Bill C-47

59 ELIZABETH II

——————

CHAPTER 25

A second Act to implement certain provisions of the budget tabled in Parliament on March 4, 2010 and other measures

[Assented to 15th December, 2010]

Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

SHORT TITLE

1. This Act may be cited as the Sustaining Canada's Economic Recovery Act.

PART 1

AMENDMENTS TO THE INCOME TAX ACT AND RELATED ACTS AND REGULATIONS

Income Tax Act

2. (1) Subparagraph 6(1)(a)(i) of the Income Tax Act is replaced by the following:

(i) derived from the contributions of the taxpayer’s employer to or under a deferred profit sharing plan, an employee life and health trust, a group sickness or accident insurance plan, a group term life insurance policy, a private health services plan, a registered pension plan or a supplementary unemployment benefit plan,

(2) Paragraph 6(1)(f) of the Act is amended by striking out “or” at the end of subparagraph (ii), by adding “or” at the end of subparagraph (iii) and by adding the following after subparagraph (iii):

(iii.1) a plan described in any of subparagraphs (i) to (iii) that is administered or provided by an employee life and health trust,

(3) Paragraph 6(1)(g) of the Act is amended by striking out “or” at the end of subparagraph (ii), by adding “or” at the end of subparagraph (iii) and by adding the following after subparagraph (iii):

(iv) a designated employee benefit (as defined in subsection 144.1(1));

(4) Subsections (1) to (3) apply after 2009.

3. (1) The portion of subsection 7(1) of the Act before paragraph (a) is replaced by the following:

7. (1) Subject to subsection (1.1), where a particular qualifying person has agreed to sell or issue securities of the particular qualifying person (or of a qualifying person with which the particular qualifying person does not deal at arm’s length) to an employee of the particular qualifying person (or of a qualifying person with which the particular qualifying person does not deal at arm’s length),

(2) Subsection 7(1) of the Act is amended by adding the following after paragraph (b):

(b.1) if the employee has transferred or otherwise disposed of rights under the agreement in respect of some or all of the securities to the particular qualifying person (or a qualifying person with which the particular qualifying person does not deal at arm’s length) with whom the employee was not dealing at arm’s length, a benefit equal to the amount, if any, by which

(i) the value of the consideration for the disposition

exceeds

(ii) the amount, if any, paid by the employee to acquire those rights

is deemed to have been received, in the taxation year in which the employee made the disposition, by the employee because of the employee’s employment;

(3) Subsection 7(1) of the Act is amended by adding the following after paragraph (d):

(d.1) if rights of the employee under the agreement have, by one or more transactions between persons not dealing at arm’s length, become vested in a particular person who has transferred or otherwise disposed of rights under the agreement to a particular qualifying person (or a qualifying person with which the particular qualifying person does not deal at arm’s length) with whom the particular person was not dealing at arm’s length, a benefit equal to the amount, if any, by which

(i) the value of the consideration for the disposition

exceeds

(ii) the amount, if any, paid by the employee to acquire those rights

is deemed to have been received, in the taxation year in which the particular person made the disposition, by the employee because of the employee’s employment, unless at the time of the disposition the employee was deceased, in which case such a benefit is deemed to have been received by the particular person in that year as income from the duties of an employment performed by the particular person in that year in the country in which the employee primarily performed the duties of the employee’s employment; and

(4) Subsection 7(1.3) of the Act is replaced by the following:

(1.3) For the purposes of this subsection, subsection (1.1), subdivision c, paragraph 110(1)(d.01), subparagraph 110(1)(d.1)(ii) and subsections 110(2.1) and 147(10.4), and subject to subsection (1.31), a taxpayer is deemed to dispose of securities that are identical properties in the order in which the taxpayer acquired them and, for this purpose,

(a) if a taxpayer acquires a particular security (other than under circumstances to which subsection (1.1) or 147(10.1) applies) at a time when the taxpayer also acquires or holds one or more other securities that are identical to the particular security and are, or were, acquired under circumstances to which subsection (1.1) or 147(10.1) applied, the taxpayer is deemed to have acquired the particular security at the time immediately preceding the earliest of the times at which the taxpayer acquired those other securities; and

(b) if a taxpayer acquires, at the same time, two or more identical securities under circumstances to which subsection (1.1) applied, the taxpayer is deemed to have acquired the securities in the order in which the agreements under which the taxpayer acquired the rights to acquire the securities were made.

(5) Paragraph 7(1.5)(a) of the Act is replaced by the following:

(a) a taxpayer disposes of or exchanges securities of a particular qualifying person that were acquired by the taxpayer under circumstances to which subsection (1.1) applied (in this subsection referred to as the “exchanged securities”),

(6) Subsection 7(1.7) of the Act is replaced by the following:

(1.7) For the purposes of subsections (1) and 110(1), if a taxpayer receives at a particular time one or more particular amounts in respect of rights of the taxpayer to acquire securities under an agreement referred to in subsection (1) ceasing to be exercisable in accordance with the terms of the agreement, and the cessation would not, if this Act were read without reference to this subsection, constitute a transfer or disposition of those rights by the taxpayer,

(a) the taxpayer is deemed to have disposed of those rights at the particular time to a person with whom the taxpayer was dealing at arm’s length and to have received the particular amounts as consideration for the disposition; and

(b) for the purpose of determining the amount, if any, of the benefit that is deemed to have been received as a consequence of the disposition referred to in paragraph (a), the taxpayer is deemed to have paid an amount to acquire those rights equal to the amount, if any, by which

(i) the amount paid by the taxpayer to acquire those rights (determined without reference to this subsection)

exceeds

(ii) the total of all amounts each of which is an amount received by the taxpayer before the particular time in respect of the cessation.

(7) The portion of subsection 7(7) of the Act before the definition “qualifying person” is replaced by the following:

(7) The following definitions apply in this section and in subsection 47(3), paragraphs 53(1)(j) and 110(1)(d) and (d.01) and subsections 110(1.1), (1.2), (1.5), (1.6) and (2.1).

(8) Subsections 7(8) and (9) of the Act are repealed.

(9) Section 7 of the Act is amended by adding the following after subsection (9):

(9.1) If, in the course of a reorganization that gives rise to a dividend that would, in the absence of paragraph 55(3)(b), be subject to subsection 55(2), rights to acquire securities listed on a designated stock exchange (referred to in this subsection as “public options”) under an agreement to sell or issue securities referred to in subsection (1) are exchanged for rights to acquire securities that are not listed on a designated stock exchange (referred to in this subsection as “private options”), and the private options are subsequently exchanged for public options, the private options are deemed to be rights to acquire shares that are listed on a designated stock exchange for the purposes of subparagraph 7(9)(d)(ii).

(10) Subsection 7(9.1) of the Act, as enacted by subsection (9), and subsections (10) to (15) of the Act are repealed.

(11) Subsections (1), (4) to (8) and (10) apply in respect of rights exercised after 4:00 p.m. Eastern Standard Time, March 4, 2010.

(12) Subsections (2) and (3) apply to dispositions of rights occurring after 4:00 p.m. Eastern Standard Time, March 4, 2010.

(13) Subsection (9) applies after 1999 and before 4:00 p.m. Eastern Standard Time, March 4, 2010, except that, for the period before December 14, 2007, the reference in subsection 7(9.1) of the Act, as enacted by subsection (9), to “designated stock exchange” shall be read as a reference to “prescribed stock exchange”.

4. (1) Paragraph 12(1)(z.5) of the Act is replaced by the following:

(z.5) any amount required by subsection 146.2(9) or section 207.061 to be included in computing the taxpayer’s income for the year; and

(2) Subsection (1) applies after October 16, 2009.

5. (1) Subsection 18(1) of the Act is amended by adding the following after paragraph (l):

(m) an amount in respect of which an election was made by or on behalf of the taxpayer under subsection 110(1.1);

(2) Subsection 18(1) of the Act is amended by adding the following after paragraph (o.2):

(o.3) except as expressly permitted by paragraph 20(1)(s), contributions to an employee life and health trust;

(3) Paragraph 18(9)(a) of the Act is amended by striking out “or” at the end of subparagraph (ii), by adding “or” at the end of subparagraph (iii) and by adding the following after subparagraph (iii):

(iv) subject to clause (iii)(B) and subsections 144.1(4) to (7), as consideration for a “designated employee benefit” (as defined in subsection 144.1(1)) to be provided after the end of the year (other than consideration payable in the year, to a corporation that is licensed to provide insurance, for insurance coverage in respect of the year);

(4) Subsection (1) applies in respect of transfers or dispositions of rights occurring after 4:00 p.m. Eastern Standard Time, March 4, 2010.

(5) Subsections (2) and (3) apply after 2009.

6. (1) Subsection 20(1) of the Act is amended by adding the following after paragraph (r):

(s) such amount in respect of employer contributions paid to a trustee under an employee life and health trust as is permitted by subsections 144.1(4) to (7);

(2) Subsection (1) applies after 2009.

