Bill C-28

Income Tax Application Rules

69. (1) Subsection 10(5) of the Income Tax Application Rules is repealed.

(2) Subsection (1) applies after 2007.

Income Tax Conventions Interpretation Act

70. (1) The Income Tax Conventions Interpretation Act is amended by adding the following after section 4.1:

4.2 Notwithstanding the provisions of a convention or the Act giving the convention the force of law in Canada, each reference in a convention to a stock exchange that is prescribed under, or for the purposes of, the Income Tax Act shall be read as a reference to a designated stock exchange, as defined in the Income Tax Act.

(2) Subsection (1) applies on and after the day on which this Act is assented to.

Income Tax Regulations

71. (1) Paragraphs 108(1.12)(a) and (b) of the Income Tax Regulations are replaced by the following:

(a) the average monthly withholding amount in respect of an employer for either the first or the second calendar year before the particular calendar year that includes that time is less than $3,000,

(b) throughout the 12-month period before that time, the employer has remitted, on or before the day on or before which the amounts were required to be remitted, all amounts each of which was required to be remitted under subsection 153(1) of the Act, under subsection 21(1) of the Canada Pension Plan, under subsection 82(1) of the Employment Insurance Actor under Part IX of the Excise Tax Act, and

(2) Subsection (1) applies in respect of amounts required to be deducted or withheld after 2007.

72. (1) The Regulations are amended by adding the following after section 204:

Interpretation

204.1 (1) The following definitions apply in this section.

“public investment trust”, at any time, means a public trust all or substantially all of the fair market value of the property of which is, at that time, attributable to the fair market value of property of the trust that is

(a) units of public trusts;

(b) partnership interests in public partnerships (as defined in subsection 229.1(1));

(c) shares of the capital stock of public corporations; or

(d) any combination of properties referred to in paragraphs (a) to (c). (fiducie de placement ouverte)

“public trust”, at any time, means a mutual fund trust the units of which are, at that time, listed on a designated stock exchange in Canada. (fiducie ouverte)

(2) A trust that is, at any time in a taxation year of the trust, a public trust shall, within the time required by subsection (3),

(a) make public, in prescribed form, information in respect of the trust for the taxation year by posting that prescribed form, in a manner that is accessible to the general public, on the Internet website of CDS Innovations Inc.; and

(b) notify the Minister in writing as to when the posting of the prescribed form, as required by paragraph (a), has been made.

(3) The time required for a public trust to satisfy the requirements of subsection (2) in respect of the public trust for a taxation year of the public trust is

(a) subject to paragraph (b), on or before the day that is 60 days after the end of the taxation year; and

(b) where the public trust is, at any time in the taxation year, a public investment trust, on or before the day that is 67 days after the end of the calendar year in which the taxation year ends.

(2) Subsection (1) applies to information in respect of taxation years that end on or after July 4, 2007.

73. (1) The Regulations are amended by adding the following after section 229:

Definitions

229.1 (1) The definitions in this subsection apply in this section.

“public investment partnership”, at any time, means a public partnership all or substantially all of the fair market value of the property of which is, at that time, attributable to the fair market value of property of the partnership that is

(a) units of public trusts (as defined in subsection 204.1(1));

(b) partnership interests in public partnerships;

(c) shares of the capital stock of public corporations; or

(d) any combination of properties referred to in paragraphs (a) to (c). (société de personnes de placement ouverte)

“public partnership”, at any time, means a partnership the partnership interests in which are, at that time, listed on a designated stock exchange in Canada if, at that time, the partnership carries on a business in Canada or is a Canadian partnership. (société de personnes ouverte)

(2) Every member of a partnership that is, at any time in a fiscal period of the partnership, a public partnership shall, within the time required by subsection (3),

(a) make public, in prescribed form, information in respect of the public partnership for the fiscal period by posting the prescribed form, in a manner that is accessible to the general public, on the Internet website of CDS Innovations Inc.; and

(b) notify the Minister in writing as to when the posting of the prescribed form, as required by paragraph (a), has been made.

(3) The time required for the members of a public partnership to satisfy the requirements of subsection (2) in respect of the public partnership for a fiscal period of the public partnership is

(a) subject to paragraph (b), on or before the day that is the earlier of

(i) 60 days after the end of the calendar year in which the fiscal period ends, and

(ii) four months after the end of the fiscal period; and

(b) where the public partnership is, at any time in the fiscal period, a public investment partnership, on or before the day that is 67 days after the end of the calendar year in which the fiscal period ends.

(4) Every member of a partnership that is required to satisfy the requirements of subsection (2) in respect of the partnership for a fiscal period of the partnership will be deemed to have satisfied those requirements if a particular member of the partnership, who has authority to act for the partnership, has satisfied those requirements in respect of the partnership for the fiscal period.

(2) Subsection (1) applies to information in respect of fiscal periods that end on or after July 4, 2007.

74. (1) Section 3201 of the Regulations is amended

(a) by replacing “the Australian Stock Exchange” in paragraph (a) with “the Australian Securities Exchange”;

(b) by replacing “the Brussels Stock Exchange” in paragraph (b) with “Euronext Brussels”;

(c) by replacing “the Paris Stock Exchange” in paragraph (c) with “Euronext Paris”;

(d) by replacing “the Amsterdam Stock Exchange” in paragraph (i) with “Euronext Amsterdam”;

(e) by replacing “the Zurich Stock Exchange” in paragraph (m) with “the SWX Swiss Exchange”;

(f) by replacing “the Cincinnati Stock Exchange” in subparagraph (o)(v) with “the National Stock Exchange”;

(g) by repealing subparagraph (o)(vi);

(h) by replacing “the Midwest Stock Exchange” in subparagraph (o)(vii) with “the Chicago Stock Exchange”;

(i) by replacing “the Pacific Stock Exchange” in subparagraph (o)(x) with “NYSE Arca”; and

(j) by replacing subparagraphs (o)(xi) and (xii) with the following:

(xi) the Philadelphia Stock Exchange;

(2) Sections 3200 and 3201 of the Regulations are repealed.

(3) Paragraphs (1)(a) to (d), (f) to (h) and (j) are deemed to have come into force on the day immediately before the day on which this Act is assented to.

(4) Paragraph (1)(e) is deemed to have come into force on January 1, 2007.

(5) Paragraph (1)(i) is deemed to have come into force on April 1, 2006.

(6) Subsection (2) comes into force on the day on which this Act is assented to.

75. (1) The definition “prescribed stock exchange” in section 3700 of the Regulations is repealed.

(2) Subsection (1) comes into force on the day on which this Act is assented to.

76. (1) Subparagraphs 3702(1)(b)(i) and (ii) of the Regulations are amended by replacing “prescribed stock exchange” with “designated stock exchange”.

(2) Subsection (1) comes into force on the day on which this Act is assented to.

77. (1) Subparagraph 4800(2)(a)(i) and paragraph 4800(3)(a) of the Regulations are amended by replacing “stock exchange in Canada prescribed for the purposes of section 89 of the Act” with “designated stock exchange in Canada”.

(2) Subsection (1) comes into force on the day on which this Act is assented to.

