Bill C-92

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	59. (1) Paragraph (c) of the definition ``carved-out income'' in subsection 209(1) of the Act is replaced by the following:
	(c) to the extent that the property is an interest in a bituminous sands deposit or oil shale deposit, the amount deducted under subsection 66.2(2) in computing the person's income for the year to the extent that it can reasonably be considered to be attributable to the cost of that interest;
	(2) Subsection (1) applies after March 6, 1996.
	60. (1) The definitions ``life insurance policy'' and ``life insurance policy in Canada'' in subsection 211(1) of the Act are replaced by the following:
``life insurance policy'' « police d'assurance- vie »	``life insurance policy'' includes a benefit under
	(a) a group life insurance policy, and
	(b) a group annuity contract
	but does not include
	(c) that part of a policy in respect of which the policyholder is deemed by paragraph 138.1(1)(e) to have an interest in a related segregated fund trust, or
	(d) a reinsurance arrangement;
``life insurance policy in Canada'' « police d'assurance- vie au Canada »	``life insurance policy in Canada'' means a life insurance policy issued or effected by an insurer on the life of a person resident in Canada at the time the policy was issued or effected;
	(2) Subsection (1) applies to the 1996 and subsequent taxation years.
	61. (1) Paragraphs (a) and (b) of the description of A in subsection 211.1(3) of the Act are replaced by the following:
	(a) the maximum amount that would be determined under paragraph 1401(1)(a), (c) or (d) of the Income Tax Regulations (other than an amount that would be determined under subparagraph 1401(1)(d)(ii) of those Regulations in respect of a disabled life) in respect of the insurer for the year in respect of the liability, benefit, risk or guarantee if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement, and
	(b) the maximum amount that would be determined under paragraph 1401(1)(a), (c) or (d) of the Income Tax Regulations (other than an amount that would be determined under subparagraph 1401(1)(d)(ii) of those Regulations in respect of a disabled life) in respect of the insurer for the preceding taxation year in respect of the liability, benefit, risk or guarantee if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement;
	(2) Paragraphs (a) and (b) of the description of D in the description of B in subsection 211.1(3) of the Act are replaced by the following:
	(a) the maximum amount that would be determined under paragraph 1401(1)(c.1) of the Income Tax Regulations in respect of the insurer for the year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement, and
	(b) the maximum amount that would be determined under paragraph 1401(1)(c.1) of the Income Tax Regulations in respect of the insurer for the preceding taxation year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement, and
	(3) Paragraph (c) of the description of E in the description of B in subsection 211.1(3) of the Act is replaced by the following:
	(c) the amount, if any, by which
	(i) the maximum amount that would be determined under paragraph 1401(1)(c.1) of the Income Tax Regulations in respect of the insurer for the year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement
	exceeds
	(ii) the maximum amount that would be determined under paragraph 1401(1)(c.1) of the Income Tax Regulations in respect of the insurer for its last 1989 taxation year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement; and
	(4) Subsections (1) to (3) apply to the 1996 and subsequent taxation years.
	62. (1) The Act is amended by adding the following after Part XII.4:
	PART XII.5
	RECOVERY OF LABOUR-SPONSORED FUNDS TAX CREDIT
Definitions	211.7 The definitions in this section apply for the purposes of this Part.
``approved share'' « action approuvée »	``approved share'' has the meaning assigned by subsection 127.4(1).
``labour- sponsored funds tax credit'' « crédit d'impôt relatif à un fonds de travailleurs »	``labour-sponsored funds tax credit'' in respect of a share is
	(a) where the original acquisition of the share occurred before 1996, 20% of the net cost of the share on that acquisition; and
	(b) in any other case, the amount that would be determined under subsection 127.4(6) in respect of the share if this Act were read without reference to paragraphs 127.4(6)(b) and (d).
``net cost'' « coût net »	``net cost'' has the meaning assigned by subsection 127.4(1).
``original acquisition'' « acquisition initiale »	``original acquisition'' has the meaning assigned by subsection 127.4(1).
``qualifying trust'' « fiducie admissible »	``qualifying trust'' has the meaning assigned by subsection 127.4(1).
``revoked corporation'' « société radiée »	``revoked corporation'' means a corporation the registration of which has been revoked under subsection 204.81(6).
Disposition of approved share	211.8 (1) Where an approved share of the capital stock of a registered labour-sponsored venture capital corporation or a revoked corporation is redeemed, acquired or cancelled by the corporation less than 8 years after the day on which the share was issued (other than in circumstances described in subclause 204.81(1)(c)(v)(A)(I) or (III) or clause 204.81(1)(c)(v)(B) or (D)) or any other approved share is disposed of, the person who was the shareholder immediately before the redemption, acquisition, cancellation or disposition shall pay a tax under this Part equal to the lesser of
	(a) the amount determined by the formula
	A x B
	where
	A is
	(i) where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the labour-sponsored funds tax credit in respect of the share, and
	(ii) where the share was issued by any other labour-sponsored venture capital corporation, the amount, if any, required to be remitted to the government of a province as a consequence of the redemption, acquisition, cancellation or disposition (otherwise than as a consequence of an increase in the corporation's liability for a penalty under a law of the province), and
	B is
	(i) nil, where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the original acquisition of the share was before March 6, 1996 and the redemption, acquisition, cancellation or disposition is
	(A) more than 2 years after the day on which it was issued, where the redemption, acquisition, cancellation or disposition is permitted under the articles of the corporation because an individual attains 65 years of age, retires from the workforce or ceases to be resident in Canada, or