7. Subsection 33.1(6) of the Act is replaced by the following:

(6) For the purposes of subsections (4) and (5), where a taxpayer so elects in the taxpayer’s return of income for a taxation year or in a prescribed form filed with the Minister within 90 days after the day of sending of a notice of assessment for the year or a notification that no tax is payable for the year, an eligible deposit recorded in the books of account of an international banking centre business of the taxpayer at the end of a day in the year is deemed not to have been recorded at any time in the day in the books of account of that business and is deemed to have been recorded throughout that day in the books of account of another international banking centre business of the taxpayer designated by the taxpayer in the election.

8. (1) Section 40 of the Act is amended by adding the following after subsection (3.2):

(3.21) If, in respect of a taxation year, a taxpayer has made an election under subsection 180.01(1), the amount deemed to be a capital gain under paragraph 180.01(2)(b) is deemed to be a gain from the disposition of property for the taxation year.

(2) Subsection (1) is deemed to have come into force on March 4, 2010.

9. (1) Subsection 56(1) of the Act is amended by striking-out “and” at the end of paragraph (z), by renumbering paragraph (aa) as paragraph (z.1), by adding “and” at the end of paragraph (z.1) and by adding the following after paragraph (z.1):

(z.2) the total of all amounts, each of which is an amount received in the year by the taxpayer that is required to be included in income under subsection 144.1(11) except to the extent that the amount was required under subsection 70(2) to be included in computing the income for the year by the taxpayer or other person resident in Canada.

(2) Subsection (1) applies after 2009.

10. (1) Paragraph 60(m) of the Act is replaced by the following:

(m) such amount in respect of payments to a registered disability savings plan as is permitted under section 60.02;

(2) Subsection (1) applies after March 3, 2010.

11. (1) Section 60.02 of the Act is replaced by the following:

60.02 (1) The definitions in this subsection apply in this section and section 146.4,

“eligible individual” means a child or grandchild of a deceased annuitant under a registered retirement savings plan or a registered retirement income fund, or of a deceased member of a registered pension plan, who was financially dependent on the deceased for support, at the time of the deceased’s death, by reason of mental or physical infirmity.

“eligible proceeds” means an amount (other than an amount that was deducted under paragraph 60(l) in computing the eligible individual’s income) received by an eligible individual as a consequence of the death after March 3, 2010 of a parent or grandparent of the eligible individual that is

(a) a refund of premiums (as defined in subsection 146(1));

(b) an eligible amount under subsection 146.3(6.11); or

(c) a payment (other than a payment that is part of a series of periodic payments or that relates to an actuarial surplus) out of or under a registered pension plan.

“specified RDSP payment” in respect of an eligible individual means a payment that

(a) is made to a registered disability savings plan under which the eligible individual is the beneficiary;

(b) complies with the conditions set out in paragraphs 146.4(4)(f) to (h);

(c) is made after June 2011; and

(d) has been designated in prescribed form for a taxation year by the holder of the plan and the eligible individual at the time that the payment is made.

“transitional eligible proceeds” of a taxpayer means

(a) any amount (other than an amount that is eligible proceeds or an amount that was deducted under paragraph 60(l) in computing the taxpayer’s income) that is received by the taxpayer as a consequence of the death of an individual after 2007 and before 2011 out of or under

(i) a registered retirement savings plan or registered retirement income fund, or

(ii) a registered pension plan (other than an amount that is received as part of a series of periodic payments or that relates to an actuarial surplus); or

(b) an amount withdrawn from the taxpayer’s registered retirement savings plan or a registered retirement income fund (in this subsection referred to as the “RRSP withdrawal”) if

(i) the taxpayer previously deducted an amount under paragraph 60(l) in respect of an amount that would be described by paragraph (a) if it were read without reference to “other than an amount that is eligible proceeds or an amount that was deducted under paragraph 60(l) in computing the taxpayer’s income”,

(ii) the RRSP withdrawal is included in computing the taxpayer’s income for the year of the withdrawal, and

(iii) the RRSP withdrawal does not exceed the amount deducted under subparagraph (i).

(2) There may be deducted in computing the income for a taxation year of a taxpayer who is an eligible individual an amount that

(a) does not exceed the lesser of

(i) the total specified RDSP payments made in the year or within 60 days after the end of the year (or within any longer period after the end of the year that is acceptable to the Minister) in respect of the taxpayer; and

(ii) the total amount of eligible proceeds that is included in computing the taxpayer’s income in the year; and

(b) was not deducted in computing the taxpayer’s income for a preceding taxation year.

(3) Subsections (4) and (5) do not apply unless

(a) a taxpayer who was the annuitant under a registered retirement savings plan or a registered retirement income fund or was a member of a registered pension plan died after 2007 and before 2011;

(b) the taxpayer was, immediately before the taxpayer’s death, the parent or grandparent of an eligible individual;

(c) transitional eligible proceeds were received from the plan or fund by

(i) an eligible individual in respect of the taxpayer,

(ii) a person who was the spouse or common-law partner of the taxpayer immediately before the taxpayer’s death, or

(iii) a person who is a beneficiary of the taxpayer’s estate or who directly received transitional eligible proceeds as a consequence of the death of the taxpayer; and

(d) the transitional eligible proceeds were included in computing the income of a person for a taxation year.

(4) There may be deducted in computing the income of a taxpayer described in paragraph (3)(c) for a taxation year an amount approved by the Minister that does not exceed the lesser of

(a) the total specified RDSP payments made by the taxpayer before 2012, and

(b) the amount of transitional eligible proceeds included in computing the taxpayer’s income for the year.

(5) There may be deducted in computing the income of a taxpayer for the taxation year in which the taxpayer died an amount approved by the Minister that does not exceed the lesser of

(a) the total specified RDSP payments made before 2012 by an individual described in subparagraph (3)(c)(iii), and

(b) the amount by which the total of all amounts that were included in computing the taxpayer’s income for the year under subsection 146(8.8) or 146.3(6) exceeds the total of all amounts, if any, that were deducted in computing the taxpayer’s income for the year under subsection 146(8.92) or 146.3(6.3).

(6) The total amounts that may be deducted under subsections (4) and (5) in respect of transitional eligible proceeds received in respect of the death of a taxpayer shall not exceed the total transitional eligible proceeds received in respect of the deceased taxpayer.

(2) Subsection (1) applies after March 3, 2010.

12. (1) Paragraphs (h) and (i) of the definition “principal-business corporation” in subsection 66(15) of the Act are replaced by the following:

(h) the generation or distribution of energy, or the production of fuel, using property described in Class 43.1 or 43.2 of Schedule II to the Income Tax Regulations, and

(i) the development of projects for which it is reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in each project would be the capital cost of property described in Class 43.1 or 43.2 of Schedule II to the Income Tax Regulations,

(2) Subsection (1) applies to 2004 and subsequent taxation years.

13. The portion of subsection 70(2) of the Act before paragraph (a) is replaced by the following:

(2) If a taxpayer who has died had at the time of death rights or things (other than any capital property or any amount included in computing the taxpayer’s income by virtue of subsection (1)), the amount of which when realized or disposed of would have been included in computing the taxpayer’s income, the value of the rights or things at the time of death shall be included in computing the taxpayer’s income for the taxation year in which the taxpayer died, unless the taxpayer’s legal representative has, not later than the later of the day that is one year after the date of death of the taxpayer and the day that is 90 days after the sending of any notice of assessment in respect of the tax of the taxpayer for the year of death, elected otherwise, in which case the legal representative shall file a separate return of income for the year under this Part and pay the tax for the year under this Part as if

14. (1) Paragraph 75(3)(b) of the Act is replaced by the following:

(b) by an employee life and health trust, an employee trust, a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), a trust described in paragraph (a.1) of the definition “trust” in subsection 108(1), or a trust described in paragraph 149(1)(y);

(2) Subsection (1) applies after 2009.

15. (1) Paragraph 87(2)(j.3) of the Act is replaced by the following:

(j.3) for the purposes of paragraphs 12(1)(n.1) to (n.3) and 20(1)(r), (s), (oo) and (pp), section 32.1, paragraph 104(13)(b), subsections 144.1(4) to (7) and Part X1.3, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(2) Subsection (1) applies after 2009.

16. (1) Subsection 104(6) of the Act is amended by striking out “and” at the end of paragraph (a.3) and by adding the following after that paragraph:

(a.4) in the case of an employee life and health trust, an amount that became payable by the trust in the year as a designated employee benefit (as defined in subsection 144.1(1)); and

(2) Subsection (1) applies after 2009.

17. (1) The portion of section 107.1 of the Act before subparagraph (a)(i) is replaced by the following:

107.1 If at any time any property of an employee life and health trust, an employee trust, a trust governed by an employee benefit plan or a trust described in paragraph (a.1) of the definition “trust” in subsection 108(1) has been distributed by the trust to a taxpayer who was a beneficiary under the trust in satisfaction of all or any part of the taxpayer’s interest in the trust, the following rules apply:

(a) in the case of an employee life and health trust, an employee trust or a trust described in paragraph (a.1) of the definition “trust” in subsection 108(1),

(2) Subsection (1) applies after 2009.

