a tax credit of $500 for a taxation year if

(a) the individual has claimed a tax credit under section 118 for the taxation year, or

(b) the individual has received an amount referred to in section 56 (1) (n.1) of the federal Act [federal apprenticeship incentive grant] in the taxation year.

45 The following section is added:

Enhanced tax credit for employers -- eligible apprentice

124.1 (1) In this section:

"apprenticeship expenditure" has the same meaning as in section 127 (9) of the federal Act;

"eligible apprentice" has the same meaning as in section 127 (9) of the federal Act except that the reference to "apprenticeship contract" in that section is to be read as "industry training agreement";

"eligible period", in relation to an eligible apprentice employed by an eligible employer in a taxation year of the eligible employer, means that part of the taxation year that

(a) is within 24 months after the date the eligible apprentice entered into the industry training agreement, and

(b) is in the applicable period;

"eligible salary and wages" has the same meaning as in section 127 (9) of the federal Act;

"government assistance" does not include a deduction under section 127 (5) of the federal Act in respect of an apprenticeship expenditure.

(2) This section applies to an eligible employer for a taxation year in respect of an eligible apprentice if

(a) the eligible apprentice is employed in a position that

(i) is in a business carried on in British Columbia in the taxation year by the eligible employer, and

(ii) relates to the trade in respect of which the eligible apprentice has entered into an industry training agreement, and

(b) the eligible apprentice

(i) is entitled to a deduction under section 118.3 (1) of the federal Act for the taxation year, or

(ii) is registered as an Indian under the Indian Act (Canada).

(3) An eligible employer may claim a tax credit for a taxation year in respect of an eligible apprentice in the amount that is the lesser of

(a) $1 000, and

(b) 15% of the amount determined by the following formula:

amount = salary and wages - designated assistance

where
designated assistance	=	the total of all amounts of government assistance and non-government assistance that can reasonably be considered to be in respect of the salary and wages payable in the eligible period to the eligible apprentice and that, at the time of filing of the eligible employer's return of income for the taxation year,
		(i)	the eligible employer has received or is entitled to receive or can reasonably be expected to receive,
		(ii)	have not been repaid under a legal obligation to do so, and
		(iii)	have not otherwise reduced the salary and wages;
salary and wages	=	the amount of the eligible salary and wages payable by the eligible employer in the taxation year to the eligible apprentice in respect of the eligible apprentice's employment, in the taxation year and in the applicable period, in a business carried on in British Columbia in the taxation year by the eligible employer.

46 Section 126 is amended

(a) in subsections (1) and (2) by striking out "123 or 124" in both places and substituting "123, 124 or 124.1", and

(b) in subsection (2) (b) by striking out "sections 122 (3) (b) and 123 (4)," and substituting "sections 122 (3) (b), 123 (4) and 124.1 (3),".

Consequential Amendments

International Financial Activity Act

47 Section 19.1 (b) of the International Financial Activity Act, S.B.C. 2004, c. 49, is repealed and the following substituted:

(b) the corporation's tax payable under sections 14 to 16 [corporation income tax; corporate straddle provision; small business rate] of the Income Tax Act for the taxation year less the following:

(i) any deductions made by the corporation under the sections referred to in section 18.1 [order of making deductions from tax payable] of that Act for the taxation year;

(ii) any amounts deemed to have been paid by the corporation under the following sections of that Act for the taxation year:

(A) section 25.1 [mining exploration tax credit];

(B) section 84 [film and television tax credit];

(D) section 113 [book publishing tax credit];

(E) section 127 [training tax credits].

48 Section 22 is amended in paragraph (b) of the description of "net tax payable"

(a) in subparagraph (ii) by striking out "and 19 (3)", and

(b) by repealing subparagraph (iv) and substituting the following:

(iv) any amounts deemed to have been paid by the individual under the following sections of that Act for the taxation year:

(A) section 8 [refundable sales tax credit];

(B) section 25.1 [mining exploration tax credit];

Transitional Provisions

Transitional -- repeal of section 19 of the
Income Tax Act

49 (1) Despite sections 3, 12, 17, 21, 22 and 48 of this Act, sections 4.2, 4.7. 4.79, 18.1 and 19 of the Income Tax Act and section 22 of the International Financial Activity Act, as they read on December 31, 2006, continue to apply to a taxation year that began before January 1, 2007.

(2) Despite section 47 of this Act, section 19.1 of the International Financial Activity Act, as it read on December 31, 2006, continues to apply to a taxation year that began before January 1, 2007, except that section 19.1 (b) (iv) must be read as including a reference to section 127 of the Income Tax Act.

Transitional -- authority to make retroactive
regulations under the Income Tax Act

50 If made before January 1, 2008, regulations under section 48 (2) of the Income Tax Act prescribing an area for the purposes of section 25.1 of that Act may be made retroactive to February 21, 2007 or a later date, and if made retroactive are deemed to have come into force on the specified date.

Commencement

51 The provisions of this Act referred to in column 1 of the following table come into force as set out in column 2 of the table:

Item	Column 1 Provisions of Act	Column 2 Commencement
1	Anything not elsewhere covered by this table	The date of Royal Assent
2	Section 1	January 1, 2007
3	Section 2	January 1, 2008
4	Sections 3 and 4	January 1, 2007
5	Section 5	January 1, 2008
6	Sections 6 to 10	January 1, 2007
7	Section 11	By regulation of the Lieutenant Governor in Council, which may be made to apply for the purposes of taxation years that end after 2005, retroactive to the extent necessary to give it effect for those purposes
8	Sections 12 to 18	January 1, 2007
9	Section 19	July 1, 2006
10	Section 20	By regulation of the Lieutenant Governor in Council, which may be made to apply for the purposes of taxation years that end after 2005, retroactive to the extent necessary to give it effect for those purposes
11	Sections 21 and 22	January 1, 2007
12	Section 23	February 21, 2007
13	Sections 24 and 25	January 1, 2007
14	Sections 27 to 31	January 1, 2007
15	Sections 32 to 41	February 21, 2007
16	Section 42	The date of Royal Assent or March 31, 2007, whichever is earlier
17	Section 43	January 1, 2007
18	Sections 44 to 46	By regulation of the Lieutenant Governor in Council and, when brought into force by regulation, sections 44 to 46 are deemed to have come into force on January 1, 2007 and are retroactive to the extent necessary to give them effect on and after that date
19	Sections 47 to 49	January 1, 2007