Legislative proposals relating to the Income Tax Act and the Income Tax Regulations (Budget 2022 and other proposals)

1 (1) Subsection 18(11) of the Income Tax Act is amended by striking out “or” at the end of paragraph (i), by adding “or” at the end of paragraph (j) and by adding the following after paragraph (j):

(k) making a contribution to a FHSA,

(2) Subsection (1) comes into force on January 1, 2023.

2 (1) Subsection 56(1) of the Act is amended by striking out “and” at the end of paragraph (z.4), by adding “and” at the end of paragraph (z.5) and by adding the following after paragraph (z.5):

First home savings account

(z.6) any amount required by section 146.6 to be included in computing the taxpayer’s income for the year.

(2) Subsection (1) comes into force on January 1, 2023.

3 (1) Paragraph 60(i) of the Act is replaced by the following:

Premium or payment – FHSA, RRSP or RRIF

(i) any amount that is deductible under section 146, 146.3 or 146.6 or subsection 147.3(13.1) in computing the income of the taxpayer for the year;

(2) Subsection (1) comes into force on January 1, 2023.

4 (1) Subsection 74.5(12) 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) as a payment of a contribution under a FHSA.

(2) Subsection (1) comes into force on January 1, 2023.

5 (1) Subsection 146(16) of the Act is amended by striking out “or” at the end of paragraph (a.1) and by adding the following after paragraph (a.1):

(a.2) to a FHSA for the benefit of the transferor, if subsection (8.3) would not apply to an amount in respect of the property in the case that the property was instead received by the transferor as a benefit out of or under the registered retirement savings plan, or

(2) Paragraph 146(16)(d) of the Act is replaced by the following:

(d) no deduction may be made under subsection (5), (5.1) or (8.2) or section 8, 60 or 146.6 in respect of the payment or transfer in computing the income of any taxpayer, and

(3) Subsections (1) and (2) come into force on January 1, 2023.

6 (1) The definition regular eligible amount in subsection 146.01(1) of the Act is amended by striking out “and” at the end of paragraph (h), by adding “and” at the end of paragraph (i) and by adding the following after paragraph (i):

(j) the individual did not make a qualifying withdrawal (as defined in subsection 146.6(1)) in respect of the qualifying home. (montant admissible principal)

(2) The definition supplemental eligible amount in subsection 146.01(1) of the Act is amended by striking out “and” at the end of paragraph (g), by adding “and” at the end of paragraph (h) and by adding the following after paragraph (h):

(i) the individual did not make a qualifying withdrawal (as defined in subsection 146.6(1)) in respect of the qualifying home. (montant admissible supplémentaire)

(3) Subsections (1) and (2) come into force on January 1, 2023.

7 (1) Paragraph 146.3(2)(f) of the Act is amended by striking out “or” at the end of subparagraph (viii), by adding “or” at the end of subparagraph (ix) and by adding the following after subparagraph (ix):

(x) a FHSA in accordance with subsection 146.6(6);

(2) Subsection (1) comes into force on January 1, 2023.

8 (1) The Act is amended by adding the following after section 146.5:

Definitions

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

beneficiary under a FHSA means an individual (including an estate) or a qualified donee that has a right to receive a distribution from the FHSA after the death of the holder of the FHSA. (bénéficiaire)

first home savings account or FHSA means an arrangement that has been registered with the Minister and has not ceased to be a FHSA under 146.6(13). (compte d’épargne libre d’impôt pour l’achat d’une première propriété ou CELIAPP )

FHSA carryforward of a taxpayer for a taxation year is the least of

(a) $8,000;

(b) the amount determined by the formula

A − B

where

A is the amount determined in paragraph (b) of the definition FHSA deduction limit for the preceding taxation year;

B is the amount determined in paragraph (a) of the definition FHSA deduction limit for the preceding taxation year; and

(c) nil, if the taxpayer had not started their maximum participation period prior to the taxation year. (montant des cotisations reporté)

FHSA deduction limit of a taxpayer for a taxation year is the least of

(a) the amount determined by the formula

A + B − C

where

A is the total of all contributions made to a FHSA in the year by the taxpayer (other than any contributions made after the taxpayer's first qualifying withdrawal from a FHSA);

B is the amount by which the amount determined under this paragraph for the preceding taxation year exceeds the FHSA deduction limit for that taxation year; and

C is the total of all designated amounts described in paragraph (b) of the definition designated amount in subsection 207.01(1) for the year;

(b) the amount determined by the formula

$8,000 + D − (E − F − G)

where

D is the amount of the FHSA carryforward for the taxation year;

E is the total of all amounts transferred in the year or a preceding taxation year under paragraph 146(16)(a.2) to a FHSA under which the taxpayer is the holder; and

F is the total of all amounts, each of which is an amount determined in respect of each preceding taxation year that is

(i) if the taxpayer did not have a FHSA in the preceding taxation year, nil; or

(ii) in any other case, the lesser of

(A) the amount determined by the formula

H − I

where

H is the amount for E in the preceding taxation year;

I is the amount determined for F in the preceding taxation year; and

(B) $8,000; and

G is the total of all designated amounts described in paragraph (a) of the definition designated amount in subsection 207.01(1); and

(i) the taxpayer’s maximum participation period has ended, or

(ii) the taxpayer has died. (maximum déductible au titre du CELIAPP)

holder of an arrangement means

(a) until the death of the individual who entered into the arrangement, the individual; and

(b) after the death of the individual, the individual’s survivor, if the survivor is designated under the arrangement to become a successor of the holder and is a qualifying individual. (titulaire)

issuer of an arrangement means the person described as the issuer in the definition qualifying arrangement. (émetteur)

maximum participation period of an individual means the period that

(a) begins when an individual first enters into a qualifying arrangement; and

(b) ends at the end of the year following the year in which the earliest of the following events occur

(i) the 14th anniversary of the date the individual first enters into a qualifying arrangement,

(ii) the individual attains 70 years of age, and

(iii) the individual first makes a qualifying withdrawal from a FHSA. (période de participation maximale)

non-qualified investment has the same meaning as in subsection 207.01(1). (placement non admissible)

qualified investment has the same meaning as in subsection 207.01(1). (placement admissible)

qualifying arrangement, at a particular time, means an arrangement

(a) that is entered into after 2022 between a person (in this definition referred to as the “issuer”) and a qualifying individual;

(b) that is

(i) an arrangement in trust with an issuer that is a corporation 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,

(ii) an annuity contract with an issuer that is a licensed annuities provider, or

(iii) a deposit with an issuer that is

(A) a person that is, or is eligible to become, a member of the Canadian Payments Association, or

(B) a credit union that is a shareholder or member of a body corporate referred to as a “central” for the purposes of the Canadian Payments Act;

(c) that provides for contributions to be made under the arrangement to the issuer in consideration of, or to be used, invested or otherwise applied for the purpose of, the issuer making distributions under the arrangement to the holder;

(d) under which the issuer and the qualifying individual agree, at the time the arrangement is entered into, that the issuer will file with the Minister an election to register the arrangement as a FHSA, in the prescribed form and manner under the Social Insurance Number of the qualifying individual with whom the arrangement was entered into; and

(e) that, at all times throughout the period that begins at the time the arrangement is entered into and that ends at the particular time, complies with the conditions in subsection (2). (arrangement admissible)

qualifying home means

(a) a housing unit located in Canada, or

(b) a share of the capital stock of a cooperative housing corporation, the holder of which is entitled to possession of a housing unit located in Canada, except that, where the context so requires, a reference to a share with a right to possession of a housing unit described means the housing unit to which the share relates. (habitation admissible)

qualifying individual, at any time, means an individual who

(a) is a resident of Canada;

(b) is at least 18 years of age; and

(c) did not, at any prior time in the calendar year or in the preceding four calendar years, inhabit a qualifying home (or what would be a qualifying home if it were located in Canada) as the individual’s principal place of residence, and

(i) own, whether jointly with another person or otherwise, the qualifying home (or what would be a qualifying home if it were located in Canada), or

(ii) have an interest in the qualifying home (or what would be a qualifying home if it were located in Canada), including any rights as a beneficiary, whether immediate or future, whether absolute or contingent or whether conditional on or subject to the exercise of any discretion by any person or partnership, other than an entitlement to acquire less than a ten per cent interest in the qualifying home. (particulier déterminé)

qualifying withdrawal of an individual means an amount received at a particular time by the individual as a benefit out of or under a FHSA if

(a) the individual

(i) is a resident of Canada and,

(ii) the individual does not have an owner-occupied home within the meaning of paragraph 146.01(2)(a.1) in the period

(A) that begins at the beginning of the fourth preceding calendar year that ended before the particular time, and

(B) that ends on the 31st day before the particular time,

(b) the amount is received pursuant to the individual’s written request in a prescribed form in which the individual sets out the location of a qualifying home that the individual has begun, or intends not later than one year after its acquisition by the individual to begin, using as a principal place of residence,

(c) the individual entered into an agreement in writing before the particular time for the acquisition or construction of the qualifying home before October 1 of the calender year following the year in which the amount was received,