18. (1) 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 life and health 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 (within the meaning assigned by paragraph 138.1(1)(a)), 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, a registered supplementary unemployment benefit plan or a TFSA, the particular trust is the same type of trust.

(2) Subsection (1) applies after 2009.

19. (1) 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 life and health 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, a registered supplementary unemployment benefit plan or a TFSA,

(2) Subsection (1) applies after 2009.

20. (1) Subparagraph 110(1)(d)(i) of the Act is replaced by the following:

(i) the security was acquired under the agreement by the taxpayer or a person not dealing at arm’s length with the taxpayer in circumstances described in paragraph 7(1)(c),

(i.1) the security

(A) is a prescribed share at the time of its sale or issue, as the case may be,

(B) would have been a prescribed share if it were issued or sold to the taxpayer at the time the taxpayer disposed of rights under the agreement,

(C) would have been a unit of a mutual fund trust at the time of its sale or issue if those units issued by the trust that were not identical to the security had not been issued, or

(D) would have been a unit of a mutual fund trust if

(I) it were issued or sold to the taxpayer at the time the taxpayer disposed of rights under the agreement, and

(II) those units issued by the trust that were not identical to the security had not been issued,

(2) Section 110 of the Act is amended by adding the following after subsection (1):

(1.1) For the purpose of computing the taxable income of a taxpayer for a taxation year, paragraph (1)(d) shall be read without reference to its subparagraph (i) in respect of all rights granted to the taxpayer under an agreement to sell or issue securities referred to in subsection 7(1) if

(a) the particular qualifying person elects in prescribed form that neither the particular qualifying person nor any person not dealing at arm’s length with the particular qualifying person will deduct in computing its income for a taxation year any amount (other than a designated amount described in subsection (1.2)) in respect of a payment to or for the benefit of a taxpayer for the taxpayer’s transfer or disposition of rights under the agreement;

(b) the particular qualifying person files the election with the Minister;

(c) the particular qualifying person provides the taxpayer with evidence in writing of the election; and

(d) the taxpayer files the evidence with the Minister with the taxpayer’s return of income for the year in which a deduction under paragraph (1)(d) is claimed.

(1.2) For the purposes of subsection (1.1), an amount is a designated amount if the following conditions are met:

(a) the amount would otherwise be deduct- ible in computing the income of the particular qualifying person in the absence of subsection (1.1);

(b) the amount is payable to a person

(i) with whom the particular qualifying person deals at arm’s length, and

(ii) who is neither an employee of the particular qualifying person nor of any person not dealing at arm’s length with the particular qualifying person; and

(c) the amount is payable in respect of an arrangement entered into for the purpose of managing the particular qualifying person’s financial risk associated with a potential increase in value of the securities under the agreement described in subsection (1.1).

(3) Subsections (1) and (2) apply in respect of acquisitions of securities and transfers or dispositions of rights occurring after 4:00 p.m. Eastern Standard Time, March 4, 2010.

21. (1) The portion of paragraph 111(4)(e) of the Act before subparagraph (i) is replaced by the following:

(e) each capital property owned by the corporation immediately before that time (other than a property in respect of which an amount would, but for this paragraph, be required by paragraph (c) to be deducted in computing its adjusted cost base to the corporation or a depreciable property of a prescribed class to which, but for this paragraph, subsection (5.1) would apply) as is designated by the corporation in its return of income under this Part for the taxation year that ended immediately before that time or in a prescribed form filed with the Minister on or before the day that is 90 days after the day on which a notice of assessment of tax payable for the year or notification that no tax is payable for the year is sent to the corporation, is deemed to have been disposed of by the corporation immediately before the time that is immediately before that time for proceeds of disposition equal to the lesser of

(2) Section 111 of the Act is amended by adding the following after subsection (7.2):

(7.3) Paragraph (1)(a) does not apply in computing the taxable income of a trust for a taxation year if the trust is, in the year, an employee life and health trust.

(7.4) For the purposes of computing the taxable income of an employee life and health trust for a taxation year, there may be deducted such portion as the trust may claim of the trust’s non-capital losses for the three taxation years immediately preceding and the three taxation years immediately following the year.

(7.5) Notwithstanding paragraph (1)(a) and subsection (7.4), no amount in respect of the trust’s non-capital losses for a taxation year in which the trust was an employee life and health trust may be deducted in computing the trust’s taxable income for another taxation year (referred to in this subsection as the “specified year”) if

(a) the trust was not an employee life and health trust for the specified year; or

(b) the trust is an employee life and health trust that, because of the application of subsection 144.1(3), is not permitted to deduct any amount under subsection 104(6) for the specified year.

(3) The description of E in the definition “non-capital loss” in subsection 111(8) of the Act is amended by adding the following after paragraph (a):

(a.1) an amount deductible under paragraph 104(6)(a.4) in computing the taxpayer’s income for the year;

(4) Subsections (2) and (3) apply after 2009.

22. (1) The portion of subsection 117.1(1) of the Act before paragraph (a) is replaced by the following:

117.1 (1) The amount of $1,000 referred to in the formula in paragraph 8(1)(s), each of the amounts expressed in dollars in subparagraph 6(1)(b)(v.1), subsection 117(2), the description of B in subsection 118(1), subsection 118(2), paragraph (a) of the description of B in subsection 118(10), subsection 118.01(2), the descriptions of C and F in subsection 118.2(1), subsections 118.3(1), 122.5(3) and 122.51(1) and (2), the amounts of $925 and $1,680 referred to in the description of A, and the amounts of $10,500 and $14,500 referred to in the description of B, in the formula in subsection 122.7(2), the amount of $462.50 referred to in the description of C, and the amounts of $16,667 and $25,700 referred to in the description of D, in the formula in subsection 122.7(3), and each of the amounts expressed in dollars in Part I.2 in relation to tax payable under this Part or Part I.2 for a taxation year shall be adjusted so that the amount to be used under those provisions for the year is the total of

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

23. (1) 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 in computing that income no amount were

(a) included

(i) under paragraph 56(1)(q.1) or subsection 56(6),

(ii) in respect of any gain from a disposition of property to which section 79 applies, or

(iii) in respect of a gain described in subsection 40(3.21); or

(b) deductible under paragraph 60(y) or (z).

(2) Section 122.5 of the Act is amended by adding the following after subsection (3):

(3.01) Notwithstanding subsection (3), if an eligible individual is a shared-custody parent (within the meaning assigned by section 122.6, but with the words “qualified dependant” in that section having the meaning assigned by subsection (1)) in respect of one or more qualified dependants at the beginning of a month, the amount deemed by subsection (3) to have been paid during a specified month is equal to the amount determined by the following formula:

1/2 × (A + B)

where

A      is the amount determined by the formula in subsection (3), calculated without reference to this subsection, and

B      is the amount determined by the formula in subsection (3), calculated without reference to this subsection and subparagraph (b)(ii) of the definition “eligible individual” in section 122.6.

(3) Paragraph 122.5(6)(b) of the Act is replaced by the following:

(b) in the absence of an agreement referred to in paragraph (a), the person is deemed to be, in relation to that month, a qualified depend- ant of the individuals, if any, who are, at the beginning of that month, eligible individuals (within the meaning assigned by section 122.6, but with the words “qualified depend- ant” in that section having the meaning assigned by subsection (1)) in respect of that person; and

(4) Subsection (1) applies to the 2000 and subsequent taxation years.

(5) Subsections (2) and (3) apply for amounts that are deemed to be paid during months after June 2011.

24. (1) 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 in computing that income no amount were

(a) included

(i) under paragraph 56(1)(q.1) or subsection 56(6),

(ii) in respect of any gain from a disposition of property to which section 79 applies, or

(iii) in respect of a gain described in subsection 40(3.21), or

(b) deductible under paragraph 60(y) or (z);

(2) Paragraph (b) of the definition “eligible individual” in section 122.6 of the Act is replaced by the following:

(b) is a parent of the qualified dependant who

(i) is the parent who primarily fulfils the responsibility for the care and upbringing of the qualified dependant and who is not a shared-custody parent in respect of the qualified dependant, or

(ii) is a shared-custody parent in respect of the qualified dependant,

(3) Section 122.6 of the Act is amended by adding the following in alphabetical order:

“shared-custody parent” in respect of a qualified dependent at a particular time means, where the presumption referred to in paragraph (f) of the definition “eligible individual” does not apply in respect of the qualified dependant, an individual who is one of the two parents of the qualified dependant who

(a) are not at that time cohabitating spouses or common-law partners of each other,

(b) reside with the qualified dependant on an equal or near equal basis, and

(c) primarily fulfil the responsibility for the care and upbringing of the qualified depend- ant when residing with the qualified depend- ant, as determined in consideration of prescribed factors,

(4) Subsection (1) applies to the 2000 and subsequent taxation years.

(5) Subsections (2) and (3) apply for overpayments that are deemed to arise after June 2011.