78. (1) The portion of subsection 6201(5) of the Regulations before paragraph (a) is replaced by the following:

(5) For the purpose of paragraph (f) of the definition “term preferred share” in subsection 248(1) of the Act, a share of a class of the capital stock of a corporation that is listed on a designated stock exchange in Canada is a prescribed share at any particular time with respect to another corporation that is registered or licensed under the laws of a province to trade in securities and that holds the share for the purpose of sale in the course of the business ordinarily carried on by it unless

(2) The portion of subsection 6201(5.1) of the Regulations before paragraph (a) is replaced by the following:

(5.1) For the purpose of the definition “taxable RFI share” in subsection 248(1) of the Act, a share of a class of the capital stock of a corporation that is listed on a designated stock exchange in Canada is a prescribed share at any particular time with respect to another corporation that is registered or licensed under the laws of a province to trade in securities and that holds the share for the purpose of sale in the course of the business ordinarily carried on by it unless

(3) Subsections (1) and (2) apply to dividends received in taxation years that begin after October 1994, except that in its application before the day on which this Act is assented to, the references to “a designated stock exchange in Canada” in subsections 6201(5) and (5.1) of the Regulations, as enacted by subsections (1) and (2), shall be read as a reference to “a stock exchange referred to in section 3200”.

79. (1) Paragraph 7303.1(1)(a) of the Regulations is replaced by the following:

(a) the Yukon Territory, the Northwest Territories or Nunavut;

(2) Paragraph 7303.1(2)(a) of the Regulations is amended by striking out the word “or” at the end of subparagraph (i), by adding the word “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) north of 55°13′N latitude and east of 123°16′W longitude;

(3) Subsection (1) applies after March 31, 1999.

(4) Subsection (2) applies to the 2007 and subsequent taxation years.

80. (1) The Regulations are amended by adding the following after section 7309:

7310. For the purpose of the definition “eligible apprentice” in subsection 127(9) of the Act, a prescribed trade in respect of a province means, at all times in a taxation year, a trade that is, at any time in that taxation year, a Red Seal trade for the province under the Interprovincial Standards Red Seal Program.

(2) Subsection (1) applies to taxation years ending on or after May 2, 2006, except that in its application to taxation years ending before October 2007, section 7310 of the Regulations, as enacted by subsection (1), is to be read as follows:

7310. For the purpose of the definition “eligible apprentice” in subsection 127(9) of the Act, a prescribed trade in respect of a province means, at all times in a taxation year, a trade that is, on September 30, 2007, a Red Seal trade for the province under the Interprovincial Standards Red Seal Program.

81. (1) Clause 8303(5)(f.1)(ii)(C) of the Regulations is replaced by the following:

(C) the plan is not a designated plan,

(2) Subparagraph 8303(5)(f.2)(iv) of the Regulations is replaced by the following:

(iv) the plan is not a designated plan,

(3) Subsections (1) and (2) apply to past service events that occur after 2007.

82. (1) Subsection 8500(1) of the Regulations is amended by adding the following in alphabetical order:

“designated plan” has the meaning assigned by section 8515; (régime désigné)

(2) Subsection 8500(2) of the Regulations is replaced by the following:

(2) All words and expressions used in this Part that are defined in subsection 147.1(1) of the Act or in Part LXXXIII have the meanings assigned in those provisions.

(3) Subsections (1) and (2) apply after 2007.

83. (1) The portion of paragraph 8503(3)(a) of the Regulations before subparagraph (i) is replaced by the following:

(a) the only lifetime retirement benefits provided under the provision to a member (other than additional lifetime retirement benefits provided to a member because the member is totally and permanently disabled at the time the member’s retirement benefits commence to be paid) are lifetime retirement benefits provided in respect of one or more of the following periods (other than the portion of a period that is after the calendar year in which the member attains 71 years of age), namely,

(2) Subsection 8503(9) of the Regulations is amended by striking out the word “and” at the end of paragraph (e), by adding the word “and” at the end of paragraph (f) and by adding the following after paragraph (f):

(g) the provisions in paragraph (2)(m), Part LXXXIII and subsection 8517(4) that depend on whether the member’s retirement benefits have commenced to be paid apply to past service events, commutations and transfers occurring in the period in which the member’s benefits are suspended as if the member’s benefits had not previously commenced to be paid.

(3) Section 8503 of the Regulations is amended by adding the following after subsection (15):

(16) The following definitions apply in this subsection and in subsections (17) to (23).

“qualifying period” of a member under a defined benefit provision of a pension plan means a period throughout which the member is employed by an employer who participates in the plan but does not include any period that is before the day that is the first day, on or after the later of the following days, in respect of which retirement benefits are provided under the provision to the member:

(a) the day on which retirement benefits first commenced to be paid to the member under the provision; and

(b) the member’s specified eligibility day under the provision. (période admissible)

“specified eligibility day” of a member under a defined benefit provision of a pension plan means the earlier of

(a) the later of

(i) the day on which the member attains 55 years of age, and

(ii) the day on which the member attains the earliest age at which payment of the member’s lifetime retirement benefits may commence under the terms of the provision without a reduction computed by reference to the member’s age, duration of service, or both (and without any other similar reduction), otherwise than because of the member being totally and permanently disabled; and

(b) the day on which the member attains 60 years of age. (date d’admissibilité)

(17) The condition in subparagraph (2)(b)(i) that bridging benefits be payable to a member under a defined benefit provision of a pension plan for a period beginning no earlier than the time lifetime retirement benefits commence to be paid under the provision to the member does not apply where the following conditions are satisfied:

(a) the bridging benefits do not commence to be paid before the member’s specified eligibility day under the provision;

(b) the plan provides that bridging benefits are payable under the provision to the member only for calendar months

(i) at any time in which the member is employed by an employer who participates in the plan, or

(ii) that begin on or after the time the member’s lifetime retirement benefits under the provision commence to be paid;

(c) the member was not, at any time before the time at which the bridging benefits commence to be paid, connected with an employer who participates in the plan; and

(d) the plan is not a designated plan.

(18) Where bridging benefits under a defined benefit provision of a pension plan commence to be paid to a member in circumstances to which subsection (17) applies, the following rules apply:

(a) if the member dies before lifetime retirement benefits under the provision commence to be paid to the member, subsections (2) and (6) apply in respect of benefits provided under the provision on the death of the member as if the bridging benefits had not commenced to be paid before the member’s death; and

(b) the provisions in paragraph (2)(m), Part LXXXIII and subsection 8517(4) that depend on whether the member’s retirement benefits have commenced to be paid apply to past service events, commutations and transfers occurring before lifetime retirement benefits under the provision commence to be paid to the member as if the bridging benefits had not commenced to be paid.

(19) Paragraph (3)(b) does not apply to retirement benefits (in this subsection and in subsections (20) and (21) referred to as “additional benefits”) provided under a defined benefit provision of a pension plan to a member of the plan if the following conditions are satisfied:

(a) the additional benefits are provided in respect of all or part of a qualifying period of the member under the provision;

(b) the amount of retirement benefits payable to the member under the provision for each whole calendar month in the qualifying period does not exceed 5% of the amount (expressed on an annualized basis) of retirement benefits that have accrued under the provision to the member to the beginning of the month, determined without a reduction computed by reference to the member’s age, duration of service, or both, and without any other similar reduction (except that, if the plan limits the amount of pensionable service of a member or prohibits the provision of benefits in respect of periods after a member attains a specific age or combination of age and pensionable service, this condition does not apply to any calendar month in respect of which no benefits can be provided to the member because of the limit or prohibition, as the case may be);

(c) no part of the additional benefits are provided as a consequence of a past service event, unless the benefits are provided in circumstances to which subsection 8306(1) would apply if no qualifying transfers were made in connection with the past service event;

(d) the member was not, at any time before the additional benefits become provided, connected with an employer who participates in the plan; and

(e) the plan is not a designated plan.

(20) Where the amount of retirement benefits payable under a defined benefit provision of a pension plan to a member is redetermined to include additional benefits provided to the member in respect of a qualifying period of the member under the provision, the conditions in paragraph (2)(b) and section 8504 apply in respect of benefits payable under the provision to the member after the redetermination as if the member’s retirement benefits had first commenced to be paid at the time of the redetermination.