(d) the individual did not acquire the qualifying home more than 30 days before the particular time, and

(e) the individual has not received an amount from an RRSP that is a regular eligible amount (within the meaning of subsection 146.01(1)) in respect of the qualifying home described in paragraph (b). (retrait admissible)

survivor of a qualifying individual means another individual who is, immediately before the qualifying individual’s death, a spouse or common-law partner of the qualifying individual. (survivant)

Qualifying arrangement conditions

(2) For the purposes of paragraph (e) of the definition qualifying arrangement in subsection (1), the conditions are as follows:

(a) the arrangement requires that it be maintained for the exclusive benefit of the holder (determined without regard to any right of a person to receive a payment out of or under the arrangement only on or after the death of the holder);

(b) the arrangement prohibits, while there is a holder of the arrangement, anyone that is neither the holder nor the issuer of the arrangement from having rights under the arrangement relating to the amount and timing of distributions and the investing of funds;

(d) the arrangement permits distributions to be made to reduce the amount of tax otherwise payable by the holder under section 207.021;

(e) the arrangement provides that, at the direction of the holder, the issuer shall transfer all or any part of the property held in connection with the arrangement (or an amount equal to its value) to another FHSA of the holder or to an RRSP or a RRIF under which the holder is the annuitant;

(f) if the arrangement is an arrangement in trust, it prohibits the trust from borrowing money or other property for the purposes of the arrangement;

(g) the arrangement provides that it ceases to be a FHSA after the end of the holder’s maximum participation period; and

(h) the arrangement meets prescribed conditions.

Trust not taxable

(3) No tax is payable under this Part by a trust that is governed by a FHSA on its taxable income for a taxation year, except that, if at any time in the taxation year, it carries on one or more businesses or holds one or more properties that are non-qualified investments for the trust, tax is payable under this Part by the trust on the amount that would be its taxable income for the taxation year if it had no incomes or losses from sources other than those businesses and properties, and no capital gains or capital losses other than from dispositions of those properties, and for that purpose,

(a) income includes dividends described in section 83;

(b) the trust’s taxable capital gain or allowable capital loss from the disposition of a property is equal to its capital gain or capital loss, as the case may be, from the disposition; and

FHSA deduction

(4) There may be deducted in computing a taxpayer’s income for a taxation year an amount not exceeding the lesser of

(a) the amount determined by the formula

A − B

where

A is the total of all amounts each of which is the taxpayer’s FHSA deduction limit for the year and each preceding taxation year, and

B is the total of all amounts each of which is an amount deducted under this subsection in computing the individual’s income for preceding taxation years; and

(b) the amount by which $40,000 exceeds the total of

(i) the amount determined for B in paragraph (a), and

(ii) all amounts transferred in the year or a preceding taxation year under paragraph 146(16)(a.2) to a FHSA under which the taxpayer is the holder.

Withdrawals included in income

(5) There shall be included in computing the income of a taxpayer for a taxation year the total of all amounts received by the taxpayer in the year out of or under a FHSA of which the taxpayer is the holder, other than an amount that is

(a) a qualifying withdrawal;

(b) a designated amount as defined in subsection 207.01; or

Transfer of amounts

(6) Subsection (7) applies to an amount transferred at a particular time from a FHSA if the amount

(a) is transferred on behalf of an individual who is

(i) the holder of the FHSA,

(ii) a spouse or common-law partner or former spouse or common-law partner of the holder of the FHSA and who is entitled to the amount under a decree, order or judgment of a competent tribunal, or under a written agreement, relating to a division of property between the holder and the individual, in settlement of rights arising out of, or on a breakdown of, their marriage or common-law partnership, or

(iii) entitled to the amount as a consequence of the death of the holder of the FHSA and was a spouse or common-law partner of the holder immediately before the death;

(b) is transferred directly to

(i) another FHSA of the individual, or

(ii) an RRSP or a RRIF under which the individual is the annuitant; and

A − B

where

A is the amount that is the total fair market value, immediately before the particular time, of all property held by a FHSA under which the individual is a holder, and

B is the excess FHSA amount (as defined in subsection 207.01) of the individual at the particular time.

Tax-free transfer

(7) If this subsection applies to an amount transferred from a FHSA,

(a) the amount shall not, by reason only of the transfer, be included in computing the income of any taxpayer; and

(b) no deduction may be made under this Part in respect of the amount in computing the income of any taxpayer.

Taxable transfer

(8) If an amount is transferred from a FHSA to a plan or fund (in this subsection referred to as the “transferee plan”) that is a FHSA, a RRSP or a RRIF and subsection (7) does not apply to the amount transferred,

(a) the amount is deemed to have been received from the FHSA by the holder of the FHSA;

(b) the holder or annuitant of the transferee plan is deemed to have paid the amount as a contribution or premium to the transferee plan; and

(c) in the case that the transferee plan is a RRIF, for the purposes of subsection 146(5) and Part X.1, the annuitant of the transferee plan is deemed to have paid the amount at the time of the transfer as a premium under a RRSP under which the annuitant is the annuitant (within the meaning of subsection 146(1)).

Security for a loan

(9) If at any time in a taxation year a trust governed by a FHSA uses or permits to be used any property of the trust as security for a loan, the fair market value of the property at the time it commenced to be so used shall be included in computing the income for the year of the holder of the FHSA at that time.

Successor holder

(10) If the holder of a FHSA dies and the holder’s survivor is designated as the successor holder of the FHSA, the survivor is, after the time of death, deemed to have entered into a new qualifying arrangement in respect of the FHSA unless

(a) the survivor is a qualifying individual and the balance of the FHSA is transferred to a RRSP or a RRIF of the survivor, or distributed to the survivor in accordance with subsection (11), by the end of the year following the year of death; or

(b) the survivor is not a qualifying individual, in which case the balance of the FHSA must be transferred to a RRSP or a RRIF of the survivor, or distributed to the survivor in accordance with subsection (11), by the end of the year following the year of death.

Distribution on death

(11) If, as a consequence of the death of the holder of a FHSA, an amount is distributed in a taxation year from the FHSA to, or on behalf of, a beneficiary, the amount shall be included in computing the beneficiary's income for the year.

Deemed transfer or distribution

(12) If an amount is distributed at any time from the FHSA of a deceased holder to the holder’s legal representative and a survivor of the holder is entitled to all or a portion of the amount in full or partial satisfaction of the survivor’s rights as a person beneficially interested under the deceased’s estate, the following rules apply:

(a) if a payment is made from the estate to a FHSA, RRSP or RRIF of the survivor, the payment is deemed to be a transfer from the FHSA in accordance with subsection (6) to the extent that it is so designated jointly by the legal representative and the survivor in prescribed form filed with the Minister;

(b) if a payment is made from the estate to the survivor, the payment is deemed for the purposes of subsection (11) to be a distribution to the survivor as a beneficiary to the extent that it is so designated jointly by the legal representative and the survivor in prescribed form filed with the Minister; and

(c) for the purposes of subsection (11), the amount distributed to the legal representative from the FHSA is deemed to be reduced by the amounts designated in paragraphs (a) and (b).

Arrangement ceasing to be a FHSA

(13) An arrangement that was filed with the Minister as a FHSA ceases to be a FHSA at

(a) subject to paragraph (b), the earliest of the following times:

(i) the end of the maximum participation period of the last holder,

(ii) the end of the year following the year of the death of the last holder,

(iii) the time at which the arrangement ceases to be a qualifying arrangement, or

(iv) the time at which the arrangement is not administered in accordance with the conditions in subsection (2); or

(b) a later time specified by the Minister in writing.

Rules applicable on FHSA cessation

(14) If an arrangement ceases at a particular time to be a FHSA,

(a) subsection (3) does not apply to exempt the trust governed by the arrangement from tax under this Part on the taxable income of the trust earned after the particular time; and

(b) the taxpayer who was the holder under the arrangement immediately before it ceased to be a FHSA shall include in the taxpayer’s income for the taxation year that includes the particular time an amount equal to the fair market value of all property of the arrangement immediately before the particular time.

Regulations

(15) The Governor in Council may make regulations requiring issuers of FHSAs to file information returns in respect of FHSAs.

(2) Subsection (1) comes into force January 1, 2023.

9 (1) Subsection 149(1) of the Act is amended by adding the following after paragraph (u.3):

(u.4) a trust governed by a FHSA to the extent provided by section 146.6;

(2) Subsection (1) comes into force on January 1, 2023.

10 (1) Subsection 153(1) of the Act is amended by striking out “or” at the end of paragraph (t), by adding “or” at the end of paragraph (u) and by adding the following after paragraph (u):

(v) a payment out of or under

(i) a FHSA, if the amount is required by section 146.6 to be included in computing a taxpayer’s income, or

(ii) an arrangement that ceased to be a FHSA by application of subsection 146.6(13).

(2) Subsection (1) comes into force on January 1, 2023.