	(B) more than 5 years after the day on which it was issued,
	(ii) one, in any other case where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, and
	(iii) in any other case, the quotient obtained when the labour-sponsored fund tax credit in respect of the share is divided by the tax credit provided under a law of a province in respect of any previous acquisition of the share, and
	(b) the amount that would, but for subsection (2), be payable to the shareholder because of the redemption, acquisition, cancellation or disposition (determined after taking into account the amount determined under subparagraph (ii) of the description of A in paragraph (a)).
Withholding and remittance of tax	(2) Where a person or partnership (in this section referred to as the ``transferee'') redeems, acquires or cancels a share and, as a consequence, tax is payable under this Part by the person who was the shareholder immediately before the redemption, acquisition or cancellation, the transferee shall
	(a) withhold from the amount otherwise payable on the redemption, acquisition or cancellation to the shareholder the amount of the tax;
	(b) within 30 days after the redemption, acquisition or cancellation, remit the amount of the tax to the Receiver General on behalf of the shareholder; and
	(c) submit with the remitted amount a statement in prescribed form.
Liability for tax	(3) Where a transferee has failed to withhold any amount as required by subsection (2) from an amount paid or credited to a shareholder, the transferee is liable to pay as tax under this Part on behalf of the shareholder the amount the transferee failed to withhold, and is entitled to recover that amount from the shareholder.
Refund of clawback	211.9 The Minister may pay to an individual (other than a trust) an amount not exceeding the lesser of
	(a) either
	(i) the tax paid under this Part in respect of a disposition of an approved share, or
	(ii) the amount determined under regulations made for the purpose of clause 204.81(1)(c)(v)(F) that was remitted to the Receiver General in respect of a disposition of an approved share, and
	(b) the amount, if any, by which
	(i) 15% of the net cost of the share on the original acquisition by the individual (or by a qualifying trust for the individual in respect of the share)
	exceeds
	(ii) the amount deducted under subsection 127.4(2) in respect of the original acquisition of the share by the individual (or by a qualifying trust for the individual in respect of the share)
	if application for the payment has been made in writing by the individual and filed with the Minister no later than 2 years after the end of the calendar year in which the disposition occurred.
	PART XII.6
	TAX ON FLOW-THROUGH SHARES
Tax imposed	211.91 (1) Every corporation shall pay a tax under this Part in respect of each month (other than January) in a calendar year equal to the amount determined by the formula
	(A + B/2 - C - D/2) x (E/12 + F/10)
	where
	A is the total of all amounts each of which is an amount that the corporation purported to renounce in the year under subsection 66(12.6) or (12.601) because of the application of subsection 66(12.66) (other than an amount purported to be renounced in respect of expenses incurred or to be incurred in connection with production or potential production in a province where a tax, similar to the tax provided under this Part, is payable by the corporation under the laws of the province as a consequence of the failure to incur the expenses that were purported to be renounced);
	B is the total of all amounts each of which is an amount that the corporation purported to renounce in the year under subsection 66(12.6) or (12.601) because of the application of subsection 66(12.66) and that is not included in the value of A;
	C is the total of all expenses described in paragraph 66(12.66)(b) that are
	(a) made or incurred by the end of the month by the corporation, and
	(b) in respect of the purported renunciations in respect of which an amount is included in the value of A;
	D is the total of all expenses described in paragraph 66(12.66)(b) that are
	(a) made or incurred by the end of the month by the corporation, and
	(b) in respect of the purported renunciations in respect of which an amount is included in the value of B;
	E is the rate of interest prescribed for the purpose of subsection 164(3) for the month; and
	F is
	(a) one, where the month is December, and
	(b) nil, in any other case.
Return and payment of tax	(2) A corporation liable to tax under this Part in respect of one or more months in a calendar year shall, before March of the following calendar year,
	(a) file with the Minister a return for the year under this Part in prescribed form containing an estimate of the tax payable under this Part by it in respect of each month in the year; and
	(b) pay to the Receiver General the amount of tax payable under this Part by it in respect of each month in the year.
Provisions applicable to Part	(3) Subsections 150(2) and (3), sections 152, 158 and 159, subsections 161(1) and (11), sections 162 to 167 and Division J of Part I apply to this Part, with any modifications that the circumstances require.
	(2) Section 211.7 and subsection 211.8(1) of the Act, as enacted by subsection (1), apply to redemptions, acquisitions, cancellations and dispositions that occur after November 15, 1995, except that section 211.7 and subsection 211.8(1) of the Act, as enacted by subsection (1), do not apply
	(a) to any redemption that occurs before 1998 of a share of the capital stock of a corporation that was registered under subsection 204.81(1) of the Act, where an amount determined under regulations made for the purpose of clause 204.81(1)(c)(v)(F) of the Act is directed to be remitted to the Receiver General in order to permit the redemption; and
	(b) to any disposition that occurs before 1998, where an amount is required to be remitted to the government of a province as a consequence of the disposition and a portion of the amount is in respect of the recovery of a tax credit that is provided under subsection 127.4(2) of the Act in respect of the share.
	(3) Subsections 211.8(2) and (3) of the Act, as enacted by subsection (1), apply to redemptions, acquisitions and cancellations that occur after the day on which this Act is assented to.

Bill C-92

PART XII.5

RECOVERY OF LABOUR-SPONSORED FUNDS TAX CREDIT

PART XII.6

TAX ON FLOW-THROUGH SHARES