(21) Where additional benefits are provided under a defined benefit provision of a pension plan to a member in respect of a qualifying period of the member under the provision, the following rules apply:

(a) if the qualifying period ends as a consequence of the member’s death, subsections (2) and (6) apply in respect of benefits provided under the provision on the death of the member as if the member’s retirement benefits had not commenced to be paid before the member’s death; and

(b) the provisions in paragraph (2)(m), Part LXXXIII and subsection 8517(4) that depend on whether the member’s retirement benefits have commenced to be paid apply to past service events, commutations and transfers occurring in the qualifying period as if the member’s retirement benefits had not commenced to be paid.

(22) Subsections (20) and (21) do not apply where it is reasonable to consider that one of the main reasons for the provision of additional benefits to the member is to obtain the benefit of any of those subsections.

(23) Where a member is provided with benefits under two or more associated defined benefit provisions, the determination of whether the conditions in subsections (17) and (19) are satisfied in respect of benefits payable or provided to the member under a particular associated provision shall be made on the basis of the following assumptions:

(a) benefits payable to the member under each of the other associated provisions were payable under the particular associated provision;

(b) if, before the member’s specified eligi-bility day (determined without reference to this paragraph) under the particular associated provision, the member had commenced to receive retirement benefits under another associated provision on or after the member’s specified eligibility day under that provision, the member’s specified eligibility day under the particular associated provision were the member’s specified eligibility day under that other associated provision; and

(c) if one or more of the other associated provisions is in a designated plan, the plan that includes the particular provision were also a designated plan.

(24) For the purpose of subsection (23), a defined benefit provision is associated with another defined benefit provision (other than a provision that is not in a registered pension plan) if

(a) the provisions are in the same pension plan; or

(b) the provisions are in separate pension plans and

(i) there is an employer who participates in both plans, or

(ii) an employer who participates in one of the plans does not deal at arm’s length with an employer who participates in the other plan.

(25) A particular defined benefit provision of a pension plan is not associated with a defined benefit provision of another pension plan if it is unreasonable to expect the benefits under the particular provision to be coordinated with the benefits under the other provision and the Minister has agreed not to treat the particular provision as being associated with the other provision.

(4) Subsections (1) to (3) apply to benefits that are provided or payable after 2007.

84. (1) The portion of subsection 8504(2) of the Regulations before paragraph (a) is replaced by the following:

(2) For the purposes of subsection (1) and paragraph 8505(3)(d), the highest average compensation of a member of a pension plan for the purpose of a defined benefit provision of the plan, indexed to the calendar year (in this subsection referred to as the “year of commencement”) in which the member’s lifetime retirement benefits under the provision commence to be paid, is,

(2) Subsection (1) applies to the 2008 and subsequent calendar years.

85. (1) Paragraph 8507(3)(a) of the Regulations is amended by striking out the word “and” at the end of subparagraph (v) and by adding the following after subparagraph (vi):

(vii) no part of the period is after the earlier of

(A) the time at which bridging benefits commence to be paid to the individual in circumstances to which subsection 8503(17) applied, and

(B) the earliest day in respect of which benefits have been provided to the individual in circumstances to which subsection 8503(19) applied; and

(2) Subsection (1) applies to the 2008 and subsequent calendar years.

86. (1) Paragraph 8514(2)(a) of the Regulations is replaced by the following:

(a) a debt obligation described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3) of the Act;

(2) Paragraphs 8514(2)(b) and (c) of the Regulations are amended by replacing “stock exchange referred to in section 3200 or 3201” in those paragraphs with “designated stock exchange”.

(3) Subsection (1) applies after 2007.

(4) Subsection (2) comes into force on the day on which this Act is assented to.

87. (1) Paragraph 8516(2)(d) of the Regulations is replaced by the following:

(d) at the time the contribution is made, the plan is not a designated plan.

(2) Paragraph 8516(3)(d) of the Regulations is replaced by the following:

(d) at the time the contribution is made, the plan is not a designated plan.

(3) Paragraph 8516(4)(e) of the Regulations is replaced by the following:

(e) at the time the contribution is made, the plan is not a designated plan.

(4) Subsections (1) to (3) apply after 2007.

88. (1) The Regulations are amended by adding the following after Part XCIII:

PART XCIV

PRESCRIBED PROGRAMS OF PHYSICAL ACTIVITY

Interpretation

9400. (1) The following definitions apply in this Part.

“physical activity” means a supervised activity suitable for children (other than an activity where a child rides on or in a motorized vehicle as an essential component of the activity) that

(a) in the case of a qualifying child in respect of whom an amount is deductible under section 118.3 of the Act in computing any person’s income for the taxation year, results in movement and in an observable expenditure of energy in a recreational context; and

(b) in the case of any other child, contributes to cardio-respiratory endurance and to one or more of the following:

(i) muscular strength,

(ii) muscular endurance,

(iii) flexibility, and

(iv) balance. (activité physique)

“qualifying child” has the meaning assigned by subsection 118.03(1) of the Act. (enfant admissible)

(2) For the purpose of the definition “eligible fitness expense” in subsection 118.03(1) of the Act, a prescribed program of physical activity is

(a) a weekly program, that is not part of a school’s curriculum, of a duration of eight or more consecutive weeks in which all or substantially all of the activities include a significant amount of physical activity;

(b) a program, that is not part of a school’s curriculum, of a duration of five or more consecutive days of which more than 50% of the daily activities include a significant amount of physical activity;

(c) a program, that is not part of a school’s curriculum, of a duration of eight or more consecutive weeks, offered to children by a club, association or similar organization (in this section referred to as an “organization”) in circumstances where a participant in the program may select amongst a variety of activities if

(i) more than 50% of those activities offered to children by the organization are activities that include a significant amount of physical activity, or

(ii) more than 50% of the time scheduled for activities offered to children in the program is scheduled for activities that include a significant amount of physical activity; or

(d) a membership in an organization, that is not part of a school’s curriculum, of a duration of eight or more consecutive weeks if more than 50% of all the activities offered to children by the organization include a significant amount of physical activity.

(3) For the purpose of the definition “eligible fitness expense” in subsection 118.03(1) of the Act, a prescribed program of physical activity is that portion of a program, which program does not meet the requirements of paragraph (2)(c) and is not part of a school’s curriculum, of a duration of eight or more consecutive weeks, offered to children by an organization in circumstances where a participant in the program may select amongst a variety of activities

(a) that is the percentage of those activities offered to children by the organization that are activities that include a significant amount of physical activity; or

(b) that is the percentage of the time scheduled for activities in the program that is scheduled for activities that include a significant amount of physical activity.

(4) For the purpose of the definition “eligible fitness expense” in subsection 118.03(1) of the Act, a prescribed program of physical activity is that portion of a membership in an organization, which membership does not meet the requirements of paragraph (2)(d) and is not part of a school’s curriculum, of a duration of eight or more consecutive weeks that is the percentage of all the activities offered to children by the organization that are activities that include a significant amount of physical activity.

(5) For the purpose of the definition “physical activity” in subsection (1), horseback riding is deemed to be an activity that contributes to cardio-respiratory endurance and to one or more of muscular strength, muscular endurance, flexibility and balance.

(2) Subsection (1) applies after 2006.

89. (1) The Regulations are amended by replacing “stock exchange referred to in section 3200” with “designated stock exchange in Canada” in the following provisions:

(a) subparagraph 4900(1)(i)(i);

(b) the portion of subparagraph 4900(1)(i)(ii) after clause (C);

(c) the portion of 6201(1) before paragraph (a);

(d) the portion of subsection 6201(2) before paragraph (a); and

(e) the portion of subsection 6201(4) before paragraph (a).