11 (1) Section 160.2 of the Act is amended by adding the following after subsection (2.2):

Joint and several liability — FHSA

(2.3) If an amount required to be included in the income of a holder of a FHSA because of section 146.6 is received by a taxpayer other than the holder, that taxapayer is jointly and severally, or solidarily, liable with the holder to pay a part of the holder’s tax under this Part for the taxation year in which the amount is received equal to the amount by which the holder’s tax for the year exceeds the amount that would be the holder’s tax for the year if the amount had not been received, but nothing in this subsection limits the liability of the holder under any other provision of this Act or of the taxpayer for the interest that the taxpayer is liable to pay under this Act on an assessment in respect of the amount that the taxpayer is liable to pay because of this subsection.

(2) Subsection 160.2(4) of the Act is replaced by the following:

Rules applicable

(4) If a taxpayer and an annuitant or holder have, by virtue of subsection (1), (2) or (2.3), become jointly and severally, or solidarily, liable in respect of part or all of a liability of the annuitant or holder under this Act, the following rules apply:

(a) a payment by the taxpayer on account of the taxpayer’s liability shall to the extent thereof discharge their liability; but

(b) a payment by the annuitant or holder on account of the liability of the annuitant or holder discharges the taxpayer’s liability only to the extent that the payment operates to reduce the liability of the annuitant or holder to an amount less than the amount in respect of which the taxpayer was, by subsection (1), (2) or (2.3), as the case may be, made jointly and severally, or solidarily, liable.

(3) Subsections (1) and (2) come into force on January 1, 2023.

12 (1) The definition registered plan in subsection 207.01(1) of the Act is replaced by the following:

registered plan means a FHSA, RDSP, RESP, RRIF, RRSP or TFSA. (régime enregistré)

(2) The portion of the definition qualified investment in subsection 207.01(1) of the Act before paragraph (b) is replaced by the following:

qualified investment for a trust governed by a FHSA or TFSA means

(a) an investment that would be described by any of paragraphs (a) to (d), (f) and (g) of the definition qualified investment in section 204 if the reference in that definition to “a trust governed by a deferred profit sharing plan or revoked plan” were read as a reference to “a trust governed by a FHSA or TFSA” and if that definition were read without reference to the words “with the exception of excluded property in relation to the trust”;

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

designated amount of an individual means an amount, not exceeding the excess FHSA amount of the individual, designated by the individual in the prescribed form and manner that is

(a) a transfer in accordance with subparagraph 146.6(6)(b)(ii) to the extent that it does not exceed the total of all amounts transferred under paragraph 146(16)(a.2), on or before the date of the designation, to a FHSA under which the individual is the holder; or

(b) a withdrawal from a FHSA to the extent that it does not exceed the total of all amounts contributed on or before the date of the designation to a FHSA under which the individual is the holder. (montant désigné)

excess FHSA amount of an individual at a particular time in a taxation year means the amount determined by the formula

A + B − C − D − E

where

A is the total of all amounts each of which is a contribution made to a FHSA by the individual at or before the particular time;

B is the total of all amounts transferred under paragraph 146(16)(a.2), at or before the particular time, to a FHSA under which the individual is the holder;

C is the lesser of

(a) $40,000, and

(b) the amount determined by the formula

$8,000 + F + G + H - I

where

F is the amount of the FHSA carryforward as defined in subsection 146.6(1) for the taxation year,

G is the total of all amounts each of which is a contribution made to a FHSA by the individual at or before the end of the immediately preceding taxation year,

H is the total of all amounts transferred under paragraph 146(16)(a.2), at or before the end of the immediately preceding taxation year, to a FHSA under which the individual is the holder, and

I is the excess FHSA amount determined at the end of the immediately preceding taxation year;

D is the total of all amounts each of which is a designated amount in respect of a transfer or withdrawal made by the individual before the particular time; and

E is the total of all amounts required to be included in computing the income of the individual under subsection 146.6(5) or 146.6(14) at or before the particular time. (excédent de CELIAPP)

(4) Subsections (1) to (3) come into force on January 1, 2023.

13 (1) The Act is amended by adding the following after section 207.02:

Tax payable on excess FHSA amount

207.021 If, at any time in a calendar month, an individual has an excess FHSA amount, the individual shall, in respect of that month, pay a tax under this Part equal to 1% of the highest such amount in that month.

(2) Subsection (1) comes into force on January 1, 2023.

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

Waiver of tax payable

(3) If an individual would otherwise be liable to pay a tax under section 207.021, the Minister may waive or cancel all or part of the liability if

(a) the individual establishes to the satisfaction of the Minister that the liability arose as a consequence of a reasonable error; and

(b) one or more distributions are made without delay under a FHSA 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 tax, and

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

(2) Subsection (1) comes into force on January 1, 2023.

15 (1) Subsection 212(1) of the Act is amended by striking out “or” at the end of paragraph (w), by adding “or” at the end of paragraph (x) and by adding the following after paragraph (x):

First home savings account

(y) a payment out of a FHSA, other than any portion thereof that is transferred in accordance with subsection 146.6(6).

(2) Subsection (1) comes into force on January 1, 2023.

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

first home savings account or FHSA has the same meaning as in subsection 146.6(1); (compte d’épargne libre d’impôt pour l’achat d’une première propriété ou CELIAPP)

(2) Subsection (1) comes into force on January 1, 2023.

17 (1) The definition remuneration in subsection 100(1) of the Income Tax Regulations is amended by striking out “or” at the end of paragraph (o), by adding “or” at the end of paragraph (p), and adding the following after paragraph (p):

(q) a payment described in paragraph 153(1)(v) of the Act. (rémunération)

(2) Subsection (1) comes into force on January 1, 2023.

18 (1) Subsection 103(6) of the Regulations is amended by striking out “or” at the end of paragraph (g), by adding “or” at the end of paragraph (h) and by adding the following after paragraph (h):

(i) a payment described in paragraph 153(1)(v) of the Act.

(2) Subsection (1) comes into force on January 1, 2023.

19 (1) The table in subsection 205(3) of the Regulations is amended by adding the following in alphabetical order:

First Home Savings Account (FHSA) Annual Information Return

(2) Subsection (1) comes into force on January 1, 2023.

20 (1) The table in subsection 205.1(1) of the Regulations is amended by adding the following in alphabetical order:

First Home Savings Account (FHSA) Annual Information Return

(2) Subsection (1) comes into force on January 1, 2023.

21 (1) Subsection 209(1) of the Regulations is replaced by the following:

209 (1) A person who is required by section 200, 201, 202, 203, 204, 212, 214 (other than subsection 214(1.1)), 215 (other than subsection 215(2.1)), 217 or 218, subsection 219(2) or 223(2) or section 228, 229, 230, 232, 233 or 234 to make an information return shall forward to each taxpayer to whom the return relates two copies of the portion of the return that relates to that taxpayer.

(2) Subsection (1) comes into force on January 1, 2023.

22 (1) The Regulations is amended by adding the following after section 218:

219 (1) An issuer of a FHSA shall make an information return for each calendar year in prescribed form and manner in respect of the FHSA.

(2) An issuer of a FHSA shall make an information return in prescribed form and manner in respect of any calendar year in which one or more of the following occurs:

(a) the holder makes a contribution to the FHSA;

(b) an amount has been transferred to the FHSA from an RRSP under which the holder is an annuitant;

(d) the holder makes a qualifying withdrawal from the FHSA; or

(e) the holder designates an amount under the definition of designated amount in subsection 207.01(1) of the Act.

(3) An issuer of a FHSA that governs a trust shall notify the holder of the FHSA in prescribed form and manner before March of a calendar year if, at any time during the preceding calendar year,

(a) the trust acquires or disposes of property that is a non-qualified investment (as defined in subsection 207.01(1) of the Act) for the trust; or

(b) property held by the trust becomes or ceases to be a non-qualified investment (as defined in subsection 207.01(1) of the Act) for the trust.

(2) Subsection (1) comes into force on January 1, 2023.

23 (1) Subsection 4900(5) of the Regulations is replaced by the following:

(5) For the purposes of paragraph (e) of the definition qualified investment in subsection 146.1(1) of the Act, paragraph (d) of the definition qualified investment in subsection 146.4(1) of the Act and paragraph (c) of the definition qualified investment in subsection 207.01(1) of the Act, a property is prescribed as a qualified investment for a trust governed by a FHSA, a registered disability savings plan, a registered education savings plan or a TFSA at any time if at that time the property is an interest in a trust or a share of the capital stock of a corporation that was a registered investment for a trust governed by a registered retirement savings plan during the calendar year in which that time occurs or during the preceding year.

(2) The portion of subsection 4900(14) of the Regulations before paragraph (a) is replaced by the following:

(14) For the purposes of paragraph (d) of the definition qualified investment in subsection 146(1) of the Act, paragraph (e) of the definition qualified investment in subsection 146.1(1) of the Act, paragraph (c) of the definition qualified investment in subsection 146.3(1) of the Act and paragraph (c) of the definition qualified investment in subsection 207.01(1) of the Act, a property is prescribed as a qualified investment for a trust governed by a FHSA, RESP, RRIF, RRSP or TFSA at any time if, at the time the property was acquired by the trust, the property

(3) Subparagraph 4900(14)(a)(iii) of the Regulations is replaced by the following:

(iii) a qualifying share in respect of a specified cooperative corporation and the FHSA, RESP, RRIF, RRSP or TFSA; and

(4) Subsection 4900(15) of the Regulations is replaced by the following:

(15) For the purposes of the definition prohibited investment in subsection 207.01(1) of the Act, property that is a qualified investment for a trust governed by a FHSA, RESP, RRIF, RRSP or TFSA solely because of subsection (14) is prescribed property for the trust at any time if, at that time, the property is not described in any of subparagraphs (14)(a)(i) to (iii).

