Bill C-25

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	Tax on Split Income
Definitions	120.4 (1) The definitions in this subsection apply in this section.
``excluded amount'' « montant exclu »	``excluded amount'', in respect of an individual for a taxation year, means an amount that is the income from a property acquired by or for the benefit of the individual as a consequence of the death of
	(a) a parent of the individual; or
	(b) any person, if the individual is
	(i) enrolled as a full-time student during the year at a post-secondary educational institution (as defined in subsection 146.1(1)), or
	(ii) an individual in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer's tax payable under this Part for the year.
``specified individual'' « particulier déterminé »	``specified individual'', in relation to a taxation year, means an individual who
	(a) had not attained the age of 17 years before the year;
	(b) at no time in the year was non-resident; and
	(c) has a parent who is resident in Canada at any time in the year.
``split income'' « revenu fractionné »	``split income'', of a specified individual for a taxation year, means the total of all amounts (other than excluded amounts) each of which is
	(a) an amount required to be included in computing the individual's income for the year
	(i) in respect of taxable dividends received by the individual in respect of shares of the capital stock of a corporation (other than shares of a class listed on a prescribed stock exchange or shares of the capital stock of a mutual fund corporation), or
	(ii) because of the application of section 15 in respect of the ownership by any person of shares of the capital stock of a corporation (other than shares of a class listed on a prescribed stock exchange),
	(b) a portion of an amount included because of the application of paragraph 96(1)(f) in computing the individual's income for the year, to the extent that the portion
	(i) is not included in an amount described in paragraph (a), and
	(ii) can reasonably be considered to be income derived from the provision of goods or services by a partnership or trust to or in support of a business carried on by
	(A) a person who is related to the individual at any time in the year,
	(B) a corporation of which a person who is related to the individual is a specified shareholder at any time in the year, or
	(C) a professional corporation of which a person related to the individual is a shareholder at any time in the year, or
	(c) a portion of an amount included because of the application of subsection 104(13) or 105(2) in respect of a trust (other than a mutual fund trust) in computing the individual's income for the year, to the extent that the portion
	(i) is not included in an amount described in paragraph (a), and
	(ii) can reasonably be considered
	(A) to be in respect of taxable dividends received in respect of shares of the capital stock of a corporation (other than shares of a class listed on a prescribed stock exchange or shares of the capital stock of a mutual fund corporation),
	(B) to arise because of the application of section 15 in respect of the ownership by any person of shares of the capital stock of a corporation (other than shares of a class listed on a prescribed stock exchange), or
	(C) to be income derived from the provision of goods or services by a partnership or trust to or in support of a business carried on by
	(I) a person who is related to the individual at any time in the year,
	(II) a corporation of which a person who is related to the individual is a specified shareholder at any time in the year, or
	(III) a professional corporation of which a person related to the individual is a shareholder at any time in the year.
Tax on split income	(2) There shall be added to a specified individual's tax payable under this Part for a taxation year 29% of the individual's split income for the year.
Tax payable by a specified individual	(3) Notwithstanding any other provision of this Act, where an individual is a specified individual in relation to a taxation year, the individual's tax payable under this Part for the year shall not be less than the amount by which
	(a) the amount added under subsection (2) to the individual's tax payable under this Part for the year
	exceeds
	(b) the total of all amounts each of which is an amount that
	(i) may be deducted under section 121 or 126 in computing the individual's tax payable under this Part for the year, and
	(ii) can reasonably be considered to be in respect of an amount included in computing the individual's split income for the year.
	(2) Section 120.31 of the Act, as enacted by subsection (1), applies to the 1995 and subsequent taxation years and, notwithstanding subsections 152(4) to (5) of the Act, any assessment of an individual's tax payable under the Act for any taxation year that ended before 1999 shall be made as is necessary to take into account the application of that section 120.31.
	(3) Section 120.4 of the Act, as enacted by subsection (1), applies to the 2000 and subsequent taxation years.
	31. (1) Subparagraph 122.3(1)(e)(i) of the Act is replaced by the following:
	(i) where section 114 does not apply to the individual in respect of the year, the individual's income for the year, and
	(2) The definition ``tax otherwise payable under this Part for the year'' in subsection 122.3(2) of the Act is replaced by the following:
``tax otherwise payable under this Part for the year'' « impôt qu'il est par ailleurs tenu de payer pour l'année en vertu de la présente partie » ou « impôt payable par ailleurs en vertu de la présente partie pour l'année »	``tax otherwise payable under this Part for the year'' means the amount that, but for this section, sections 120 and 120.2, subsection 120.4(2) and sections 121, 126, 127 and 127.4, would be the tax payable under this Part for the year.
	(3) Subsection (1) applies to the 1998 and subsequent taxation years.
	(4) Subsection (2) applies to the 2000 and subsequent taxation years.
	32. (1) The description of B in subsection 122.51(2) of the Act is replaced by the following:
	B is 5% of the amount, if any, by which
	(a) the total of all amounts each of which is the individual's adjusted income for a taxation year that ends in the calendar year
	exceeds
	(b) $17,419 .
	(2) Subsection (1) applies to the 1999 and subsequent taxation years except that, in its application to the 1999 taxation year, paragraph (b) of the description of B in subsection 122.51(2) of the Act, as enacted by subsection (1), shall be read as follows:
	(b) $16,745.
	33. (1) The portion of the description of F in the description of C in subsection 122.61(1) of the Act before paragraph (a), as enacted by subsection 93(1) of the Budget Implementation Act, 1998, chapter 21 of the Statutes of Canada, 1998, is replaced by the following:
	F is, where the person is, at the beginning of the month, an eligible individual in respect of