(2) Subsection (1) comes into force on the day on which this Act is assented to.

Canada Pension Plan Regulations

90. (1) Paragraphs 8(1.12)(a) and (b) of the Canada Pension Plan Regulations are replaced by the following:

(a) the average monthly withholding amount in respect of an employer for either the first or the second calendar year before the particular calendar year that includes that time is less than $3,000;

(b) throughout the 12-month period before that time, the employer has remitted, on or before the day on or before which the amounts were required to be remitted, all amounts each of which was required to be remitted under subsection 21(1) of the Act, under subsection 82(1) of the Employment Insurance Act, under Part IX of the Excise Tax Act or under subsection 153(1) of the Income Tax Act; and

(2) Subsection (1) applies in respect of amounts required to be deducted or withheld after 2007.

Insurable Earnings and Collection of Premiums Regulations

91. (1) Paragraphs 4(3.1)(a) and (b) of the Insurable Earnings and Collection of Premiums Regulations are replaced by the following:

(a) the average monthly withholding amount in respect of an employer for either the first or the second calendar year before the particular calendar year that includes that time is less than $3,000;

(b) throughout the 12-month period before that time, the employer has remitted, on or before the day on or before which the amounts were required to be remitted, all amounts each of which was required to be remitted under subsection 82(1) of the Act, under subsection 21(1) of the Canada Pension Plan, under Part IX of the Excise Tax Act, or under subsection 153(1) of the Income Tax Act; and

(2) Subsection (1) applies in respect of amounts required to be deducted or withheld after 2007.

Coordinating Amendments

92. Sections 93 to 100 apply if Bill C-10, introduced in the 2nd session of the 39th Parliament and entitled the Income Tax Amendments Act, 2006 (referred to in those sections as the “other Act”), receives royal assent.

93. (1) If this Act receives royal assent before the other Act receives royal assent, section 4 of the other Act is repealed.

(2) The definition “controlled foreign affiliate” in subsection 17(15) of the Income Tax Act, as enacted by subsection 10(3) of this Act, is replaced by the following:

“controlled foreign affiliate”, at any time, of a taxpayer resident in Canada, means a corporation that would, at that time, be a controlled foreign affiliate of the taxpayer within the meaning assigned by the definition “controlled foreign affiliate” in subsection 95(1) if the word “or” were added at the end of paragraph (a) of that definition and

(a) subparagraph (b)(ii) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with the taxpayer,”;

(b) subparagraph (b)(iv) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with any relevant Canadian shareholder;”; and

(c) that definition were read without reference to its paragraph (c).

(3) Subsection (2) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after February 23, 1998, except that, in applying the definition “controlled foreign affiliate” in subsection 17(15) of the Income Tax Act, as enacted by subsection (2),

(a) for taxation years, of a foreign affiliate of a taxpayer, that begin after 2002 and on or before February 27, 2004, that definition is to be read as follows:

“controlled foreign affiliate” has the meaning that would be assigned by the definition “controlled foreign affiliate” in subsection 95(1) for taxation years, of a foreign affiliate of a taxpayer, that begin after 2002 and on or before February 27, 2004, if the word “or” were added at the end of paragraph (a) of that definition and

(a) subparagraph (b)(ii) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with the taxpayer,”;

(b) subparagraph (b)(iv) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with any relevant Canadian shareholder;”; and

(c) that definition were read without reference to its paragraph (c).

(b) for taxation years, of a foreign affiliate of a taxpayer, that begin after February 23, 1998 and before 2003, that definition is to be read as follows:

“controlled foreign affiliate” has the meaning that would be assigned by the definition “controlled foreign affiliate” in subsection 95(1) for taxation years, of a foreign affiliate of a taxpayer, that begin after February 23, 1998 and before 2003, if subparagraph (b)(iii) of that definition were read as “each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any person resident in Canada with whom the taxpayer does not deal at arm’s length.”.

94. (1) If this Act receives royal assent before the other Act receives royal assent, subsection 19(2) of the other Act is repealed.

(2) The definition “controlled foreign affiliate” in subsection 95(1) of the Income Tax Act, as enacted by subsection 26(1) of this Act, is replaced by the following:

“controlled foreign affiliate”, at any time, of a taxpayer resident in Canada, means

(a) a foreign affiliate of the taxpayer that is, at that time, controlled by the taxpayer,

(b) a foreign affiliate of the taxpayer that would, at that time, be controlled by the taxpayer if the taxpayer owned

(i) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the taxpayer,

(ii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with the taxpayer,

(iii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the persons (each of whom is referred to in this definition as a “relevant Canadian shareholder”), in any set of persons not exceeding four (which set of persons shall be determined without ref-erence to the existence of or the absence of any relationship, connection or action in concert between those persons), who

(A) are resident in Canada,

(B) are not the taxpayer or a person described in subparagraph (ii), and

(C) own, at that time, shares of the capital stock of the foreign affiliate, and

(iv) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with any relevant Canadian shareholder, or

(c) a foreign affiliate of the taxpayer that is, at that time, a controlled foreign affiliate of the taxpayer because of paragraph 94.1(2)(h);

(3) Subsection (2) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after 1995, except that

(a) for taxation years, of a foreign affiliate of a taxpayer, that begin after 2002 and on or before February 27, 2004, the definition “controlled foreign affiliate” in subsection 95(1) of the Income Tax Act, as enacted by subsection (2), is to be read as follows:

“controlled foreign affiliate”, at any time, of a taxpayer resident in Canada, means

(a) a foreign affiliate of the taxpayer that is, at that time, controlled

(i) by the taxpayer,

(ii) by the taxpayer and not more than four other persons resident in Canada, or

(iii) by not more than four persons resident in Canada, other than the taxpayer,

(b) a foreign affiliate of the taxpayer that would, at that time, be controlled by the taxpayer if the taxpayer owned

(i) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the taxpayer,

(ii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with the taxpayer,

(iii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the persons (each of whom is referred to in this definition as a “relevant Canadian shareholder”), in any set of persons not exceeding four (which set of persons shall be determined without ref-erence to the existence of or the absence of any relationship, connection or action in concert between those persons), who

(A) are resident in Canada,

(B) are not the taxpayer or a person described in subparagraph (ii), and

(C) own, at that time, shares of the capital stock of the foreign affiliate, and

(iv) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with any relevant Canadian shareholder, or

(c) a foreign affiliate of the taxpayer that is, at that time, a controlled foreign affiliate of the taxpayer because of paragraph 94.1(2)(h);

(b) for taxation years, of a foreign affiliate of a taxpayer, that begin after 1995 and before 2003, the definition “controlled foreign affiliate” in subsection 95(1) of the Income Tax Act, as enacted by subsection (2), is to be read as follows:

“controlled foreign affiliate”, at any time of a taxpayer resident in Canada, means a foreign affiliate of the taxpayer that

(a) is, at that time, controlled

(i) by the taxpayer,

(ii) by the taxpayer and not more than four other persons resident in Canada, or

(iii) by not more than four persons resident in Canada, other than the taxpayer, or

(b) would, at that time, be controlled by the taxpayer if the taxpayer owned

(i) each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any of not more than four other persons resident in Canada,

(ii) each share of the capital stock of a corporation that is owned at that time by any of not more than four persons resident in Canada (other than the taxpayer), and

(iii) each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any person with whom the taxpayer does not deal at arm’s length.