(5) Subsections (1) to (4) come into force on January 1, 2023.

24 (1) Section 5 of the Schedule to the Canada Deposit Insurance Corporation Act is amended by adding the following after subsection (3):

(3.1) Despite subsection 6(2), for the purposes of deposit insurance with the Corporation, if moneys that constitute a deposit or part of a deposit are received by a member institution from a depositor under a first home savings account as defined in subsection 146.6(1) of the Income Tax Act, and the account is for the benefit of an individual, then the aggregate of those moneys and any other moneys that constitute a deposit or part of a deposit received from that depositor under any other first home savings account that is for the benefit of that individual is considered to be a single deposit separate from any other deposit for the benefit of that individual.

(2) Subsection (1) comes into force on January 1, 2023.

1 (1) Subsection 118.05(3) of the Act is replaced by the following:

First-time homebuyers’ tax credit

(3) In computing the tax payable under this Part by an individual for a taxation year in which a qualifying home in respect of the individual is acquired, there may be deducted the amount determined by multiplying $10,000 by the appropriate percentage for the taxation year.

(2) Subsection (1) applies to the 2022 and subsequent taxation years.

1 (1) Paragraph 108(1.1)(a) of the Act is replaced by the following:

(a) a qualifying expenditure (within the meaning of section 118.04, 118.041 or 122.92) of a beneficiary under the trust; or

(2) Subsection (2) comes into force on January 1, 2023.

2 (1) The Act is amended by adding the following after section 122.91:

SUBDIVISION A.6

Definitions

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

eligible dwelling, of a qualifying individual, for a renovation period taxation year, means a housing unit (including the land subjacent to the housing unit and the immediately contiguous land, but not including the portion of that land that exceeds the greater of ½ hectare and the portion of that land that is necessary for the use and enjoyment of the housing unit as a residence) located in Canada if

(a) the qualifying individual or a qualifying relation of the qualifying individual (or a trust under which the qualifying individual or a qualifying relation is a beneficiary) owns — whether jointly with another person or otherwise — at any time in the renovation period taxation year, the housing unit; and

(b) the housing unit is ordinarily inhabited, or is reasonably expected to be ordinarily inhabited, within twelve months after the end of the renovation period

(i) by the qualifying individual, and

(ii) by a qualifying relation of the qualifying individual. (logement admissible)

eligible individual, in respect of an eligible dwelling for a renovation period taxation year, means

(a) an individual who ordinarily resides, or intends to ordinarily reside, in the eligible dwelling within twelve months after the end of the renovation period in respect of a qualifying renovation of the eligible dwelling and who is

(i) a qualifying individual,

(ii) the cohabiting spouse or common-law partner (within the meaning of section 122.6) of a qualifying individual at any time in the renovation period taxation year, or

(iii) a qualifying relation of a qualifying individual; or

(b) a qualifying relation, of a qualifying individual, who

(i) owns the eligible dwelling, or

(ii) is the beneficiary of a trust that owns the eligible dwelling. (particulier admissible)

individual does not include a trust. (particulier)

qualifying expenditure, of an individual, means a reasonable outlay or expense that

(a) is directly attributable to a qualifying renovation of an eligible dwelling in respect of which the individual is an eligible individual;

(b) is made or incurred by the individual during the renovation period in respect of the qualifying renovation referred to in paragraph (a);

(c) is the cost of goods acquired or services received, including an outlay or expense for permits required for, or for the rental of equipment used in the course of, the qualifying renovation; and

(d) is not an outlay or expense

(i) that is the cost of annual, recurring or routine repair or maintenance;

(ii) to acquire a household appliance,

(iii) to acquire an electronic home-entertainment device,

(iv) that is the cost of housekeeping, security monitoring, gardening, outdoor maintenance or similar services,

(v) for financing costs in respect of the qualifying renovation,

(vi) in respect of goods or services provided by a person not dealing at arm’s length with the individual, unless the person is registered for the purposes of Part IX of the Excise Tax Act, or

(vii) to the extent that the outlay or expense can reasonably be considered to have been reimbursed. (dépense admissible)

qualifying individual, in respect of a renovation period taxation year, means an individual who has attained the age of

(a) 65 years before the end of the renovation period taxation year; or

(b) 18 years before the end of the renovation period taxation year and in respect of whom an amount is deductible, or would be deductible if this Act were read without reference to paragraph 118.3(1)(c), under section 118.3 in computing a taxpayer’s tax payable under this Part for the renovation period taxation year. (particulier déterminé)

qualifying relation, of a qualifying individual for a renovation period taxation year, means an individual who

(a) has attained the age of 18 years before the end of the renovation period taxation year; and

(b) at any time in the renovation period taxation year, is a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of either the qualifying individual or the cohabiting spouse or common-law partner (within the meaning of section 122.6) of the qualifying individual. (proche admissible)

qualifying renovation means a renovation or alteration of, or addition to, an eligible dwelling of a qualifying individual that

(a) is of an enduring nature and integral to the eligible dwelling; and

(b) is undertaken to enable the qualifying individual to reside in the dwelling with a qualifying relation of the qualifying individual, by establishing a secondary unit within the dwelling for occupancy by the qualifying individual or the qualifying relation. (travaux de rénovation admissibles)

renovation period, for a qualifying renovation of an eligible dwelling, means a period that

(a) begins at the time that the municipality or local authority where the eligible dwelling is located permits or authorizes the commencement of the qualifying renovation; and

(b) ends at the time of the completion of the qualifying renovation. (période de rénovation)

renovation period taxation year means the taxation year in which the renovation period in respect of a qualifying renovation ends. (année d’imposition de la période de rénovation)

secondary unit means a self-contained housing unit that

(a) has a private entrance, kitchen, bathroom and sleeping area;

(b) if applicable, meets any local requirements to qualify as a secondary dwelling unit; and

Qualifying expenditure rules

(2) For the purposes of this section, a qualifying expenditure of a particular individual who is an eligible individual in respect of an eligible dwelling, includes an outlay or expense made or incurred by a trust of which the particular individual is a beneficiary, in respect of the eligible dwelling, to the extent of the share of that outlay or expense that is reasonably attributable to the eligible dwelling, having regard to the amount of the outlays or expenses made or incurred in respect of the eligible dwelling, if

(a) the outlay or expense would be a qualifying expenditure of the particular individual if the outlay or expense had been made or incurred by that individual; and

(b) the trust has notified the particular individual of the amount of the outlay or expenses that are attributable to the eligible dwelling.

Deemed overpayment

(3) An eligible individual who files a return of income for a renovation period taxation year and who makes a claim under this subsection in that return of income, is deemed to have paid, at the end of the taxation year, on account of tax payable under this Part for the taxation year, an amount equal to the amount determined by the formula

A×B

where

A is the appropriate percentage for the taxation year; and

B is the least of

(a) $50,000,

(b) the total of all amounts, each of which is a qualifying expenditure of the individual in respect of a qualifying renovation that ended in the taxation year, and

Limits

(4) For the purpose of this section,

(a) qualifying expenditures may be claimed under subsection (3) only for one qualifying renovation in respect of a qualifying individual in the lifetime of the qualifying individual by all taxpayers in respect of the qualifying individual;

(b) a maximum of $50,000 of qualifying expenditures may be claimed by all taxpayers in respect of the same qualifying renovation; and

(c) if more than one taxpayer is entitled to a deduction under subsection (3) in respect of the same qualifying individual or the same qualifying renovation and the taxpayers cannot agree as to what portion of the amount each can so deduct, the Minister may fix the portions.

Effect of bankruptcy

(5) For the purpose of this Subdivision, if an eligible individual becomes bankrupt in a particular calendar year, despite subsection 128(2), any reference to the taxation year of the eligible individual is deemed to be a reference to the particular calendar year.

Special rules in the event of death

(6) For the purpose of this section, if an eligible individual or a qualifying individual dies in a calendar year,

(a) the deceased individual is deemed to be resident in Canada from the time of death until the end of the year if, immediately before death, the deceased individual was resident in Canada;

(b) the deceased individual is deemed to be the same age at the end of the year as the individual would have been if the individual were alive at the end of the year; and

(c) the deceased individual is deemed to be the cohabiting spouse or common-law partner of another individual (referred to in this paragraph as the “surviving spouse”) at the end of the year if,

(i) immediately before death, the deceased individual was the cohabiting spouse or common-law partner of the surviving spouse, and

(ii) the surviving spouse is not the cohabiting spouse or common-law partner of another individual at the end of the year; and

(d) any return of income filed by a legal representative of the deceased individual is deemed to be a return of income filed by the individual.