25. (1) Section 122.61 of the Act is amended by adding the following after subsection (1):

(1.1) Notwithstanding subsection (1), if an eligible individual is a shared-custody parent in respect of one or more qualified dependants at the beginning of a month, the overpayment deemed by subsection (1) to have arisen during the month is equal to the amount determined by the formula

1/2 × (A + B)

where

A      is the amount determined by the formula in subsection (1), calculated without reference to this subsection, and

B      is the amount determined by the formula in subsection (1), calculated without reference to this subsection and subparagraph (b)(ii) of the definition “eligible individual” in section 122.6.

(2) Subsection (1) applies for overpayments that are deemed to arise after June 2011.

26. (1) Paragraph (b) of the definition “adjusted net income” in subsection 122.7(1) of the Act is replaced by the following:

(b) in computing that income, no amount were included under paragraph 56(1)(q.1) or subsection 56(6), in respect of any gain from a disposition of property to which section 79 applies or in respect of a gain described in subsection 40(3.21); and

(2) Subsection (1) applies to the 2000 and subsequent taxation years.

27. (1) Paragraph 127.55(f) of the Act is amended by striking out “or” at the end of subparagraph (ii), by adding “or” at the end of subparagraph (iii) and by adding the following after subparagraph (iii):

(iv) an employee life and health trust.

(2) Subsection (1) applies after 2009.

28. (1) Paragraph 128.1(4)(c) of the Act is replaced by the following:

(b.1) notwithstanding paragraph (b), if the taxpayer is or was at any time an employee life and health trust,

(i) the taxpayer is deemed

(A) to have disposed, at the time (in this paragraph referred to as the “time of disposition”) that is immediately before the time that is immediately before the particular time, of each property owned by the taxpayer for proceeds equal to its fair market value at the time of disposition, which proceeds are deemed to have become receivable and to have been received by the taxpayer at the time of disposition, and

(B) to have carried on a business at the time of disposition, and

(ii) each property of the taxpayer is deemed

(A) to have been described in the inventory of the business referred to in clause (i)(B), and

(B) to have a cost of nil at the time of disposition;

(c) the taxpayer is deemed to have reacquired, at the particular time, each property deemed by paragraph (b) or (b.1) to have been disposed of by the taxpayer, at a cost equal to the proceeds of disposition of the property;

(2) 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 (vi):

(vi.1) an employee life and health trust,

(3) Subsections (1) and (2) apply after 2009.

29. (1) The portion of paragraph 129(1)(a) of the Act before subparagraph (i) is replaced by the following:

(a) may, on sending the notice of assessment for the year, refund without application an amount (in this Act referred to as its “dividend refund” for the year) equal to the lesser of

(2) Paragraph 129(1)(b) of the Act is replaced by the following:

(b) shall, with all due dispatch, make the dividend refund after sending the notice of assessment if an application for it has been made in writing by the corporation within the period within which the Minister would be allowed under subsection 152(4) to assess tax payable under this Part by the corporation for the year if that subsection were read without reference to paragraph 152(4)(a).

30. Paragraph 131(2)(b) of the Act is replaced by the following:

(b) shall, with all due dispatch, make that capital gains refund after sending the notice of assessment if an application for it has been made in writing by the corporation within the period within which the Minister would be allowed under subsection 152(4) to assess tax payable under this Part by the corporation for the year if that subsection were read without reference to paragraph 152(4)(a).

31. Paragraph 132(1)(b) of the Act is replaced by the following:

(b) shall, with all due dispatch, make that capital gains refund after sending the notice of assessment if an application for it has been made in writing by the trust within the period within which the Minister would be allowed under subsection 152(4) to assess tax payable under this Part by the trust for the year if that subsection were read without reference to paragraph 152(4)(a).

32. Paragraphs 133(6)(a) and (b) of the Act are replaced by the following:

(a) may, on sending the notice of assessment for the year, refund without application its allowable refund for the year; and

(b) shall, with all due dispatch, make that allowable refund after sending the notice of assessment if an application for it has been made in writing by the corporation within the period within which the Minister would be allowed under subsection 152(4) to assess tax payable by the corporation for the year if that subsection were read without reference to paragraph 152(4)(a).

33. (1) The definition “transition year” in subsection 138(12) of the Act is replaced by the following:

“transition year” of a life insurer means

(a) in respect of the accounting standards adopted by the Accounting Standards Board and effective as of October 1, 2006, the life insurer’s first taxation year that begins after September 2006, and

(b) in respect of the International Financial Reporting Standards adopted by the Accounting Standards Board and effective as of January 1, 2011, the life insurer’s first taxation year that begins after 2010;

(2) Subsection 138(12) of the Act is amended by adding the following in alphabetical order:

“deposit accounting insurance policy” in respect of a life insurer’s taxation year means an insurance policy of the life insurer that, according to generally accepted accounting principles, is not an insurance contract for that taxation year;

“excluded policy” in respect of a life insurer’s base year means an insurance policy of the life insurer that would be a deposit accounting insurance policy for the life insurer’s base year if the International Financial Reporting Stand- ards adopted by the Accounting Standards Board and effective as of January 1, 2011 applied for that base year;

(3) Section 138 of the Act is amended by adding the following after subsection (17):

(17.1) In applying subsections (18) and (19) to a life insurer for a taxation year of the life insurer in respect of the International Financial Reporting Standards adopted by the Accounting Standards Board and effective as of January 1, 2011,

(a) the reference to “policy reserve” in B of the formula in the definition “reserve transition amount” in subsection (12) is to be read as a reference to “policy reserve determined without reference to the life insurer’s excluded policies”;

(b) the reference in those subsections to “that ends after the beginning of the transition year” is to be read as a reference to “that ends no sooner than two years after the beginning of the transition year”; and

(c) the reference in those subsections to “the first day of the transition year” is to be read as a reference to “the first day of the first year that ends no sooner than two years after the beginning of the transition year”.

(4) Subsections (1) to (3) apply to taxation years that begin after 2010.

34. (1) The Act is amended by adding the following after section 144:

Employee Life and Health Trust

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

“actuary” means a Fellow of the Canadian Institute of Actuaries.

“class of beneficiaries” of a trust means a group of beneficiaries who have identical rights or interests under the trust.

“designated employee benefit” means a benefit from a group sickness or accident insurance plan, a group term life insurance policy or a private health services plan.

“employee” means a current or former employee of an employer and includes an individual in respect of whom the employer has assumed responsibility for the provision of designated employee benefits as a result of the acquisition by the employer of a business in which the individual was employed.

“key employee”, of an employer in respect of a taxation year, means an employee who

(a) was at any time in the taxation year or in a preceding taxation year, a specified employee of the employer; or

(b) was an employee whose employment income from the employer in any two of the five taxation years preceding the year exceeded five times the Year’s Maximum Pensionable Earnings (as determined under section 18 of the Canada Pension Plan) for the calendar year in which the employment income was earned.

(2) A trust that is established for employees of one or more employers (each referred to in this subsection as a “participating employer”) is an employee life and health trust for a taxation year if, throughout the taxation year, under the terms that govern the trust,

(a) the only purpose of the trust is to provide designated employee benefits to, or for the benefit of, persons described in subparagraphs (d)(i) or (ii); and

(b) on wind-up or reorganization, the property of the trust may only be distributed to

(i) each remaining beneficiary of the trust who is described in subparagraph (d)(i) or (ii) (other than a key employee or an individual who is related to a key employee) on a pro rata basis,

(ii) another employee life and health trust, or

(iii) after the death of the last beneficiary described in subparagraph (d)(i) or (ii), Her Majesty in right of Canada or a province;

(c) the trust is required to be resident in Canada, determined without reference to section 94;

(d) the trust may not have any beneficiaries other than persons each of whom is

(i) an employee of a participating employer,

(ii) an individual who, in respect of an employee of a participating employer, is (or, if the employee is deceased, was, at the time of the employee’s death)

(A) the spouse or common law partner of the employee, or

(B) related to the employee and either a member of the employee’s household or dependent on the employee for support,

(iii) another employee life and health trust, or

(iv) Her Majesty in right of Canada or a province;

(e) the trust contains at least one class of beneficiaries where

(i) the members of the class represent at least 25% of all of the beneficiaries of the trust who are employees of the participating employer, and

(ii) at least 75% of the members of the class are not key employees of the participating employer;

(f) the rights under the trust of each key employee of a participating employer are not more advantageous than the rights of a class of beneficiaries described in paragraph (e);

(g) no participating employer, nor any person who does not deal at arm’s length with a participating employer, has any rights under the trust as a beneficiary or otherwise, except rights to

(i) designated employee benefits,

(ii) to enforce covenants, warranties or similar provisions regarding

(A) the maintenance of the trust as an employee life and health trust, or

(B) the operation of the trust in a manner that prevents subsection (3) from applying to prohibit the deduction of an amount by the trust under subsection 104(6), or

(iii) prescribed payments;

(h) the trust may not make a loan to, or an investment in, a participating employer or a person or partnership with whom the participating employer does not deal at arm’s length;

(i) representatives of one or more participating employers do not constitute the majority of the trustees of the trust or otherwise control the trust.