95. (1) Paragraph 95(2)(g.02) of the Act, as enacted by subsection 26(13) of this Act, is replaced by the following:

(g.02) in applying subsection 39(2) for the purpose of this subdivision (other than sections 94 to 94.4), the gains and losses of a foreign affiliate of a taxpayer in respect of excluded property are to be computed in respect of the taxpayer separately from the gains and losses of the foreign affiliate in respect of property that is not excluded property;

(2) Subsection (1) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after 2002.

96. Paragraph 110.1(1)(a.1) of the Act, as enacted by subsection 30(1) of this Act, is replaced by the following:

(a.1) the total of all amounts each of which is an amount, in respect of property that is the subject of an eligible medical gift made by the corporation in the taxation year or in any of the 5 preceding taxation years, determined by the formula

A × B/C

where

A      is the lesser of

(a) the cost to the corporation of the property, and

(b) 50 per cent of the amount, if any, by which the corporation’s proceeds of disposition of the property in respect of the gift exceeds the cost to the corporation of the property;

B      is the eligible amount of the gift; and

C      is the corporation’s proceeds of disposition of the property in respect of the gift.

97. (1) Subsections 179(1) to (3), (10), (16) to (19), (24) and (27) of the other Act and subsections 59(2), (3), (6) and (8) of this Act apply as though the other Act had received royal assent before this Act received royal assent.

(2) Subsection 268(1) of the other Act is repealed.

(3) If subsection 194(8) of the other Act comes into force, then, on the day on which this Act is assented to, the portion of paragraph (d) of the definition “fully exempt interest” in subsection 212(3) of the Income Tax Act before subparagraph (i), as enacted by subsection 59(3) of this Act, is replaced by the following:

(d) an amount paid or payable or credited under a securities lending arrangement that is deemed by subparagraph 260(8)(c)(i) to be a payment made by a borrower to a lender of interest, if

98. (1) If the other Act receives royal assent before this Act receives royal assent, section 63 and subsection 64(1) of this Act are repealed.

(2) On the later of the day on which the other Act receives royal assent and the day on which this Act receives royal assent, paragraph (b) of the definition “listed international agreement” in subsection 248(1) of the Income Tax Act, as enacted by subsection 187(11) of the other Act, is replaced by the following:

(b) a comprehensive tax information exchange agreement between Canada and another country or jurisdiction;

99. (1) The definition “qualified trust unit” in subsection 260(1) of the Act, as enacted by subsection 194(5) of the other Act, is replaced by the following:

“qualified trust unit” means a unit of a mutual fund trust that is listed on a stock exchange;

(2) If the other Act receives royal assent before subsection 66(2) of this Act comes into force, that subsection 66(2) is repealed and the words “Subsections (2) and (3) apply” in subsection 66(5) of this Act are replaced by “Subsection (3) applies”.

(3) Subparagraph 260(8)(c)(ii) of the Income Tax Act, as enacted by subsection 194(8) of the other Act, is replaced by the following:

(ii) is, to the extent of the amount of the interest, if any, paid in respect of the security, deemed, if the security is described in paragraph (c) of the definition “qualified security” in subsection (1), to have been payable on a security described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3); and

(4) On the first day on which both subsection 260(10) of the Income Tax Act, as enacted by subsection 194(9) of the other Act, and subsection 260(10) of the Income Tax Act, as enacted by subsection 66(3) of this Act, are in force, subsection 260(10) of the Income Tax Act, as enacted by subsection 66(3) of this Act, is renumbered as subsection 260(9.1) and is repositioned accordingly if required.

100. (1) If the other Act receives royal assent before this Act receives royal assent, paragraph 68(2)(d) of this Act is repealed.

(2) Sections 17, 18, 69 and 87 of the other Act and section 68 of this Act apply as though the other Act had received royal assent before this Act received royal assent, and, on the day on which this Act is assented to, the references to “prescribed stock exchange” in the following provisions of the Income Tax Act, as enacted by those sections of the other Act, are replaced by references to “designated stock exchange”:

(a) paragraphs (b) and (c) of the definition “qualified person” in subsection 55(1), and subsection 55(6);

(b) the definitions “arm’s length transfer” and “excluded property” in subsection 94(1);

(c) the definitions “arm’s length interest” and “exempt interest” in subsection 94.1(1); and

(d) the definitions “readily obtainable fair market value” and “trading day” in subsection 94.2(1), and paragraph 94.2(2)(b).

PART 4

DISABILITY SAVINGS

Amendments Relating to Income Tax

Income Tax Act

101. Paragraph 4(3)(a) of the Income Tax Act is replaced by the following:

(a) subject to paragraph (b), all deductions permitted in computing a taxpayer’s income for a taxation year for the purposes of this Part, except any deduction permitted by any of paragraphs 60(b) to (o), (p), (r) and (v) to (z), shall apply either wholly or in part to a particular source or to sources in a particular place; and

102. Subsection 18(11) of the Act is amended by striking out the word “or” at the end of paragraph (g), by adding the word “or” at the end of paragraph (h) and by adding the following after paragraph (h):

(i) making a contribution to a registered disability savings plan,

103. Clause 40(2)(g)(iv)(A) of the Act is replaced by the following:

(A) a trust governed by a deferred profit sharing plan, an employees profit sharing plan, a registered disability savings plan or a registered retirement income fund under which the taxpayer is a beneficiary or immediately after the disposition becomes a beneficiary, or

104. Subsection 56(1) of the Act is amended by adding the following after paragraph (q):

(q.1) amounts in respect of a registered disability savings plan required by section 146.4 to be included in computing the taxpayer’s income for the year;

105. Section 60 of the Act is amended by striking out the word “and’’ at the end of paragraph (x), by adding the word “and” at the end of paragraph (y) and by adding the following after paragraph (y):

(z) the total of all amounts each of which is an amount paid in the taxation year as a repayment, under the Canada Disability Savings Act, of an amount that was included because of section 146.4 in computing the taxpayer’s income for the taxation year or a preceding taxation year.

106. Subsection 74.5(12) of the Act is amended by striking out the word “or” at the end of paragraph (a.1) and by adding the following after that paragraph:

(a.2) as a payment of a contribution under a registered disability savings plan; or

107. Paragraph 75(3)(a) of the Act is replaced by the following:

(a) by a trust governed by a deferred profit sharing plan, an employee benefit plan, an employees profit sharing plan, a registered disability savings plan, a registered education savings plan, a registered pension plan, a registered retirement income fund, a registered retirement savings plan, a registered supplementary unemployment benefit plan or a retirement compensation arrangement;

108. The portion of subsection 87(10) of the Act after paragraph (f) is replaced by the following:

the new share is deemed, for the purposes of subsection 116(6), the definitions “qualified investment” in subsections 146(1), 146.1(1), 146.3(1), in section 204 and in subsection 205(1), and the definition “taxable Canadian property” in subsection 248(1), to be listed on the exchange until the earliest time at which it is so redeemed, acquired or cancelled.

109. Paragraph 107.4(1)(j) of the Act is replaced by the following:

(j) if the contributor is an amateur athlete trust, a cemetery care trust, an employee trust, an inter vivos trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, a related segregated fund trust (as defined by section 138.1), a trust described in paragraph 149(1)(o.4) or a trust governed by an eligible funeral arrangement, an employees profit sharing plan, a registered disability savings plan, a registered education savings plan or a registered supplementary unemployment benefit plan, the particular trust is the same type of trust.