(2) Subsection (1) applies to the 2023 and subsequent taxation years, in respect of qualifying expenditures paid after December 31, 2022 for services performed or goods acquired after that date.

1 (1) Section 12 of the Act is amended by adding the following after subsection (11):

Flipped property — deemed income

(12) For the purposes of this Act, if, absent this subsection and paragraph 40(2)(b), a taxpayer would have had a gain from the disposition of a flipped property, then throughout the period that the taxpayer owned the flipped property

(a) the taxpayer is deemed to carry on a business that is an adventure or concern in the nature of trade with respect to the flipped property;

(b) the flipped property is deemed to be inventory of the taxpayer’s business; and

Flipped property

(13) For the purposes of subsections (12) and 111(8), a flipped property means a housing unit of a taxpayer (other than a property that would be inventory of the taxpayer if the definition inventory was read without reference to subsection (12)) located in Canada, that was owned by the taxpayer for less than 365 consecutive days prior to the disposition of the property, other than a disposition that can reasonably be considered to occur due to, or in anticipation of, one or more of the following events:

(a) the death of the taxpayer or a person related to the taxpayer;

(b) one or more persons related to the taxpayer joining the taxpayer’s household or the taxpayer joining the household of a related person;

(c) the breakdown of the marriage or common-law partnership of the taxpayer if the taxpayer has been living separate and apart from their spouse or common-law partner for at least 90 days prior to the disposition;

(d) a threat to the personal safety of the taxpayer or a related person;

(e) the taxpayer or a related person suffering from a serious illness or disability;

(f) an eligible relocation of the taxpayer or the taxpayer’s spouse or common-law partner, if that definition was read without reference to the requirements for the new work location and the new residence to be in Canada;

(g) an involuntary termination of the employment of the taxpayer or the taxpayer’s spouse or common-law partner;

(h) the insolvency of the taxpayer; or

(i) the destruction or expropriation of the property.

(2) Subsection (1) applies in respect of dispositions that occur after 2022.

2 (1) Paragraph (a) of the description of E in the definition non-capital loss in subsection 111(8) of the Act is replaced by the following:

(a) the taxpayer’s loss for the year from an office, employment, business or property, (other than a loss from the disposition of a flipped property (within the meaning of subsection 12(13)),

(2) Subsection (1) applies in respect of dispositions that occur after 2022.

1 (1) Subsection 118.2(2) of the Act is amended by striking out “or” at the end of paragraph (t), by adding “or” at the end of paragraph (u) and by adding the following after paragraph (u):

(v) to a fertility clinic, or donor bank, in Canada as a fee or other amount paid or payable, to obtain sperm or ova to enable the conception of a child by the individual, the individual’s spouse or common-law partner or a surrogate mother on behalf of the individual.

(2) Section 118.2 of the Act is amended by adding the following after subsection (2.2):

Surrogacy expenses

(2.21) An amount is deemed to be a medical expense of an individual for the purposes of this section if the amount

(a) is paid by the individual or the individual’s spouse or common-law partner;

(b) is

(i) an expenditure described under any of sections 2 to 4 of the Reimbursement Related to Assisted Human Reproduction Regulations, or

(ii) paid in respect of a surrogate mother or donor, and would be an expenditure described in subparagraph (i) if it was paid to the surrogate mother or donor;

(c) would be a medical expense of the individual (within the meaning of subsection (2)) if the amount was paid in respect of a good or service provided to the individual or the individual’s spouse or common-law partner;

(d) is an expense incurred in Canada; and

(e) is paid for the purpose of the individual becoming a parent.

(3) Subsections (1) and (2) apply to the 2022 and subsequent taxation years.

1 (1) 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/365 × B

where

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

B is

(a) 3.5% of 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 the prescribed amount is equal to or less than $1 million but greater than

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

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

(b) if 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 is greater than $1 million, $35,000 plus 5% of the amount by which the prescribed amount exceeds $1 million, and

(2) Subsection 149.1(1.1) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) expenditures on administration and management of the charity.

(3) Paragraph 149.1(4.1)(d) of the English version of the Act is replaced by the following:

(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 that are qualifying disbursements to qualified donees or grantee organizations, with which it deals at arm’s length;

(4) Subsection 149.1(5) of the Act is replaced by the following:

Reduction

(5) The Minister may, on application made to the Minister in prescribed form by a registered charity, specify an amount in respect of the charity for a taxation year and the registered charity’s disbursement quota shall be deemed to be reduced by that amount.

(5) Subsection 149.1(8) of the Act is repealed.

(6) Subsection (1), (2) and (4) apply to taxation years beginning on or after January 1, 2023.

(7) Subsection (3) is deemed to have come into force on June 23, 2022.

(8) Subsection (5) applies in respect of applications made on or after January 1, 2023.

2 (1) Paragraph 241(3.2) of the Act is amended by striking out “and” at the end of paragraph (g) and by replacing paragraph (h) with the following:

(h) in the case of a registrant that is a charity, an application by the registrant, and information filed in support of the application, for a designation, determination or decision by the Minister under any of subsections 149.1 (6.3), (7), (8) and (13); and

(i) in the case of a registrant that is a charity, in respect of an application for a determination by the Minister under subsection 149.1(5), information in respect of the application including:

(i) the application,

(ii) information filed in support of the application, and

(iii) a copy of the entirety of or any part of any letter or notice by the Minister to the registrant relating to the application.

(2) Subsection (1) comes into force on January 1, 2023.

1 (1) The portion of paragraph 8502(i) of the Regulations before subparagraph (i) is replaced by the following:

Borrowing

(i) in the case of a money purchase provision of the plan or in the case of an individual pension plan, a trustee or other person who holds property in connection with the plan does not borrow money for the purposes of the money purchase provision or the individual pension plan, as the case may be, except where

(2) Section 8502 of the Regulations is amended by adding the following after paragraph (i.1):

Borrowing — defined benefit provision

(i.2) in the case of a defined benefit provision of the plan (other than an individual pension plan), a trustee or other person who holds property in connection with the provision does not borrow money for the purposes of the defined benefit provision, except

(i) in the case where money is borrowed for the purpose of acquiring real property, if

(A) the property may reasonably be considered to be acquired for the purpose of producing income from property,

(B) the aggregate of all amounts borrowed for the purpose of acquiring the property and any indebtedness incurred as a consequence of the acquisition of the property does not exceed the cost to the person of the property, and

(C) none of the property that is held in connection with the plan, other than the real property, is used as security for the borrowed money, and

(ii) in any other case, at any time that an amount is borrowed, if the total of that amount and the amount of any other outstanding borrowings in respect of the provision (other than those described in subparagraph (i)) does not exceed the lesser of the following amounts:

(A) the amount determined by the formula

0.20 (A − B)

where

A is the value of the plan assets in respect of the provision on the first day of the fiscal period of the plan in which the amount is borrowed, and

B is the amount of outstanding borrowings in respect of the provision, determined on the first day of the fiscal period in which the amount is borrowed, and

(B) the amount determined by the formula

1.25 × C − (D − E)

where

C is the amount of actuarial liabilities in respect of the provision, determined on the effective date of the plan’s most recent actuarial report,

D is the amount determined for A in clause (A), and

E is the amount determined for B in clause (A);

(3) Subsection (1) is deemed to come into force on May 1, 2022.

(4) Subsection (2) is deemed to come into force on April 7, 2022.

1 (1) Subsection 209(1) of the Regulations is replaced by the following:

(2) Subsection (1) applies to the 2023 and subsequent taxation years.

2 (1) Subsection 214 of the Regulations is amended by adding the following after subsection (1):

(1.1) The issuer of a registered retirement savings plan shall make an information return in prescribed form for each calendar year containing the total fair market value of all property held by the plan at the end of the year.

(2) Subsection (1) applies to the 2023 and subsequent taxation years.

3 (1) Section 215 of the Regulations is amended by adding the following after subsection (2):

(2.1) Every carrier of a registered retirement income fund shall make an information return in prescribed form for each calendar year containing the total fair market value of all property held by the fund at the end of the year.

(2) Subsection (1) applies to the 2023 and subsequent taxation years.

1 (1) Subsection 87(2) of the Act is amended by striking out “and” at the end of paragraph (vv), by adding “and” at the end of paragraph (ww) and by adding the following after paragraph (ww):

(xx) for the purposes of Part VI.2, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation.

(2) Subsection (1) applies to the 2022 and subsequent taxation years.

2 (1) The portion of paragraph 88(1)(e.2) of the Act before subparagraph (i) is replaced by the following:

(e.2) paragraphs 87(2)(c), (d.1), (e.1), (e.3), (e.42), (g) to (l), (l.21) to (u), (x), (z.1), (z.2), (aa), (cc), (ll), (nn), (pp), (rr) and (tt) to (xx), subsection 87(6) and, subject to section 78, subsection 87(7) apply to the winding-up as if the references in those provisions to

(2) Subsection (1) applies to the 2022 and subsequent taxation years.

