Bill C-28

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	RECOMMENDATION
	His Excellency the Governor General recommends to the House of Commons the appropriation of public revenue under the circumstances, in the manner and for the purposes set out in a measure entitled ``An Act to amend the Income Tax Act, the Income Tax Application Rules, the Bankruptcy and Insolvency Act, the Canada Pension Plan, the Children's Special Allowances Act, the Companies' Creditors Arrangement Act, the Cultural Property Export and Import Act, the Customs Act, the Customs Tariff, the Employment Insurance Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the Income Tax Conventions Interpretation Act, the Old Age Security Act, the Tax Court of Canada Act, the Tax Rebate Discounting Act, the Unemployment Insurance Act, the Western Grain Transition Payments Act and certain Acts related to the Income Tax Act''.
	SUMMARY
	These amendments implement the draft income tax measures announced in the February 1997 budget and the technical amendments to the Income Tax Act and related statutes originally included in Bill C-69. Also included is a provision that increases the cash floor of the Canada Health and Social Transfer under the Federal-Provincial Fiscal Arrangements Act from $11 billion to $12.5 billion and makes the cash floor operative beginning in the 1997-98 fiscal year. The income tax amendments of greater significance are summarized below.
	(1) Charitable Donations: introduces capital gains tax relief for gifts of certain listed securities, increases the charitable donations limit by recaptured depreciation that arises in respect of gifts of depreciable property, and denies charitable donation treatment for loan-back arrangements.
	(2) Registered Education Savings Plans (RESPs): increases the annual RESP contribution limit from $2,000 to $4,000 per beneficiary, allows growth on RESP contributions not to be forfeited in certain cases where post-secondary education is not pursued by beneficiaries, and provides a 20% penalty on any portion of such growth that is not transferred on a tax-deductible basis to an RRSP.
	(3) Transfer Pricing: implements, in conformity with the revised transfer pricing guidelines of the Organization for Economic Co-operation and Development, a transfer pricing regime based explicitly on the arm's length principle and introduces transfer pricing documentation requirements and penalties for failure to make reasonable efforts to determine arm's length transfer prices.
	(4) Film or Video Production Services Tax Credit: introduces a new refundable 11% tax credit to provide economic development assistance to film and video productions produced in Canada.
	(5) Loss Trading: restricts the transferability of losses between affiliated persons.
	(6) Bankrupt Individuals: eliminates the double deduction of personal tax credits in the year of bankruptcy.
	(7) Changes of Tax Status of Corporations: provides rules that apply when a corporation becomes or ceases to be exempt from income tax.
	(8) Disability Benefit Top-ups: ensures that there will be no change in the income tax treatment to recipients of disability benefits where the insurance company paying the benefits becomes insolvent and employers take responsibility for continuing the current level of benefits.
	(9) Adventures in the Nature of Trade: implements the measures announced by the Minister of Finance on December 20, 1995 according to which, for income tax purposes, inventory held as an adventure in the nature of trade must be valued at its historical cost, rather than at the lower of cost or fair market value, so that accrued losses on such property will be recognized only on its disposition.