(3) No amount may be deducted in a taxation year by an employee life and health trust pursuant to subsection 104(6) if in the taxation year the trust

(a) is not operated in accordance with the terms required by subsection (2) to govern the trust, or

(b) is operated or maintained primarily for the benefit of one or more key employees or their family members described in subparagraph 2(d)(ii).

(4) In computing the income of an employer,

(a) the employer may deduct for a taxation year the portion of its contributions to an employee life and health trust made in the year that may reasonably be regarded as having been contributed to enable the trust to

(i) pay premiums to an insurance corporation that is licensed to provide insurance under the laws of Canada or a province for insurance coverage for the year or a prior year in respect of designated employee benefits for beneficiaries described in subparagraph (2)(d)(i) or (ii), or

(ii) otherwise provide

(A) group term life insurance as described in clause 18(9)(a)(iii)(B), or

(B) any designated employee benefits payable in the year or a prior year to, or for the benefit of, beneficiaries described in subparagraph (2)(d)(i) or (ii); and

(b) the portion of any contribution made to an employee life and health trust that exceeds the amount deductible under paragraph (a) and that may reasonably be regarded as enabling the trust to provide or pay benefits described in subparagraphs (a)(i) or (ii) in a subsequent taxation year is deductible for that year.

(5) For the purposes of subsection (4), if, in respect of an employer’s obligations to fund an employee life and health trust, a report has been prepared by an independent actuary, using accepted actuarial principles and practices, before the time of a contribution by the employer, the portion of the contribution that the report specifies to be the amount that the employee life and health trust is reasonably expected to pay or incur in a taxation year in order to provide designated employee benefits to beneficiaries described in subparagraph (2)(d)(i) or (ii) for a taxation year is, in the absence of evidence to the contrary, presumed to have been contributed to enable the trust to provide those benefits for the year.

(6) Notwithstanding subsection (4) and paragraph 18(9)(a), an employer may deduct in computing its income for a taxation year the amount that it is required to contribute for the year to an employee life and health trust if the following conditions are met at the time that the contribution is made:

(a) it is reasonable to expect that

(i) at no time in the year will more than 95% of the employees who are beneficiaries of the trust be employed by a single employer or by a related group of employers, and

(ii) at least 15 employers will contribute to the trust in respect of the year or at least 10% of the employees who are beneficiaries of the trust will be employed in the year by more than one participating employer and, for the purpose of this condition, all employers who are related to each other are deemed to be a single employer;

(b) employers contribute to the trust under a collective bargaining agreement and in accordance with a negotiated contribution formula that does not provide for any variation in contributions determined by reference to the financial experience of the trust; and

(c) contributions that are to be made by each employer are determined, in whole or in part, by reference to the number of hours worked by individual employees of the employer or some other measure that is specific to each employee with respect to whom contributions are made to the trust.

(7) The amount deducted in a taxation year by an employer in computing its income in respect of contributions made to an employee life and health trust shall not exceed the amount determined by the formula

A – B

where

A      is the total of all amounts contributed by the employer to the trust in the year or in a preceding taxation year; and

B      is the total of all amounts deducted by the employer in a preceding taxation year in respect of amounts contributed by the employer to the trust.

(8) If an employer issues a promissory note or provides other evidence of its indebtedness to an employee life and health trust in respect of its obligation to the trust,

(a) the issuance of the note or the provision of the evidence of indebtedness to the trust is not a contribution to the trust; and

(b) a payment by the employer to the trust in full or partial satisfaction of its liability under the note or the evidence of indebtedness, whether stated to be of principal or interest or any other amount, is deemed to be an employer contribution to the trust that is subject to this section and not a payment of principal or interest on the note or indebtedness.

(9) For the purposes of determining whether an amount is deductible by an employer under subsection (4), if a trust was an employee life and health trust at the time that a promissory note or other evidence of indebtedness referred to in subsection (8) was issued or provided, the trust is deemed to be an employee life and health trust at each time that an employer contribution is deemed to have been made under paragraph (8)(b) in respect of the note or other indebtedness.

(10) For the purposes of paragraph 6(1)(f), subsection 6(4) and paragraph 118.2(2)(q), employee contributions to an employee life and health trust, to the extent that they are, and are identified by the trust at the time of contribution as, contributions in respect of a particular designated employee benefit, are deemed to be payments by the employee in respect of the particular designated employee benefit.

(11) If a trust that is, or was, at any time, an employee life and health trust pays an amount as a distribution from the trust to any person in a taxation year, the amount of the distribution shall be included in computing the person’s income for the year, except to the extent that the amount is

(a) a payment of a designated employee benefit that is not included in the person’s income because of section 6; or

(b) a distribution to another employee life and health trust that is a beneficiary of the employee life and health trust.

(12) Where contributions have been received by an employee life and health trust from more than one employer, the trust is deemed to be a separate trust established in respect of the property held for the benefit of beneficiaries described in subparagraph (2)(d)(i) or (ii) in respect of a particular employer, if

(a) the trustee designates the property to be held in a separate trust for the benefit of those beneficiaries in an election made on or before the filing-due date of the first taxation year of the separate trust described in this subsection; and

(b) under the terms of the trust, contributions from the employer and the income derived from those contributions accrues solely for the benefit of those beneficiaries.

(13) No non-capital loss is deductible by an employee life and health trust in computing its taxable income for a taxation year, except as provided by subsections 111(7.3) to (7.5).

(2) Subsection (1) applies to trusts established after 2009.

35. (1) Subsection 146.2(6) of the Act is amended by striking out the word “and” at the end of paragraph (a), by adding the word “and” at the end of paragraph (b) and by adding the following after paragraph (b):

(c) the trust’s income shall be computed without reference to subsection 104(6).

(2) Subsection (1) applies to the 2010 and subsequent taxation years.

36. (1) The definition “contribution” in subsection 146.4(1) of the Act is amended by striking out “or” at the end of paragraph (b), by adding “or” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) other than for the purposes of paragraphs (4)(f) to (h) and (n), a specified RDSP payment as defined in subsection 60.02(1).

(2) Subsection (1) applies after June 2011.

37. (1) The definitions “capital gains pool”, “enduring property” and “specified gift” in subsection 149.1(1) of the Act are repealed.

(2) The definition “disbursement quota” in subsection 149.1(1) of the Act is replaced by the following:

“disbursement quota”, for a taxation year of a registered charity, means the amount determined by the formula

A × B × 0.035/365

where

A      is the number of days in the taxation year, and

B      is

(a) the prescribed amount for the year, in respect of all or a portion of a property owned by the charity at any time in the 24 months immediately preceding the taxation year that was not used directly in charitable activities or administration, if that amount is greater than

(i) if the registered charity is a charitable organization, $100,000, and

(ii) in any other case, $25,000, and

(b) in any other case, nil;

(3) Subsection 149.1(1) of the Act is amended by adding the following in alphabetical order:

“designated gift” means that portion of a gift of property made in a taxation year by a particular registered charity, to another registered charity with which it does not deal at arm’s length, that is designated by the particular registered charity in its information return for the taxation year;

(4) Paragraph 149.1(1.1)(a) of the Act is replaced by the following:

(a) a designated gift;

(5) The portion of subsection 149.1(1.2) of the Act before paragraph (b) is replaced by the following:

(1.2) For the purposes of the determination of B in the definition “disbursement quota” in subsection 149.1(1), the Minister may

(a) authorize a change in the number of periods chosen by a registered charity in determining the prescribed amount; and

(6) Paragraphs 149.1(4.1)(a) and (b) of the Act are replaced by the following:

(a) of a registered charity, if it has entered into a transaction (including a gift to another registered charity) and it may reasonably be considered that a purpose of the transaction was to avoid or unduly delay the expenditure of amounts on charitable activities;

(b) of a registered charity, if it may reasonably be considered that a purpose of entering into a transaction (including the acceptance of a gift) with another registered charity to which paragraph (a) applies was to assist the other registered charity in avoiding or unduly delaying the expenditure of amounts on charitable activities;

(7) Subsection 149.1(4.1) of the Act is amended by adding “and” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) of a registered charity, if it has in a taxation year received a gift of property (other than a designated gift) from another registered charity with which it does not deal at arm’s length and it has expended, before the end of the next taxation year, in addition to its disbursement quota for each of those taxation years, an amount that is less than the fair market value of the property, on charitable activities carried on by it or by way of gifts made to qualified donees with which it deals at arm’s length.

(8) Subsections 149.1(8) and (9) of the Act are replaced by the following:

(8) A registered charity may, with the approval in writing of the Minister, accumulate property for a particular purpose, on terms and conditions and over any period of time that the Minister specifies in the approval. Any property accumulated after receipt of and in accordance with the approval, including any income earned in respect of the accumulated property, is not to be included in calculating the prescribed amount in paragraph (a) of the description of B in the definition “disbursement quota” in subsection (1) for the portion of any taxation year in the period, except to the extent that the registered charity is not in compliance with the terms and conditions of the approval.

(9) Subparagraph 149.1(12)(b)(i) of the Act is replaced by the following:

(i) a designated gift,

(10) Subsections (1) to (9) apply to taxation years that end on or after March 4, 2010.