3 (1) The Act is amended by adding the following after section 123.5:

Definitions

123.6 (1) The following definition applies in this section.

bank or life insurer group member means a corporation that is

(a) a bank,

(b) a life insurance corporation that carries on business in Canada, or

(c) any financial institution (within the meaning of subsection 190(1)) that is related to any corporation described in paragraphs (a) or (b). (membre d’un groupe de banques ou d’assureurs-vie)

Additional tax payable

(2) There shall be added to the tax otherwise payable under this Part for a taxation year by a corporation that is a bank or life insurer group member at any time during the taxation year, an amount determined by the formula

0.015 (A − B)

where

A is the corporation’s taxable income for the taxation year (or the corporation’s taxable income earned in Canada, if the corporation is non-resident in the taxation year); and

B is

(a) if the corporation is not related to another bank or life insurer group member at the end of the taxation year of the corporation,

(i) where the corporation’s taxation year is not less than 51 weeks, $100 million, and

(ii) in any other case, the amount determined by the formula

$100 million × (C / 365)

where

C is the number of days in the taxation year; and

(b) in any other case, subject to subsection (5), nil.

Related group

(3) A corporation that is described in paragraph (a) or (b) of the definition bank or life insurer group member at any time during a taxation year and that was related to any other bank or life insurer group member at the end of the year (in this section, the corporation and each such bank or life insurer group member are referred to together as the “related group”) may file with the Minister, with the corporation’s return of income, an agreement in prescribed form on behalf of the related group under which an amount that does not exceed $100 million is allocated among the related group for all taxation years of members of the related group ending in the same calendar year.

Allocation by Minister

(4) The Minister may request a corporation that is a member of a related group at any time during a taxation year to file with the Minister an agreement referred to in subsection (3) and, if the corporation does not file such an agreement within 30 days after receiving the request, the Minister may allocate amounts referred to in subsection (3), among the related group for the taxation years of the bank or life insurer group members ending in the same calendar year.

Allocation

(5) For the purposes of this section, the least amount allocated for a taxation year to each bank or life insurer group member under an agreement described in subsection (3) or by the Minister under subsection (4) is the amount determined for variable B in subsection (2) for the taxation year of that member, but, if no such allocation is made, the amount determined for variable B in subsection (2) of each bank or life insurer group member for that year is nil.

Anti-avoidance

(6) Where an amount has been deducted in computing the income of a corporation, the amount shall be deemed not to have been deducted in computing the corporation’s taxable income, or taxable income earned in Canada, as the case may be, for the purpose of computing the tax payable by the corporation under subsection (2), if

(a) the deduction is in respect of an amount that can reasonably be considered to have been paid or payable, directly or indirectly, to a person or partnership that was not dealing at arm’s length with the corporation;

(b) the person or partnership was not a bank or life insurer group member; and

(c) it can reasonably be considered that one of the purposes of the payment was to reduce the tax payable by the corporation under subsection (2).

(2) Subsection (1) applies to taxation years that end after April 7, 2022. However, for a taxation year that includes April 7, 2022, the amount of tax payable under subsection 123.6(2) is prorated based on the number of days in the taxation year that are after April 7, 2022.

4 (1) Subsection 161(1) of the Act is replaced by the following:

General

161 (1) Where at any time after a taxpayer’s balance-due day for a taxation year

(a) the total of the taxpayer’s taxes payable under this Part and Parts I.3, VI, VI.1 and VI.2 for the year

exceeds

(b) the total of all amounts each of which is an amount paid at or before that time on account of the taxpayer’s tax payable and applied as at that time by the Minister against the taxpayer’s liability for an amount payable under this Part or Part I.3, VI, VI.1 or VI.2 for the year,

the taxpayer shall pay to the Receiver General interest at the prescribed rate on the excess, computed for the period during which that excess is outstanding.

(2) Subsection (1) applies to the 2022 and subsequent taxation years.

5 (1) Paragraph 190.1(3)(a) of the Act is replaced by the following:

(a) the corporation’s tax payable under Parts I and VI.2 (determined in accordance with subsection 191.5(9)) for the year; and

(2) Subsection (1) applies to the 2022 and subsequent taxation years.

6 (1) The Act is amended by adding the following after part VI.1:

PART vi.2

Canada Recovery Dividend

Definitions

191.5 (1) The following definition applies in this Part.

bank or life insurer group member means a corporation that is

(a) a bank,

(b) a life insurance corporation that carries on business in Canada, or

(c) any financial institution (within the meaning of subsection 190(1)) that is related to any corporation described in paragraph (a) or (b). (membre d’un groupe de banques ou d’assureurs-vie)

Tax payable

(2) Every corporation that is a bank or life insurer group member at any time during a 2021 taxation year shall pay a tax under this Part for its 2022 taxation year equal to the amount determined by the formula

0.15 [(A / 2) − B]

where

A is, subject to subsection (4), the total of all amounts, each of which is the corporation’s taxable income for a

(a) 2020 taxation year of the corporation (or the corporation’s taxable income earned in Canada, if the corporation is non-resident in the taxation year), determined under Part I, without regard to paragraphs 111(1)(a) and (b), or

(b) 2021 taxation year of the corporation (or the corporation’s taxable income earned in Canada, if the corporation is non-resident in the taxation year), determined under Part I, without regard to paragraphs 111(1)(a) and (b),

B is

(a) if the corporation is not related to another bank or life insurer group member at the end of each 2021 taxation year of the corporation, $1 billion, and

(b) in any other case, subject to subsection (5), nil.

Multiple 2022 taxation years

(3) Where a corporation has more than one 2022 taxation year, the latest 2022 taxation year is the 2022 taxation year for purposes of subsection (2).

Multiple 2020 and 2021 taxation years

(4) For the purposes of subsection (2), if a corporation has more than one

(a) 2020 taxation year and the aggregate number of days in all its 2020 taxation years is greater than 365 days, each amount determined for the corporation under paragraph (a) of variable A in subsection (2) shall be reduced to that proportion of that total amount that 365 is of the aggregate number of days in all 2020 taxation years, and

(b) 2021 taxation year and the aggregate number of days in all its 2021 taxation years is greater than 365 days, each amount determined for the corporation under paragraph (b) of variable A in subsection (2) shall be reduced to that proportion of that total amount that 365 is of the aggregate number of days in all 2021 taxation years.

Related group

(5) A corporation that is described in paragraph (a) or (b) of the definition bank or life insurer group member at any time during a 2021 taxation year and that was related to any other bank or life insurer group member at the end of the year (in this section, the corporation and each such bank or life insurer group member are referred to together as a “related group”) may file with the Minister an agreement in prescribed form, with the prescribed form referred to in subsection (8), on behalf of the related group under which an amount that does not exceed $1 billion is allocated among the members of the related group for the taxation year.

Allocation by Minister

(6) The Minister may request a corporation that is member of a related group at any time during the 2021 taxation year to file with the Minister an agreement referred to in subsection (5) and, if the corporation does not file such an agreement within 30 days after receiving the request, the Minister may allocate amounts referred to in subsection (5), among the members of the related group for the taxation year.

Allocation

(7) For the purposes of this Part, the least amount allocated for the taxation year to each bank or life insurer group member under an agreement described in subsection (5) or by the Minister under subsection (6) is the amount determined for B in subsection (2) for the taxation year of that member, but, if no such allocation is made, the amount determined for B in subsection (2) of each bank and life insurer group member for the year is nil.

Return

(8) A corporation that is a bank or life insurer group member shall file with the Minister, no later than the day on or before which the corporation is required by section 150 to file its return of income for the 2022 taxation year under Part I, a prescribed form containing prescribed information.

Instalments

(9) A corporation liable to pay tax for the 2022 taxation year under this Part shall pay 1/5 of the tax to the Receiver General on or before its balance-due day for the 2022 and each of the four subsequent taxation years.

Administrative provisions applicable to Part VI.2

191.6 Sections 152, 158 and 159, subsection 161(11), sections 162 to 167 and Division J of Part I apply to this Part with such modifications as the circumstances require.

(2) Subsection (1) applies to the 2022 and subsequent taxation years.

1 (1) Paragraph 12(1)(t) of the Act is replaced by the following:

Investment tax credit

(t) the amount deducted under subsection 127(5), 127(6) or 127.44(2) in respect of a property acquired or an expenditure made in a preceding taxation year in computing the taxpayer’s tax payable for a preceding taxation year to the extent that it was not included in computing the taxpayer’s income for a preceding taxation year under this paragraph or is not included in an amount determined under paragraph 13(7.1)(e) or 37(1)(e), subparagraph 53(2)(c)(vi) or 53(2)(h)(ii) or for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.1(6);

(2) Subsection (1) applies to taxation years that end after 2021.

2 (1) The portion of subsection 13(7.1) of the Act before paragraph (a) is replaced by the following:

Deemed capital cost of certain property

(7.1) For the purposes of this Act, where section 80 applied to reduce the capital cost to a taxpayer of a depreciable property or a taxpayer deducted an amount under subsection 127(5),127(6) or 127.44(2) in respect of a depreciable property or received or is entitled to receive assistance from a government, municipality or other public authority in respect of, or for the acquisition of, depreciable property, whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance other than

(2) Paragraph 13(7.1)(e) of the Act is replaced by the following:

(e) where the property was acquired in a taxation year ending before the particular time, all amounts deducted under subsection 127(5), 127(6) or 127.44(2) by the taxpayer for a taxation year ending before the particular time,

(3) Section 13 of the Act is amended by adding the following after subsection (18.1):

Ascertainment of CCUS property

(18.2) For the purpose of determining whether a process is a CCUS process (as defined in subsection 1104(2) of the Income Tax Regulations) or whether a property meets the criteria set out in the regulations in respect of prescribed CCUS property, any technical guide published by the Department of Natural Resources to these classes shall apply conclusively with respect to engineering and scientific matters.