110. Paragraph (a) of the definition “trust” in subsection 108(1) of the Act is replaced by the following:

(a) an amateur athlete trust, an employee trust, a trust described in paragraph 149(1)(o.4) or a trust governed by a deferred profit sharing plan, an employee benefit plan, an employees profit sharing plan, a foreign retirement arrangement, a registered disability savings plan, a registered education savings plan, a registered pension plan, a registered retirement income fund, a registered retirement savings plan or a registered supplementary unemployment benefit plan,

111. The definition “adjusted income” in subsection 122.5(1) of the Act is replaced by the following:

“adjusted income”, of an individual for a taxation year in relation to a month specified for the taxation year, means the total of the individual’s income for the taxation year and the income for the taxation year of the individual’s qualified relation, if any, in relation to the specified month, both calculated as if no amount were included under paragraph 56(1)(q.1) or subsection 56(6) or in respect of any gain from a disposition of property to which section 79 applies in computing that income and as if no amount were deductible under paragraph 60(y) or (z) in computing that income.

112. The definition “adjusted income” in section 122.6 of the Act is replaced by the following:

“adjusted income”, of an 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 of the person who was the individual’s cohabiting spouse or common-law partner at the end of the year if no amount were included under paragraph 56(1)(q.1) or subsection 56(6) or in respect of any gain from a disposition of property to which section 79 applies in computing that income and if no amount were deductible under paragraph 60(y) or (z) in computing that income;

113. Paragraph (a) of the definition “excluded right or interest” in subsection 128.1(10) of the Act is amended by adding the following after subparagraph (iii):

(iii.1) a registered disability savings plan,

114. Paragraph 132.2(1)(k) of the Act is replaced by the following:

(k) where a share to which paragraph (j) applies would, but for this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3, section 204 or subsection 205(1) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the transfer time and the time at which it is disposed of in accordance with paragraph (j);

115. The Act is amended by adding the following after section 146.3:

Registered Disability Savings Plan

146.4 (1) The following definitions apply in this section.

“assistance holdback amount”, in relation to a disability savings plan, has the meaning assigned under the Canada Disability Savings Act.

“contribution” to a disability savings plan does not include (other than for the purpose of paragraph (b) of the definition “disability savings plan”) an amount paid into the plan under the Canada Disability Savings Act or a prescribed payment.

“disability assistance payment”, in relation to a disability savings plan of a beneficiary, means any payment made from the plan to the beneficiary or to the beneficiary’s estate.

“disability savings plan” of a beneficiary means an arrangement

(a) between

(i) a corporation (in this section referred to as the “issuer”)

(A) that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, and

(B) with which the specified Minister has entered into an agreement that applies to the arrangement for the purposes of the Canada Disability Savings Act, and

(ii) one or more of the following:

(A) the beneficiary,

(B) an entity that, at the time the arrangement is entered into, is a qualifying person in relation to the beneficiary, and

(C) a legal parent of the beneficiary who, at the time the arrangement is entered into, is not a qualifying person in relation to the beneficiary but is a holder of another arrangement that is a registered disability savings plan of the beneficiary;

(b) under which one or more contributions are to be made in trust to the issuer to be invested, used or otherwise applied by the issuer for the purpose of making payments from the arrangement to the beneficiary; and

(c) that is entered into in a taxation year in respect of which the beneficiary is a DTC-eligible individual.

“DTC-eligible individual”, in respect of a taxation year, means an individual in respect of whom an amount is deductible, or would if this Act were read without reference to paragraph 118.3(1)(c) be deductible, under section 118.3 in computing a taxpayer’s tax payable under this Part for the taxation year.

“holder” of a disability savings plan at any time means each of the following:

(a) an entity that has, at that time, rights as an entity with whom the issuer entered into the plan;

(b) an entity that has, at that time, rights as a successor or assignee of an entity described in paragraph (a) or in this paragraph; and

(c) the beneficiary if, at that time, the beneficiary is not an entity described in paragraph (a) or (b) and has rights under the plan to make decisions (either alone or with other holders of the plan) concerning the plan, except where the only such right is a right to direct that disability assistance payments be made as provided for in subparagraph (4)(n)(iii)).

“lifetime disability assistance payments” under a disability savings plan of a beneficiary means disability assistance payments that are identified under the terms of the plan as lifetime disability assistance payments and that, after they begin to be paid, are payable at least annually until the earlier of the day on which the beneficiary dies and the day on which the plan is terminated.

“plan trust”, in relation to a disability savings plan, means the trust governed by the plan.

“qualifying person”, in relation to a beneficiary of a disability savings plan, at any time, means

(a) if the beneficiary has not, at or before that time, attained the age of majority, an entity that is, at that time,

(i) a legal parent of the beneficiary,

(ii) a guardian, tutor, curator or other individual who is legally authorized to act on behalf of the beneficiary, or

(iii) a public department, agency or institution that is legally authorized to act on behalf of the beneficiary, and

(b) if the beneficiary has, at or before that time, attained the age of majority and is not, at that time, contractually competent to enter into a disability savings plan, an entity that is, at that time, an entity described in subparagraph (a)(ii) or (iii).

“registered disability savings plan” means a disability savings plan that satisfies the conditions in subsection (2), but does not include a plan to which subsection (3) or (10) applies.

“specified Minister” means the minister designated under section 4 of the Canada Disability Savings Act.

“specified year” for a disability savings plan of a beneficiary means the particular calendar year in which a medical doctor licensed to practice under the laws of a province (or of the place where the beneficiary resides) certifies in writing that the beneficiary’s state of health is such that, in the professional opinion of the medical doctor, the beneficiary is not likely to survive more than five years, and each of the five calendar years following the particular calendar year, but does not include any calendar year prior to the calendar year in which the certification is provided to the issuer of the plan.

(2) The conditions that must be satisfied for a disability savings plan of a beneficiary to be a registered disability savings plan are as follows:

(a) before the plan is entered into, the issuer of the plan has received written notification from the Minister that, in the Minister’s opinion, a plan whose terms are identical to the plan would, if entered into by entities eligible to enter into a disability savings plan, comply with the conditions in subsection (4);

(b) at or before the time the plan is entered into, the issuer of the plan has been provided with the Social Insurance Number of the beneficiary and the Social Insurance Number or business number, as the case may be, of each entity with which the issuer has entered into the plan; and

(c) at the time the plan is entered into, the beneficiary is resident in Canada, except that this condition does not apply if, at that time, the beneficiary is the beneficiary under another registered disability savings plan.

(3) A disability savings plan is deemed never to have been a registered disability savings plan if

(a) the issuer of the plan has not, on or before the day that is 60 days after the particular day on which the plan was entered into, provided notification of the plan’s existence in prescribed form containing prescribed information to the specified Minister; or

(b) the beneficiary was, on the particular day, the beneficiary under another registered disability savings plan and that other plan has not been terminated on or before the day that is 120 days after the particular day or any later day that the specified Minister considers reasonable in the circumstances.