38. (1) Paragraphs 152(3.1)(a) and (b) of the Act are replaced by the following:

(a) if at the end of the year the taxpayer is a mutual fund trust or a corporation other than a Canadian-controlled private corporation, the period that ends four years after the earlier of the day of sending of a notice of an original assessment under this Part in respect of the taxpayer for the year and the day of sending of an original notification that no tax is payable by the taxpayer for the year; and

(b) in any other case, the period that ends three years after the earlier of the day of sending of a notice of an original assessment under this Part in respect of the taxpayer for the year and the day of sending of an original notification that no tax is payable by the taxpayer for the year.

(2) Subparagraph 152(4)(d)(ii) of the Act is replaced by the following:

(ii) the day that is 90 days after the day of sending of a notice of the provincial reassessment.

39. (1) Paragraph 153(1)(s) of the Act is replaced by the following:

(s) an amount described in paragraph 56(1)(r) or (z.2), or

(2) Section 153 of the Act is amended by adding the following after subsection (1):

(1.01) An amount that is deemed to have been received by a taxpayer as a benefit under or because of any of paragraphs 7(1)(a) to (d.1) is remuneration paid as a bonus for the purposes of paragraph (1)(a), except the portion, if any, of the amount that is

(a) deductible by the taxpayer under paragraph 110(1)(d) in computing the taxpayer’s taxable income for a taxation year;

(b) deemed to have been received in a taxation year as a benefit because of a disposition of securities to which subsection 7(1.1) applies; or

(c) determined under paragraph 110(2.1)(b) to be deductible by the taxpayer under paragraph 110(1)(d.01) in computing the taxpayer’s taxable income for a taxation year.

(3) Section 153 of the Act is amended by adding the following after subsection (1.3):

(1.31) An amount deemed to have been received as a benefit under or because of any of paragraphs 7(1)(a) to (d.1) shall not be considered a basis on which the Minister may determine a lesser amount under subsection (1.1) solely because it is received as a non-cash benefit.

(4) Subsection (1) applies after 2009.

(5) Subsection (2) applies after 2010, except that it does not apply with respect to benefits arising from rights granted before 2011 to a taxpayer under an agreement to sell or issue securities that was entered into in writing before 4:00 p.m. Eastern Standard Time, March 4, 2010 and that included, at that time, a written condition prohibiting the taxpayer from disposing of the securities acquired under the agreement for a period of time after exercise.

(6) Subsection (3) applies after 2010.

40. Paragraph 161(11)(c) of the Act is replaced by the following:

(c) in the case of a penalty payable by reason of any other provision of this Act, from the day of sending of the notice of original assessment of the penalty to the day of payment.

41. Subparagraphs 161.1(3)(c)(i) to (v) of the Act are replaced by the following:

(i) the day of sending of the first notice of assessment giving rise to any portion of the corporation’s overpayment amount to which the application relates,

(ii) the day of sending of the first notice of assessment giving rise to any portion of the corporation’s underpayment amount to which the application relates,

(iii) if the corporation has served a notice of objection to an assessment referred to in subparagraph (i) or (ii), the day of sending of the notification under subsection 165(3) by the Minister in respect of the notice of objection,

(iv) if the corporation has appealed, or applied for leave to appeal, from an assessment referred to in subparagraph (i) or (ii) to a court of competent jurisdiction, the day on which the court dismisses the application, the application or appeal is discontinued or final judgment is pronounced in the appeal, and

(v) the day of sending of the first notice to the corporation indicating that the Minister has determined any portion of the corporation’s overpayment amount to which the application relates, if the overpayment amount has not been determined as a result of a notice of assessment sent before that day.

42. (1) Paragraphs 164(1)(a) and (b) of the Act are replaced by the following:

(a) may,

(i) before sending the notice of assessment for the year, where the taxpayer is, for any purpose of the definition “refundable investment tax credit” (as defined in subsection 127.1(2)), a qualifying corporation (as defined in that subsection) and claims in its return of income for the year to have paid an amount on account of its tax payable under this Part for the year because of subsection 127.1(1) in respect of its refundable investment tax credit (as defined in subsection 127.1(2)), refund all or part of any amount claimed in the return as an overpayment for the year, not exceeding the amount by which the total determined under paragraph (f) of the definition “refundable investment tax credit” in subsection 127.1(2) in respect of the taxpayer for the year exceeds the total determined under paragraph (g) of that definition in respect of the taxpayer for the year,

(ii) before sending the notice of assessment for the year, where the taxpayer is a qualified corporation (as defined in subsection 125.4(1)) or an eligible production corporation (as defined in subsection 125.5(1)) and an amount is deemed under subsection 125.4(3) or 125.5(3) to have been paid on account of its tax payable under this Part for the year, refund all or part of any amount claimed in the return as an overpayment for the year, not exceeding the total of those amounts so deemed to have been paid, and

(iii) on or after sending the notice of assessment for the year, refund any overpayment for the year, to the extent that the overpayment was not refunded pursuant to subparagraph (i) or (ii); and

(b) shall, with all due dispatch, make the refund referred to in subparagraph (a)(iii) after sending the notice of assessment if application for it is made in writing by the taxpayer within the period within which the Minister would be allowed under subsection 152(4) to assess tax payable under this Part by the taxpayer for the year if that subsection were read without reference to paragraph 152(4)(a).

(2) The portion of subsection 164(1.5) of the Act before paragraph (a) is replaced by the following:

(1.5) Notwithstanding subsection (1), the Minister may, on or after sending a notice of assessment for a taxation year, refund all or any portion of any overpayment of a taxpayer for the year

(3) Subsection 164(2.3) of the Act is replaced by the following:

(2.3) For the purpose of subsection (1), where a taxpayer files the form referred to in paragraph (b) of the definition “return of income” in section 122.6 for a taxation year, the form is deemed to be a return of the taxpayer’s income for that year and a notice of assessment in respect of that return is deemed to have been sent by the Minister.

43. (1) Subparagraph 165(1)(a)(ii) of the Act is replaced by the following:

(ii) the day that is 90 days after the day of sending of the notice of assessment; and

(2) Paragraph 165(1)(b) of the Act is replaced by the following:

(b) in any other case, on or before the day that is 90 days after the day of sending of the notice of assessment.

(3) The portion of subsection 165(1.1) of the Act after paragraph (c) and before paragraph (d) is replaced by the following:

the taxpayer may object to the assessment or determination within 90 days after the day of sending of the notice of assessment or determination, but only to the extent that the reasons for the objection can reasonably be regarded

44. Subsection 166.1(6) of the Act is replaced by the following:

(6) If an application made under subsection (1) is granted, the notice of objection or the request, as the case may be, is deemed to have been served or made on the day on which the decision of the Minister is sent to the taxpayer.

45. The portion of subsection 169(1) of the Act after paragraph (b) is replaced by the following:

but no appeal under this section may be instituted after the expiration of 90 days from the day notice has been sent to the taxpayer under section 165 that the Minister has confirmed the assessment or reassessed.

46. (1) The Act is amended by adding the following after section 180:

PART I.01

TAX IN RESPECT OF STOCK OPTION BENEFIT DEFERRAL

180.01 (1) A taxpayer may make an election in prescribed form to have subsection (2) apply for a taxation year in respect of particular securities if

(a) the taxpayer elected to have subsection 7(8) apply, as that subsection applied before 4:00 p.m. Eastern Standard Time, March 4, 2010, in respect of the particular securities; and

(b) the taxpayer has, in the year and before 2015, disposed of the particular securities; and

(c) the election under this subsection is filed

(i) if the taxpayer has disposed of the particular securities before 2010, on or before the taxpayer’s filing-due date for 2010, and

(ii) in any other case, on or before the taxpayer’s filing-due date for the year of disposition of the particular securities.

(2) If a taxpayer makes an election under subsection (1) for a taxation year in respect of particular securities, the following rules apply:

(a) paragraph 110(1)(d) shall be read without reference to the phrase “1/2 of” in respect of the amount of the benefit deemed by subsection 7(1) to have been received by the taxpayer in the year in respect of the particular securities;

(b) the taxpayer is deemed to have realized a capital gain for the year equal to the lesser of

(i) the amount that is deductible by the taxpayer under paragraph 110(1)(d), as modified by paragraph (a), and

(ii) the taxpayer’s capital loss in respect of the disposition of the particular securities;

(c) the taxpayer is liable to pay a tax for the year equal to

(i) in the case of a taxpayer resident in the Province of Quebec at the end of the year, 2/3 of the taxpayer’s proceeds of disposition (as defined in section 54, but determined without reference to subsection 73(1)) of the particular securities, and

(ii) in any other case, the taxpayer’s proceeds of disposition (as defined in section 54, but determined without reference to subsection 73(1)) of the particular securities;

(d) to the extent that the taxation year is outside the normal reassessment period (as defined in subsection 152(3.1)), the election is deemed to be an application for reassessment under subsection 152(4.2); and

(e) notwithstanding subsection 152(4) and as the circumstances require, the Minister shall re-determine the taxpayer’s “net capital loss” (as defined in subsection 111(8)) for the taxation year and reassess any taxation year in which an amount has been deducted under paragraph 111(1)(b).