(4) The description of I in the definition undepreciated capital cost in subsection 13(21) of the Act is replaced by the following:

I is the total of all amounts deducted under subsections 127(5), 127(6) or 127.44(2), in respect of a depreciable property of the class of the taxpayer, in computing the taxpayers tax payable for a taxation year ending before that time and subsequent to the disposition of that property by the taxpayer,

(5) Subsections (1), (2) and (4) apply to taxation years that end after 2021.

(6) Subsection (3) is deemed to have come into force on January 1, 2021.

3 (1) Section 20 of the Act is amended by adding the following after subsection (1.1):

Application of paragraph (1)(a)

(1.11) For the purpose of paragraph (1)(a) and Schedule II to the Income Tax Regulations, an expenditure is deemed to be an amount in respect of the capital cost to the taxpayer of property if the exenditure is

(a) incurred by the taxpayer on account of capital; and

(b) described in Class 59 or 60 of Schedule II to the Income Tax Regulations, as the case may be.

(2) Subsection (1) applies to expenditures incurred or property acquired after 2021.

4 (1) The Act is amended by adding the following after section 127.43:

127.44

Definitions

(1) The following definitions apply in this section.

CCUS project has the meaning assigned by subsection 1104(2) of the Regulations. (projet de CUSC)

captured carbon means captured carbon dioxide that

(a) would otherwise be released into the atmosphere; or

(b) is captured directly from the ambient air. (carbone capté)

dedicated geological storage means a geological formation

(a) capable of permanently storing captured carbon in a province or territory within Canada, in an offshore area of Canada or in a jurisdiction outside Canada, that has sufficient environmental laws and enforcement to ensure that captured carbon is permanently stored, as prescribed by the regulations at the time a relevant expenditure is incurred; and

(b) in which captured carbon is not used for enhanced oil recovery. (stockage géologique dédié)

eligible use means captured carbon that is stored in, or otherwise used for,

(a) dedicated geological storage; or

(b) producing concrete using a qualified concrete storage process. (utilisation admissible)

ineligible use means captured carbon that is stored in, or otherwise used for,

(a) enhanced oil recovery; or

(b) any other purpose that is not an eligible use. (utilisation non admissible)

non-government assistance has the same meaning as in subsection 127(9). (aide non gouvernementale)

project plan means a plan for a CCUS project that

(a) reflects a front-end engineering design study (or an equivalent study as determined by the Minister of Natural Resources) for the project;

(b) describes the quantity of captured carbon that the CCUS project is expected to support for storage, in each calendar year over the life of the project, in

(i) eligible use, and

(ii) ineligible use;

(d) is filed with the Minister of Natural Resources, in the form and manner determined by the Minister of Natural Resources. (plan de projet)

qualified CCUS expenditure means a

(a) qualified carbon capture expenditure;

(b) qualified carbon transportation expenditure;

(d) qualified carbon use expenditure. (dépense de CUSC admissible)

qualified CCUS project means a CCUS project of a taxpayer that meets the following conditions:

(a) it is expected to support the capture of carbon dioxide in Canada;

(b) an initial project evaluation has been issued by the Minister of Natural Resources, in the form and manner determined by the Minister of Natural Resources, in respect of the project following the filing of most recent project plan for the project;

(c) based on the most recent project plan for the project, in each of the project’s first 20 years of operation, the quantity of captured carbon the project is expected to support for storage or use in eligible use equals or exceeds the fraction 1 / 10, determined by the formula

A/B

where

A is the quantity of captured carbon that the project is expected to support for storage or use in eligible use during the year, and

B is the aggregate quantity of captured carbon that the project is expected to support for storage or use in both eligible use and ineligible use during the year;

(d) at the relevant time, it complies with all environmental laws, by-laws and regulations applicable in respect of the project, including those

(i) of Canada, and any province or a municipality in Canada, and

(ii) of any municipal or public body performing a function of government in Canada; and

(e) it is not a project that is

(i) operated to service a facility that existed on April 7, 2022, and

(ii) undertaken for the purpose of complying with emission standards that apply, or will apply, under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations. (projet de CUSC admissible)

qualified carbon capture expenditure incurred by a taxpayer in a taxation year means an amount that is the portion of an expenditure incurred in the year by the taxpayer to acquire a property in respect of a qualified CCUS project, determined by the formula

A x (B + C + D + E)

where

A is the capital cost of the property acquired by the taxpayer in the year (other than property situated outside of Canada) that is property described in (and is verified in writing by the Minister of Natural Resources as being described in)

(a) paragraph (a) of Class 57 in Schedule II to the Regulations, or

(b) paragraph (d), (e) or (f) of Class 57 in relation to equipment described in paragraph (a) of Class 57,

B is the percentage determined by the formula,

F ÷ G x 0.25

where

F is the quantity of captured carbon that the qualified CCUS project is expected to support for storage or use in eligible use during the first to fifth years of operation of the project based on the project’s most recent project plan before the time the expenditure is incurred, and

G is the aggregate quantity of captured carbon that the qualified CCUS project is expected to support for storage or use in both eligible use and ineligible use during the first to fifth years of operation of the project based on the project’s most recent project plan before the time the expenditure is incurred,

C is the percentage determined by the formula,

H ÷ I x 0.25

where

H is the quantity of captured carbon that the qualified CCUS project is expected to support for storage or use in eligible use during the sixth to tenth years of operation of the project based on the project’s most recent project plan before the time the expenditure is incurred, and

I is the aggregate quantity of captured carbon that the qualified CCUS project is expected to support for storage or use in both eligible use and ineligible use during the sixth to tenth years of operation of the project based on the project’s most recent project plan before the time the expenditure is incurred,

D is the percentage determined by the formula,

J ÷ K x 0.25

where

J is the quantity of captured carbon that the qualified CCUS project is expected to support for storage or use in eligible use during the eleventh to fifteenth years of operation of the project based on the project’s most recent project plan before the time the expenditure is incurred, and

K is the aggregate quantity of captured carbon that the qualified CCUS project is expected to support for storage or use in both eligible use and ineligible use during the eleventh to fifteenth years of operation of the project based on the project’s most recent project plan before the time the expenditure is incurred, and

E is the percentage determined by the formula,

L ÷ M x 0.25

where

L is the quantity of captured carbon that the qualified CCUS project is expected to support for storage or use in eligible use during the sixteenth to twentieth years of operation of the project based on the project’s most recent project plan before the time the expenditure is incurred, and

M is the aggregate quantity of captured carbon that the qualified CCUS project is expected to support for storage or use in both eligible use and ineligible use during the sixteenth to twentieth years of operation of the project based on the project’s most recent project plan before the time the expenditure is incurred. (dépense admissible pour le captage du carbone)

qualified carbon storage expenditure incurred by a taxpayer in a taxation year means an amount that is the capital cost incurred in the year by the taxpayer to acquire, in respect of a qualified CCUS project, a property (other than property situated outside of Canada) that is

(a) described in (and that is verified in writing by the Minister of Natural Resources as being property described in)

(i) paragraph (c) of Class 57 in Schedule II to the Regulations, or

(ii) paragraph (d), (e) or (f) of Class 57 in relation to equipment described in paragraph (c) of Class 57; and

(b) expected, based on the qualified CCUS project’s most recent project plan before the time the expenditure is incurred, to support storage of captured carbon solely in a manner described in paragraph (a) of the definition of eligible use. (dépense admissible pour le stockage du carbone)

qualified carbon transportation expenditure incurred by a taxpayer in a taxation year means an amount that is the portion of an expenditure incurred in the year by the taxpayer to acquire a property in respect of a qualified CCUS project, determined by the formula

A x (B + C + D + E)

where

A is the capital cost of the property acquired by the taxpayer in the year (other than property situated outside of Canada) that is described in (and is verified in writing by the Minister of Natural Resources as being property described in)

(a) paragraph (b) of Class 57 in Schedule II to the Regulations, or

(b) paragraph (d), (e) or (f) of Class 57 in relation to equipment described in paragraph (b) of Class 57,

B is the percentage determined by the formula,

F ÷ G x 0.25

where

C is the percentage determined by the formula,

H ÷ I x 0.25

where

D is the percentage determined by the formula,

J ÷ K x 0.25

where

E is the percentage determined by the formula,

L ÷ M x 0.25

where

qualified carbon use expenditure incurred by a taxpayer in a taxation year means an amount that is the capital cost incurred in the year by the taxpayer to acquire, in respect of a qualified CCUS project, a property (other than property situated outside of Canada) that is