(4) The conditions referred to in paragraph (2)(a) are as follows:

(a) the plan stipulates

(i) that it is to be operated exclusively for the benefit of the beneficiary under the plan,

(ii) that the designation of the beneficiary under the plan is irrevocable, and

(iii) that no right of the beneficiary to receive payments from the plan is capable, either in whole or in part, of surrender or assignment;

(b) the plan allows an entity to acquire rights as a successor or assignee of a holder of the plan only if the entity is

(i) the beneficiary,

(ii) the beneficiary’s estate,

(iii) a holder of the plan at the time the rights are acquired,

(iv) a qualifying person in relation to the beneficiary at the time the rights are acquired, or

(v) an individual who is a legal parent of the beneficiary and was previously a holder of the plan;

(c) the plan provides that, where an entity (other than a legal parent of the beneficiary) that is a holder of the plan ceases to be a qualifying person in relation to the beneficiary at any time, the entity ceases at that time to be a holder of the plan;

(d) the plan provides for there to be at least one holder of the plan at all times that the plan is in existence and may provide for the beneficiary (or the beneficiary’s estate, as the case may be) to automatically acquire rights as a successor or assignee of a holder in order to ensure compliance with this requirement;

(e) the plan provides that, where an entity becomes a holder of the plan after the plan is entered into, the entity is prohibited (except to the extent otherwise permitted by the Minister or the specified Minister) from exercising their rights as a holder of the plan until the issuer has been advised of the entity having become a holder of the plan and been provided with the entity’s Social Insurance Number or business number, as the case may be;

(f) the plan prohibits contributions from being made to the plan at any time if

(i) the beneficiary is not a DTC-eligible individual in respect of the taxation year that includes that time, or

(ii) the beneficiary died before that time;

(g) the plan prohibits a contribution from being made to the plan (other than as a transfer in accordance with subsection (8)) at any time if

(i) the beneficiary attained the age of 59 years before the calendar year that includes that time,

(ii) the beneficiary is not resident in Canada at that time, or

(iii) the total of the contribution and all other contributions made (other than as a transfer in accordance with subsection (8)) at or before that time to the plan or to any other registered disability savings plan of the beneficiary would exceed $200,000;

(h) the plan prohibits contributions to the plan by any entity that is not a holder of the plan, except with the written consent of a holder of the plan;

(i) the plan provides that no payments may be made from the plan other than

(i) disability assistance payments,

(ii) a transfer in accordance with subsection (8), and

(iii) repayments under the Canada Disability Savings Act;

(j) the plan prohibits a disability assistance payment from being made if it would result in the fair market value of the property held by the plan trust immediately after the payment being less than the assistance holdback amount in relation to the plan;

(k) the plan provides for lifetime disability assistance payments to begin to be paid no later than the end of the particular calendar year in which the beneficiary attains the age of 60 years or, if the plan is established in or after the particular year, in the calendar year following the calendar year in which the plan is established;

(l) the plan provides that the total amount of lifetime disability assistance payments made in any calendar year (other than a specified year for the plan) shall not exceed the amount determined by the formula

A/(B + 3 - C) + D

where

A      is the fair market value of the property held by the plan trust at the beginning of the calendar year (other than annuity contracts held by the plan trust that, at the beginning of the calendar year, are not described in paragraph (b) of the definition “qualified investment” in subsection 205(1)),

B      is the greater of 80 and the age in whole years of the beneficiary at the beginning of the calendar year,

C      is the age in whole years of the beneficiary at the beginning of the calendar year, and

D      is the total of all amounts each of which is

(i) a periodic payment under an annuity contract held by the plan trust at the beginning of the calendar year (other than an annuity contract described at the beginning of the calendar year in paragraph (b) of the definition “qualified investment” in subsection 205(1)) that is paid to the plan trust in the calendar year, or

(ii) if the periodic payment under such an annuity contract is not made to the plan trust because the plan trust disposed of the right to that payment in the calendar year, a reasonable estimate of that payment on the assumption that the annuity contract had been held throughout the calendar year and no rights under the contract were disposed of in the calendar year;

(m) the plan stipulates whether or not disability assistance payments that are not lifetime disability assistance payments are to be permitted under the plan;

(n) the plan provides that when the total of all amounts paid under the Canada Disability Savings Act before the beginning of a calendar year to any registered disability savings plan of the beneficiary exceeds the total of all contributions made (other than as a transfer in accordance with subsection (8)) before the beginning of the calendar year to any registered disability savings plan of the beneficiary,

(i) if the calendar year is not a specified year for the plan, the total amount of disability assistance payments made from the plan to the beneficiary in the calendar year shall not exceed the amount determined by the formula set out in paragraph (l) in respect of the plan for the calendar year, except that, in calculating that total amount, any payment made following a transfer in the calendar year from another plan in accordance with subsection (8) is to be disregarded if it is made

(A) to satisfy an undertaking described in paragraph (8)(d), or

(B) in lieu of a payment that would otherwise have been permitted to be made from the other plan in the calendar year had the transfer not occurred,

(ii) if the beneficiary attained the age of 59 years before the calendar year, the total amount of disability assistance payments made from the plan to the beneficiary in the calendar year shall not be less than the amount determined by the formula set out in paragraph (l) in respect of the plan for the calendar year (or such lesser amount as is supported by the property of the plan trust), and

(iii) if the beneficiary attained the age of 27 years, but not the age of 59 years, before the calendar year, the beneficiary has the right to direct that, within the constraints imposed by subparagraph (i) and paragraph (j), one or more disability assistance payments be made from the plan to the beneficiary in the calendar year;

(o) the plan provides that, at the direction of the holders of the plan, the issuer shall transfer all of the property held by the plan trust (or an amount equal to its value) to another registered disability savings plan of the beneficiary, together with all information in its possession that may reasonably be considered necessary for compliance, in respect of the other plan, with the requirements of this Act and with any conditions and obligations imposed under the Canada Disability Savings Act; and

(p) the plan provides for any amounts remaining in the plan (after taking into consideration any repayments under the Canada Disability Savings Act) to be paid to the beneficiary or the beneficiary’s estate, as the case may be, and for the plan to be terminated, by the end of the calendar year following the earlier of

(i) the calendar year in which the beneficiary dies, and

(ii) the taxation year in respect of which the beneficiary ceases to be a DTC-eligible individual.

(5) No tax is payable under this Part by a trust on the taxable income of the trust for a taxation year if, throughout the period in the year during which the trust was in existence, the trust was governed by a registered disability savings plan, except that

(a) tax is payable under this Part by the trust on its taxable income for the year if the trust has borrowed money

(i) in the year, or

(ii) in a preceding taxation year and has not repaid it before the beginning of the year; and

(b) if the trust is not otherwise taxable under paragraph (a) on its taxable income for the year and, at any time in the year, it carries on one or more businesses or holds one or more properties that are not qualified investments (as defined in subsection 205(1)) for the trust, tax is payable under this Part by the trust on the amount that its taxable income for the year would be if it had no incomes or losses from sources other than those businesses and properties, and no capital gains or losses other than from dispositions of those properties, and for this purpose,

(i) “income” includes dividends described in section 83, and

(ii) paragraphs 38(a) and (b) are to be read as if the fraction set out in each of those paragraphs were replaced by the word “all”.

(6) Where a disability assistance payment is made from a registered disability savings plan of a beneficiary, the amount, if any, by which the amount of the payment exceeds the non-taxable portion of the payment shall be included,

(a) if the beneficiary is alive at the time the payment is made, in computing the beneficiary’s income for the beneficiary’s taxation year in which the payment is made; and

(b) in any other case, in computing the income of the beneficiary’s estate for the estate’s taxation year in which the payment is made.

(7) The non-taxable portion of a disability assistance payment made at a particular time from a registered disability savings plan of a beneficiary is the lesser of the amount of the disability assistance payment and the amount determined by the formula

A × B/C

where

A      is the amount of the disability assistance payment;

B      is the amount, if any, by which

(a) the total of all amounts each of which is the amount of a contribution made before the particular time to any registered disability savings plan of the beneficiary (other than as a transfer in accordance with subsection (8))

exceeds

(b) the total of all amounts each of which is the non-taxable portion of a disability assistance payment made before the particular time from any registered disability savings plan of the beneficiary; and

C      is the amount by which the fair market value of the property held by the plan trust immediately before the payment exceeds the assistance holdback amount in relation to the plan.