(3) An amount included under subsection (2)(b) in computing a person’s income under Part I of this Act for a taxation year shall not be included in determining the income of the person for the year under Part VII of the Employment Insurance Act.

(4) Subsection 150(3), sections 150.1 to 152, 155 to 156.1 and 158 to 167 and Division J of Part I apply to this Part with any modifications that the circumstances require.

(2) Subsection (1) is deemed to have come into force on March 4, 2010.

47. (1) 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 in computing that income no amount were

(a) included

(i) under paragraph 56(1)(q.1) or subsection 56(6),

(ii) in respect of a gain from a disposition of property to which section 79 applies, or

(iii) in respect of a gain described in subsection 40(3.21), or

(b) deductible under paragraph 60(w), (y) or (z);

(2) Subsection (1) applies to the 2000 and subsequent taxation years.

48. The portion of subsection 184(3) of the Act before paragraph (a) is replaced by the following:

(3) If, in respect of a dividend payable at a particular time after 1971, a corporation would, but for this subsection, be required to pay a tax under this Part equal to all or a portion of an excess referred to in subsection (2) of this section or subsection 184(1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, it may elect in prescribed manner on or before a day that is not later than 90 days after the day of sending of the notice of assessment in respect of the tax that would otherwise be payable under this Part, and on such an election being made, subject to subsection (4), the following rules apply:

49. The portion of subsection 185.1(2) of the Act before paragraph (a) is replaced by the following:

(2) If, in respect of an excessive eligible dividend designation that is not described in paragraph (1)(b) and that is made by a corporation in respect of an eligible dividend (in this subsection and subsection (3) referred to as the “original dividend”) paid by it at a particular time, the corporation would, if this Act were read without reference to this subsection, be required to pay a tax under subsection (1), and it elects in prescribed manner on or before the day that is 90 days after the day of sending the notice of assessment in respect of that tax that would otherwise be payable under subsection (1), the following rules apply:

50. (1) Subsection 188(3.1) of the Act is replaced by the following:

(3.1) Subsection (3) does not apply to a transfer that is a gift to which subsection 188.1(11) or (12) applies.

(2) Subsection (1) applies to taxation years that end on or after March 4, 2010.

51. (1) Subsection 188.1(11) of the Act is replaced by the following:

(11) If, in a taxation year, a registered charity has entered into a transaction (including a gift to another registered charity) and it may reasonably be considered that a purpose of the transaction was to avoid or unduly delay the expenditure of amounts on charitable activities, the registered charity is liable to a penalty under this Act for its taxation year equal to 110% of the amount of expenditure avoided or delayed, and in the case of a gift to another registered charity, both charities are jointly and severally, or solidarily, liable to the penalty.

(12) If a registered charity has in a taxation year received a gift of property (other than a designated gift) from another registered charity with which it does not deal at arm’s length and it has expended, before the end of the next taxation year, in addition to its disbursement quota for each of those taxation years, an amount that is less than the fair market value of the property, on charitable activities carried on by it or by way of gifts made to qualified donees with which it deals at arm’s length, the registered charity is liable to a penalty under this Act for that subsequent taxation year equal to 110% of the difference between the fair market value of the property and the additional amount expended.

(2) Subsection (1) applies to taxation years that end on or after March 4, 2010.

52. Subparagraph 189(6.2)(a)(i) of the Act is replaced by the following:

(i) the total of all amounts, each of which is an expenditure made by the charity, on charitable activities carried on by it, before the particular time and during the period (referred to in this subsection as the “post-assessment period”) that begins immediately after a notice of the latest such assessment was sent and ends at the end of the one-year period

53. Subparagraphs 191.2(1)(b)(i) and (ii) of the Act are replaced by the following:

(i) the day of sending of any notice of assessment of tax payable under this Part or Part I by the corporation for that year,

(ii) where the corporation has served a notice of objection to an assessment described in subparagraph (i), the day of sending of a notice that the Minister has confirmed or varied the assessment,

54. Paragraph 191.3(2)(b) of the Act is replaced by the following:

(b) it is filed on or before the day on or before which the transferor corporation’s return for the year in respect of which the agreement is filed is required to be filed under this Part or within the 90-day period beginning on the day of sending of a notice of assessment of tax payable under this Part or Part I by the transferor corporation for the year or by the transferee corporation for its taxation year ending in the calendar year in which the taxation year of the transferor corporation ends or the sending of a notification that no tax is payable under this Part or Part I for that taxation year;

55. (1) The portion of clause 204.81(1)(c)(v)(A) of the Act before subclause (I) is replaced by the following:

(A) if the share is held by the specified individual in respect of the share, a spouse or common-law partner or former spouse or common-law partner of that individual or a trust governed by a registered retirement savings plan, TFSA or registered retirement income fund under which that individual, spouse or common-law partner is the annuitant,

(2) Subclause 204.81(1)(c)(v)(D)(II) of the Act is replaced by the following:

(II) an annuitant under a trust governed by a registered retirement savings plan, TFSA or registered retirement income fund that was a holder of the share,

(3) The portion of subparagraph 204.81(1)(c)(vii) of the Act before clause (A) is replaced by the following:

(vii) the corporation shall not register a transfer of a Class A share by the specified individual in respect of the share, a spouse or common-law partner of the specified individual or a trust governed by a registered retirement savings plan, TFSA or registered retirement income fund under which the specified individual or spouse or common-law partner is the annuitant, unless

(4) Clause 204.81(1)(c)(vii)(C) of the Act is replaced by the following:

(C) the transfer is to the specified individual, a spouse or common-law partner or former spouse or common-law partner of the specified individual or a trust governed by a registered retirement savings plan, TFSA or registered retirement income fund under which the specified individual or the spouse or common-law partner or former spouse or common-law partner of the specified individual is the annuitant,

(5) Subsections (1) to (4) apply to the 2009 and subsequent taxation years.

56. Paragraphs 207(2)(a) and (b) of the Act are replaced by the following:

(a) may, on sending the notice of assessment for the year, refund without application any allowable refund of the person for the year, to the extent that it was not applied against the person’s tax payable under paragraph (1)(b); and

(b) shall, with all due dispatch, make the refund referred to in paragraph (a) after sending the notice of assessment if an application for it has been made in writing by the person within three years after the sending of an original notice of assessment for the year.

57. (1) Paragraph (b) of the definition “advantage” in subsection 207.01(1) of the Act is amended by striking out “or” at the end of subparagraph (i), by striking out “and” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) a swap transaction, or

(iv) specified non-qualified investment income that has not been distributed under the TFSA within 90 days of receipt by the holder of the TFSA of a notice issued by the Minister under subsection 207.06(4); and

(2) Paragraph (c) of the definition “advantage” in subsection 207.01(1) of the Act is replaced by the following:

(c) a benefit that is income (including a capital gain) that is reasonably attributable, directly or indirectly, to

(i) a deliberate over-contribution, or

(ii) a prohibited investment in respect of the TFSA or any other TFSA of the holder; and

(d) a prescribed benefit.

(3) Paragraph (b) of the description of C in the definition “excess TFSA amount” in subsection 207.01(1) of the Act is replaced by the following:

(b) a specified distribution;

(4) Paragraph (a) of the description of E in the definition “excess TFSA amount” in subsection 207.01(1) of the Act is replaced by the following:

(a) nil, if the distribution is a qualifying transfer or a specified distribution, and

(5) The definition “unused TFSA contribution room” in subsection 207.01(1) of the Act is amended by striking out “and” at the end of paragraph (a) and by adding the following after that paragraph:

(a.1) in circumstances where the Minister has, in accordance with section 207.06, waived or cancelled all or part of the liability imposed on the individual, the amount determined by the Minister; and

(6) Subparagraph (ii) of the description of B in the definition “unused TFSA contribution room” in subsection 207.01(1) of the Act is replaced by the following:

(ii) a specified distribution,

(7) Subsection 207.01(1) of the Act is amended by adding the following in alphabetical order:

“deliberate over-contribution” of an individual means a contribution made under a TFSA by the individual that results in, or increases, an excess TFSA amount, unless it is reasonable to conclude that the individual neither knew nor ought to have known that the contribution could result in liability for a penalty, tax or similar consequence under this Act.

“specified distribution” means

(a) a distribution made under a TFSA to the extent that it is, or is reasonably attributable to, an amount that is

(i) an advantage in respect of the TFSA or any other TFSA of the holder,

(ii) specified non-qualified investment income,

(iii) an amount in respect of which tax was payable under Part I by a trust governed by the TFSA or any other TFSA of the holder, or

(iv) an amount described in subparagraph 207.06(1)(b)(ii); or

(b) a prescribed distribution.

“specified non-qualified investment income”, in respect of a TFSA and its holder, means income (including a capital gain) that is reasonably attributable, directly or indirectly, to an amount in respect of which tax was payable under Part I by a trust governed by the TFSA or any other TFSA of the holder.