	(2) Subsection (1) is deemed to have come into force on June 18, 1998.
	34. (1) Section 125.1 of the Act is amended by adding the following after subsection (1):
Generating electrical energy for sale	(2) A corporation that generates electrical energy for sale, or produces steam for use in the generation of electrical energy for sale, in a taxation year may deduct from its tax otherwise payable under this Part for the year 7% of the amount determined by the formula
	A - B
	where
	A is the amount, if any, that would, if the definition ``manufacturing or processing'' in subsection (3), and in subsection 1104(9) of the Income Tax Regulations, were read without reference to paragraph (h) of those definitions (other than for the purpose of applying section 5201 of those Regulations and if subsection (5) applied for the purpose of subsection (1), be the lesser of
	(a) the amount determined under paragraph (1)(a) in respect of the corporation for the year, and
	(b) the amount determined under paragraph (1)(b) in respect of the corporation for the year; and
	B is the amount, if any, that is the lesser of
	(a) the amount determined under paragraph (1)(a) in respect of the corporation for the year, and
	(b) the amount determined under paragraph (1)(b) in respect of the corporation for the year.
	(2) Section 125.1 of the Act is amended by adding the following after subsection (4):
Interpreta- tion	(5) For the purpose of the description of A in subsection (2) and for the purpose of applying the Income Tax Regulations (other than section 5201 of those Regulations) to that subsection other than the description of B,
	(a) electrical energy is deemed to be a good; and
	(b) the generation of electrical energy for sale, or the production of steam for use in the generation of electrical energy for sale, is deemed to be, subject to paragraph (l) of the definition ``manufacturing or processing'' in subsection (3), manufacturing or processing.
	(3) Subsections (1) and (2) apply to taxation years that end after 1998 except that, in its application to such a taxation year that begins before 2002, the reference to ``7%'' in subsection 125.1(2) of the Act, as enacted by subsection (1), shall be read as a reference to the total of
	(a) 0% multiplied by the number of days in the year that are before 1999,
	(b) that proportion of ``1%'' that the number of days in the taxation year that are in the 1999 calendar year is of the number of days in the taxation year,
	(c) that proportion of ``3%'' that the number of days in the taxation year that are in the 2000 calendar year is of the number of days in the taxation year,
	(d) that proportion of ``5%'' that the number of days in the taxation year that are in the 2001 calendar year is of the number of days in the taxation year,
	(e) that proportion of ``7%'' that the number of days in the taxation year that are in the 2002 calendar year is of the number of days in the taxation year, and
	(f) that proportion of ``7%'' that the number of days in the taxation year that are in the 2003 calendar year is of the number of days in the taxation year.
	35. (1) Subclause 126(1)(b)(ii)(A)(I) of the Act is replaced by the following:
	(I) where section 114 does not apply to the taxpayer in respect of the year, the taxpayer's income for the year computed without reference to paragraph 20(1)(ww) , and
	(2) Subclause 126(2.1)(a)(ii)(A)(I) of the Act is replaced by the following:
	(I) where section 114 does not apply to the taxpayer in respect of the year, the taxpayer's income for the year computed without reference to paragraph 20(1)(ww) , and
	(3) Subparagraph 126(3)(b)(i) of the Act is replaced by the following:
	(i) where section 114 does not apply to the individual in respect of the year, the individual's income for the year computed without reference to paragraph 20(1)(ww) , and
	(4) The description of A in paragraph (a) of the definition ``tax for the year otherwise payable under this Part'' in subsection 126(7) of the Act is replaced by the following:
	A is the amount that would be the tax payable under this Part for the year if that tax were determined without reference to section 120.3 and before making any deduction under any of sections 121, 122.3 and 125 to 127.41, and
	(5) The description of B in paragraph (a) of the definition ``tax for the year otherwise payable under this Part'' in subsection 126(7) of the Act is replaced by the following:
	B is the amounts deemed by subsections 120(2) and (2.2) to have been paid on account of tax payable under this Part,
	(6) Paragraphs (b) and (c) of the definition ``tax for the year otherwise payable under this Part'' in subsection 126(7) of the Act are replaced by the following:
	(b) in subparagraph (2)(c)(i) and paragraph (2.2)(b), the tax for the year payable under this Part (determined without reference to sections 120.3 and 123.3 and before making any deduction under any of sections 121, 122.3 and 124 to 127.41), and
	(c) in subsection (2.1), the tax for the year payable under this Part (determined without reference to subsection 120(1) and sections 120.3 and 123.3 and before making any deduction under any of sections 121, 122.3 and 124 to 127.41);
	(7) Subsections (1) to (4) and (6) apply to the 1998 and subsequent taxation years except that, in their application to the 1998 and 1999 taxation years, subclauses 126(1)(b)(ii)(A)(I) and (2.1)(a)(ii)(A)(I) and subparagraph 126(3)(b)(i) of the Act, as enacted by subsections (1), (2) and (3), respectively, shall be read without reference to the expression ``computed without reference to paragraph 20(1)(ww)''.
	(8) Subsection (5) applies to the 1999 and subsequent taxation years.
	36. (1) The definitions ``approved share'' and ``tax otherwise payable'' in subsection 127.4(1) of the Act are replaced by the following:

Bill C-25

Tax on Split Income