(8) An amount is transferred from a registered disability savings plan (in this subsection referred to as the “prior plan”) of a beneficiary in accordance with this subsection if

(a) the amount is transferred directly to another registered disability savings plan (in this subsection referred to as the “new plan”) of the beneficiary;

(b) the prior plan is terminated immediately after the transfer;

(c) the issuer of the prior plan provides the issuer of the new plan with all information in its possession concerning the prior plan as may reasonably be considered necessary for compliance, in respect of the new plan, with the requirements of this Act and with any conditions and obligations imposed under the Canada Disability Savings Act; and

(d) where the beneficiary attained the age of 59 years before the calendar year in which the transfer occurs, the issuer of the new plan undertakes to make (in addition to any other disability assistance payments that would otherwise have been made from the new plan in the year) one or more disability assistance payments from the plan in the year, the total of which is equal to the amount, if any, by which

(i) the total amount of disability assistance payments that would have been required to be made from the prior plan in the year if the transfer had not occurred

exceeds

(ii) the total amount of disability assist-ance payments made from the prior plan in the year.

(9) An amount transferred in accordance with subsection (8) is not, solely because of that transfer, to be included in computing the income of any taxpayer.

(10) Where, at any particular time, a registered disability savings plan is non-compliant as described in subsection (11),

(a) the plan ceases, as of the particular time, to be a registered disability savings plan (other than for the purposes of applying, as of the particular time, this subsection and subsection (11));

(b) a disability assistance payment is deemed to have been made from the plan at the time (in this subsection referred to as the “relevant time”) immediately before the particular time to the beneficiary under the plan (or, if the beneficiary is deceased at the relevant time, to the beneficiary’s estate), the amount of which payment is equal to the amount, if any, by which

(i) the fair market value of the property held by the plan trust at the relevant time

exceeds

(ii) the assistance holdback amount in relation to the plan; and

(c) if the plan is non-compliant because of a payment that is not in accordance with paragraph (4)(j), a disability assistance payment is deemed to have been made from the plan at the relevant time (in addition to the payment deemed by paragraph (b) to have been made) to the beneficiary under the plan (or, if the beneficiary is deceased at the relevant time, to the beneficiary’s estate)

(i) the amount of which payment is equal to the amount by which the lesser of

(A) the assistance holdback amount in relation to the plan, and

(B) the fair market value of the property held by the plan trust at the relevant time

exceeds

(C) the fair market value of the property held by the plan trust immediately after the particular time, and

(ii) the non-taxable portion of which is deemed to be nil.

(11) A registered disability savings plan is non-compliant

(a) at any time that the plan fails to comply with a condition in subsection (4);

(b) at any time that there is a failure to administer the plan in accordance with its terms (other than those terms which the plan is required by subparagraph (4)(a)(i) to stipulate); and

(c) at any time that a person fails to comply with a condition or an obligation imposed, with respect to the plan, under the Canada Disability Savings Act, and the specified Minister has notified the Minister that, in the specified Minister’s opinion, it is appropriate that the plan be considered to be non-compliant because of the failure.

(12) Where a registered disability savings plan would otherwise be non-compliant at a particular time because of a failure described in paragraph (11)(a) or (b),

(a) the Minister may waive the application of the relevant paragraph with respect to the failure, if it is just and equitable to do so;

(b) the Minister may deem the failure to have occurred at a later time;

(c) if the failure consists of the making of a contribution that is prohibited under any of paragraphs (4)(f) to (h), an amount equal to the amount of the contribution has been withdrawn from the plan within such period as is specified by the Minister and the Minister has approved the application of this paragraph with respect to the failure,

(i) the contribution is deemed never to have been made, and

(ii) the withdrawal is deemed not to be a disability assistance payment and not to be in contravention of the condition in paragraph (4)(i); or

(d) if the failure consists of the plan not being terminated as required under paragraph (4)(p) and was due either to the issuer not being aware of the beneficiary having died or having ceased to be a DTC-eligible individual or to some uncertainty as to the beneficiary having ceased to be a DTC-eligible individ-ual, the Minister may specify a later date by which it is reasonable to assume that the plan can be terminated in an orderly manner and, for the purposes of paragraphs (11)(a) and (b), paragraph (4)(p) and the plan terms are to be read as though they required the plan to be terminated by that date.

(13) The issuer of a registered disability savings plan shall,

(a) where an entity becomes a holder of the plan after the plan is entered into, so notify the specified Minister in prescribed form containing prescribed information on or before the day that is 60 days after the later of

(i) the day on which the issuer is advised of the entity having become a holder of the plan, and

(ii) the day on which the issuer is provided with the new holder’s Social Insurance Number or business number, as the case may be;

(b) not amend the plan before having received notification from the Minister that, in the Minister’s opinion, a plan whose terms are identical to the amended plan would, if entered into by entities eligible to enter into a disability savings plan, comply with the conditions in subsection (4);

(c) where the issuer becomes aware that the plan is, or is likely to become, non-compliant (determined without reference to paragraph (11)(c) and subsection (12)), notify the Minister and the specified Minister of this fact on or before the day that is 30 days after the day on which the issuer becomes so aware; and

(d) exercise the care, diligence and skill of a reasonably prudent person to minimize the possibility that a holder of the plan may become liable to pay tax under Part XI in connection with the plan.

116. Subsection 149(1) of the Act is amended by adding the following after paragraph (u):

(u.1) a trust governed by a registered disability savings plan to the extent provided by section 146.4;

117. Subsection 153(1) of the Act is amended by adding the following after paragraph (h):

(i) a payment from a registered disability savings plan,

118. The Act is amended by adding the following after section 160.2:

160.21 (1) Where, in computing income for a taxation year, a taxpayer is required to include an amount in respect of a disability assistance payment (as defined in subsection 146.4(1)) that is deemed by subsection 146.4(10) to have been made at any particular time from a registered disability savings plan, the taxpayer and each holder (as defined in subsection 146.4(1)) of the plan immediately after the particular time are jointly and severally, or solidarily, liable to pay the part of the taxpayer’s tax under this Part for that taxation year that is equal to the amount, if any, determined by the formula

A - B

where

A      is the amount of the taxpayer’s tax under this Part for that taxation year; and

B      is the amount that would be the taxpayer’s tax under this Part for that taxation year if no disability assistance payment were deemed by subsection 146.4(10) to have been paid from the plan at the particular time.

(2) Subsection (1) limits neither

(a) the liability of the taxpayer referred to in that subsection under any other provision of this Act, nor

(b) the liability of any holder referred to in that subsection for the interest that the holder is liable to pay under this Act on an assessment in respect of the amount that the holder is liable to pay because of that subsection.

(3) Where a holder (as defined in subsection 146.4(1)) of a registered disability savings plan has, because of subsection (1), become jointly and severally, or solidarily, liable with a taxpayer in respect of part or all of a liability of the taxpayer under this Act, the following rules apply:

(a) a payment by the holder on account of the holder’s liability shall to the extent of the payment discharge the holder’s liability, but

(b) a payment by the taxpayer on account of the taxpayer’s liability only discharges the holder’s liability to the extent that the payment operates to reduce the taxpayer’s liability to an amount less than the amount in respect of which the holder was, by subsection (1), made liable.

(4) The Minister may at any time assess a taxpayer in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part.

119. The definition “adjusted income” in subsection 180.2(1) of the Act is replaced by the following:

“adjusted income” of an individual for a taxation year means the amount that would be the individual’s income under Part I for the year if no amount were included under paragraph 56(1)(q.1) or subsection 56(6) or in respect of a gain from a disposition of property to which section 79 applies in computing that income and if no amount were deductible under paragraph 60(w), (y) or (z) in computing that income;

120. The Act is amended by adding the following after section 204.94:

PART XI