“swap transaction”, in respect of a trust governed by a TFSA, means a transfer of property (other than a transfer that is a distribution or a contribution) occurring between the trust and the holder of the TFSA or a person with whom the holder does not deal at arm’s length.

(8) Subsections (1) to (6) apply after October 16, 2009, except that subparagraph (c)(ii) of the definition “advantage” in subsection 207.01(1) of the Act, as enacted by subsection (2), does not apply in respect of income (including a capital gain) earned before October 17, 2009.

(9) The definition “deliberate over-contribution” in subsection 207.01(1) of the Act, as enacted by subsection (7), applies to contributions made after October 16, 2009.

(10) The definition “specified distribution” in subsection 207.01(1) of the Act, as enacted by subsection (7), applies to distributions that occur after October 16, 2009, other than the portion of a distribution that is, or is reasonably attributable to, an advantage that was extended, or income earned, before October 17, 2009.

(11) The definition “specified non-qualified investment income” in subsection 207.01(1) of the Act, as enacted by subsection (7), applies to the 2010 and subsequent taxation years.

(12) The definition “swap transaction” in subsection 207.01(1) of the Act, as enacted by subsection (7), applies to transfers of property that occur after October 16, 2009.

58. (1) Subsections 207.04(6) and (7) of the Act are repealed.

(2) Subsection (1) applies after October 16, 2009.

59. (1) Subsection 207.05(1) of the Act is replaced by the following:

207.05 (1) A tax is payable under this Part for a calendar year if, in the year, an advantage in relation to a TFSA is extended to, or is received or receivable by, a holder of the TFSA, a trust governed by the TFSA, or any other person who does not deal at arm’s length with the holder of the TFSA.

(2) Subsection (1) applies after October 16, 2009.

60. (1) Paragraph 207.06(1)(b) of the Act is replaced by the following:

(b) one or more distributions are made without delay under a TFSA of which the individual is the holder, the total amount of which is not less than the total of

(i) the amount in respect of which the individual would otherwise be liable to pay the tax, and

(ii) income (including a capital gain) that is reasonably attributable, directly or indirectly, to the amount described in subparagraph (i).

(2) Section 207.06 of the Act is amended by adding the following after subsection (2):

(3) The Minister shall not waive or cancel a liability imposed under subsection 207.05(3) on an individual unless one or more distributions are made without delay under a TFSA of which the individual is the holder, the total amount of which is not less than the amount of the liability waived or cancelled.

(4) The Minister may notify the holder of a TFSA that the holder must cause a distribution to be made under the TFSA within 90 days of receipt of the notice, the amount of which is not less than the amount of the specified non-qualified investment income.

(3) Subsections (1) and (2) apply after October 16, 2009.

61. (1) The Act is amended by adding the following after section 207.06:

207.061 A holder of a TFSA shall include in computing the holder’s income for a taxation year under Part I the total of all amounts each of which is the portion of a distribution made in the year that is described in

(a) subparagraph 207.06(1)(b)(ii);

(b) subsection 207.06(3); or

(c) subparagraph (a)(ii) of the definition “specified distribution”.

207.062 If an individual is liable to pay an amount of tax under section 207.05 and under sections 207.02 or 207.03 in respect of the same contribution for the same calendar year, the tax payable under section 207.05 for the year shall be reduced by the amount of the tax payable under section 207.02 or 207.03, as the case may be, for the year.

(2) Subsection (1) applies after October 16, 2009.

62. Paragraphs 207.07(2)(a) and (b) of the Act are replaced by the following:

(a) may, on sending the notice of assessment for the year, refund without application any allowable refund of the person for the year, to the extent that it was not applied against the person’s tax payable under paragraph (1)(b); and

(b) shall, with all due dispatch, make the refund referred to in paragraph (a) after sending the notice of assessment if an application for it has been made in writing by the person within three years after the sending of an original notice of assessment for the year.

63. Paragraphs 207.7(2)(a) and (b) of the Act are replaced by the following:

(a) may, on sending the notice of assessment for the year or a notification that no tax is payable for the year, refund without application an amount equal to the amount, if any, by which the refundable tax of the arrangement at the end of the immediately preceding year exceeds the refundable tax of the arrangement at the end of the year; and

(b) shall, with all due dispatch, make such a refund after sending the notice of assessment if application for it has been made in writing by the custodian within three years after the day of sending of a notice of an original assessment for the year or of a notification that no tax is payable for the year.

64. (1) Subsection 212(1) of the Act is amended by striking out “or” at the end of paragraph (u), by adding “or” at the end of paragraph (v) and by adding the following after paragraph (v):

(w) a payment out of a trust that is, or was, at any time, an employee life and health trust, except to the extent that it is a payment of a designated employee benefit (as defined by subsection 144.1(1)).

(2) Subsection (1) applies after 2009.

65. Subparagraph 222(4)(a)(i) of the Act is replaced by the following:

(i) if a notice of assessment, or a notice referred to in subsection 226(1), in respect of the tax debt is sent to or served on the taxpayer, after March 3, 2004, on the day that is 90 days after the day on which the last one of those notices is sent or served, and

66. (1) Paragraphs 225.1(1.1)(b) and (c) of the Act are replaced by the following:

(b) in the case of an amount assessed under section 188.1, one year after the day on which the notice of assessment was sent; and

(c) in any other case, 90 days after the day on which the notice of assessment was sent.

(2) Subsection 225.1(2) of the Act is replaced by the following:

(2) If a taxpayer has served a notice of objection under this Act to an assessment of an amount payable under this Act, the Minister shall not, for the purpose of collecting the amount in controversy, take any of the actions described in paragraphs (1)(a) to (g) until after the day that is 90 days after the day on which notice is sent to the taxpayer that the Minister has confirmed or varied the assessment.

(3) Paragraph 225.1(7)(a) of the Act is replaced by the following:

(a) at any time on or before the particular day that is 90 days after the day of the sending of the notice of assessment, 1/2 of the amount so assessed; and

67. Subsections 244(14) and (15) of the Act are replaced by the following:

(14) For the purposes of this Act, where any notice or notification described in subsection 149.1(6.3), 152(3.1), 165(3) or 166.1(5) or any notice of assessment or determination is mailed, or sent electronically, it shall be presumed to be mailed or sent, as the case may be, on the date of that notice or notification.

(14.1) For the purposes of this Act, if a notice or other communication in respect of a person or partnership is made available in electronic format such that it can be read or perceived by a person or a computer system or other similar device, the notice or other communication is presumed to be sent to the person or partnership and received by the person or partnership on the date that an electronic message is sent, to the electronic address most recently provided before that date by the person or partnership to the Minister for the purposes of this subsection, informing the person or partnership that a notice or other communication requiring the person or partnership’s immediate attention is available in the person or partnership’s secure electronic account. A notice or other communication is considered to be made available if it is posted by the Minister in the person or partnership’s secure electronic account and the person or partnership has authorized that notices or other communications may be made available in this manner and has not before that date revoked that authorization in a manner specified by the Minister.

(15) If any notice of assessment or determination has been sent by the Minister as required by this Act, the assessment or determination is deemed to have been made on the day of sending of the notice of the assessment or determination.

68. The portion of subsection 245(6) of the Act after paragraph (b) is replaced by the following:

any person (other than a person referred to in paragraph (a) or (b)) shall be entitled, within 180 days after the day of sending of the notice, to request in writing that the Minister make an assessment, reassessment or additional assessment applying subsection (2) or make a determination applying subsection 152(1.11) with respect to that transaction.

69. (1) The definition “employee benefit plan” in subsection 248(1) of the Act is replaced by the following:

“employee benefit plan” means an arrangement under which contributions are made by an employer or by any person with whom the employer does not deal at arm’s length to another person (in this Act referred to as the “custodian” of an employee benefit plan) and under which one or more payments are to be made to or for the benefit of employees or former employees of the employer or persons who do not deal at arm’s length with any such employee or former employee (other than a payment that, if section 6 were read without reference to subparagraph 6(1)(a)(ii) and paragraph 6(1)(g), would not be required to be included in computing the income of the recipient), but does not include any portion of the arrangement that is

(a) a fund, plan or trust referred to in subparagraph 6(1)(a)(i) or paragraph 6(1)(d) or (f),

(b) a trust described in paragraph 149(1)(y),

(c) an employee trust,

(c.1) a salary deferral arrangement, in respect of a taxpayer, under which deferred amounts are required to be included as benefits under paragraph 6(1)(a) in computing the taxpayer’s income,

(c.2) a retirement compensation arrangement,

(d) an arrangement the sole purpose of which is to provide education or training for employees of the employer to improve their work or work-related skills and abilities, or

(e) a prescribed arrangement;

(2) The definition “retirement compensation arrangement” in subsection 248(1) of the Act is amended by adding the following after paragraph (f):

(f.1) an employee life and health trust,

(3) The definition “salary deferral arrangement” in subsection 248(1) of the Act is amended by adding the following after paragraph (e):

(e.1) an employee life and health trust,

(4) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:

“employee life and health trust” has the meaning assigned by subsection 144.1(2);

(5) Subsections (1) to (4) apply after 2009.