(a) described in (and that is verified in writing by the Minister of Natural Resources as being property described in) Class 58 in Schedule II to the Regulations; and

(b) expected, based on the qualified CCUS project’s most recent project plan before the time the expenditure is incurred, to support storage or use of captured carbon solely in a manner described in paragraph (b) of the definition of eligible use. (dépense admissible pour l’utilisation du carbone)

qualified concrete storage process means a process that demonstrates, in prescribed manner, that at least 60% of the captured carbon that is injected into concrete is expected to be mineralized and permanently stored in the concrete. (processus de stockage dans le béton admissible)

specified percentage means, in respect of a

(a) qualified carbon capture expenditure if incurred to capture carbon

(i) directly from ambient air

(A) after 2021 and before 2031, 60%,

(B) after 2030 and before 2041, 30%, or

(ii) other than directly from ambient air

(A) after 2021 and before 2031, 50%

(B) after 2030 and before 2041, 25% or

(b) qualified carbon transportation expenditure, qualified carbon storage expenditure, or qualified carbon use expenditure if incurred

(i) after 2021 and before 2031, 37 1/2%,

(ii) after 2030 and before 2041, 18 3/4%, or

(iii) after 2040, 0%. (pourcentage déterminé)

Reduction of Part I tax

(2) There may be deducted from a taxpayer’s tax otherwise payable under this Part for a taxation year such amount as the taxpayer may claim not exceeding the taxpayer’s CCUS tax credit for the year.

Deemed payment of Part I tax

(3) There is deemed to have been paid on account of the tax payable under this Part by a taxpayer (other than a person exempt from tax under Part I because of section 149) for a taxation year on the taxpayer’s balance due-day for the year, such amount as the taxpayer claims not exceeding the amount, if any, by which

(a) the taxpayer’s CCUS tax credit for the year

exceeds

(b) the portion of the total described in paragraph (a) that was deducted under subsection (2) in computing the taxpayer’s tax payable for the year.

Deemed deduction

(4) For purposes of paragraph 12(1)(t), subsection 13(7.1) and variable I of the definition undepreciated capital cost in subsection 13(21), the amount deemed under subsection (3) to have been paid by a taxpayer for a taxation year shall be deemed to have been deducted from the taxpayer’s tax otherwise payable under this Part for the year under subsection (2).

CCUS tax credit

(5) For the purposes of this Act, a CCUS tax credit of a taxpayer for a taxation year is the total of all amounts, each of which is the

(a) specified percentage of a qualified carbon capture expenditure incurred in the year by the taxpayer;

(b) specified percentage of a qualified carbon transportation expenditure incurred in the year by the taxpayer;

(d) specified percentage of a qualified carbon use expenditure incurred in the year by the taxpayer.

Changes to project or eligible use

(6) A taxpayer with a qualified CCUS project shall file, with all due dispatch, a new project plan for the project with the Minister of Natural Resources, in the form and manner determined by the Minister of Natural Resources, if

(a) there has been a change to the project, and the Minister of Natural Resources requests that the taxpayer file a new project plan for the project, or

(b) there has been a reduction (as compared to the most recent project plan for the project) of more than 5% in the quantity of captured carbon that the project is expected to support for storage or use in eligible use during any five year period over the life of the project.

Qualified CCUS project determination

(7) For the purpose of the definition of qualified CCUS project in subsection (1),

(a) the Minister may, in consultation with the Minister of Natural Resources, determine that one or more CCUS projects is one project or multiple projects;

(b) any determination under paragraph (a) is deemed to result in the CCUS project or CCUS projects, as the case may be, being one project or multiple projects, as the case may be; and

(c) for each project determined under paragraph (a), a new project plan shall be filed with the Minister of Natural Resources (in the form and manner determined by the Minister of Natural Resources), with all due dispatch, by a taxpayer with a project determined under paragraph (a).

Reductions to qualified CCUS expenditures

(8) For the purposes of this section, the amount of a qualified CCUS expenditure of a taxpayer in a taxation year

(a) shall not include

(i) any amount in respect of an expenditure incurred by the taxpayer before 2022 or after 2040,

(ii) any amount in respect of any expenditure

(A) incurred to acquire property that was previously used by any person or partnership, or

(B) for which a CCUS tax credit was previously deducted or claimed, or sought to be deducted or claimed, by any person in respect of the property to which the expenditure relates,

(iii) any amount in respect of an expenditure incurred for a

(A) feasibility (or pre-feasibility) study, or

(B) front-end engineering study (or equivalent study as determined by the Minister of Natural Resources), or

(iv) any amount by virtue of section 21; and

(b) shall be reduced by the amount of any non-government assistance

(i) that, at the time of the filing of the taxpayer’s return of income under this Part for the taxation year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive in respect of the qualified CCUS expenditure for the year, and

(ii) where at a particular time, a taxpayer who is a beneficiary of a trust or a member of a partnership has received, is entitled to receive or can reasonably be expected to receive non-government assistance, the amount thereof that may reasonably be considered to be in respect of the qualified CCUS expenditure incurred by the trust or partnership shall, for purposes of subparagraph (i), be deemed to have been received at that time by the trust or partnerships, as the case may be, as non-government assistance in respect of the expenditure.

Additions to qualified CCUS expenditures

(9) Where a taxpayer has, in a particular taxation year, repaid (or has not received and can no longer reasonably be expected to receive) an amount of non-government assistance that was applied to reduce the amount of a qualified CCUS expenditure (the “reduced expenditure” ) under one of paragraphs (a) to (d) (the “relevant paragraph” ) of that definition for a preceding taxation year, the amount of the reduced expenditure shall be added to the amount otherwise determined to be the taxpayer’s qualified CCUS expenditure (under the relevant paragraph of that definition) for the particular year.

Partnerships

(10) Where, in a particular taxation year of a taxpayer who is a member of a partnership, a CCUS tax credit would be determined in respect of the partnership for its taxation year that ends in the particular taxation year, subsections 127(8) to (8.5) are applicable, with such modifications as the circumstances require, to determine the portion of the CCUS tax credit in respect of the partnership that is the taxpayer’s share thereof and which amount shall be the taxpayer’s CCUS tax credit for the particular taxation year.

Unpaid amounts

(11) For the purposes of this section, a taxpayer’s expenditure that is unpaid on the day that is 180 days after the end of the taxation year in which the expenditure is otherwise incurred is deemed

(a) not to have been incurred in the year; and

(b) to be incurred at the time it is paid.

(2) Subsections (1) to (11) are deemed to have come into force on January 1, 2022.

5 (1) Paragraph 1100(1)(a) of the Regulations is amended by striking out “and” at the end of subparagraph (xli) and by adding the following after subparagraph (xlii):

(xliii) of Class 57, 8 per cent,

(xliv) of Class 58, 20 per cent,

(xlv) of Class 59, 100 per cent, and

(xlvi) of Class 60, 30 per cent,

(2) Paragraph (a) of the description of A in subsection 1100(2) of the Regulations is replaced by the following:

(a) if the property is not included in paragraph (1)(v) or in any of Classes 12, 13, 14, 15, 43.1, 43.2, 53, 54, 55, 56, 59 or in Class 43 in the circumstances described in paragraph (d),

(3) Subsections (1) and (2) apply to property acquired after 2021.

6 (1) Subsection 1104(2) of the Regulations is amended by adding the following in alphabetical order:

captured carbon means captured carbon dioxide that

(a) would otherwise be released into the atmosphere, or

(b) is captured directly from the ambient air; (carbone capté)

CCUS process means the process of carbon capture, utilization and storage that includes the

(a) capture of carbon dioxide

(i) that would otherwise be released into the atmosphere, or

(ii) directly from the ambient air, and

(b) storage or use of the captured carbon; (processus de CUSC)

CCUS project means a project that is intended to support a CCUS process by

(a) capturing carbon dioxide

(i) that would otherwise be released into the atmosphere, or

(ii) directly from the ambient air,

(b) transporting captured carbon, or

(2) Section 1104 of the Regulations is amended by adding the following after subsection (18):

CCUS process determination

(19) A process that the Minister, on the recommendation of the Minister of Natural Resources, determines does not constitute a carbon capture, utilization and storage process shall be deemed not to be a CCUS process for the purpose of the definition of CCUS process in subsection (2).

(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2022.

7 (1) The Regulations are amended by adding the following after section 8200.1:

Prescribed CCUS property

8200.2 For the purpose of subsection 13(18.2) of the Act, prescribed CCUS property means property described in Class 57 or 58 in Schedule II.

8200.3 For the purpose of paragraph (a) of the definition dedicated geological storage in subsection 127.44(1) of the Act, the following provinces, territories, offshore areas, and jurisdictions outside of Canada are prescribed

(a) the province of Alberta,

(b) the province of Saskatchewan, and

(c) any other province, territory, offshore area, or jurisdiction outside of Canada, determined by the Minister of Environment.

(2) Subsection (1) is deemed to have come into force on January 1, 2022.

8 (1) The portion of Class 8 in Schedule II to the Regulations that is before paragraph (a) is replaced by the following:

CLASS 8

(20 per cent)

Property not included in Class 1, 2, 7, 9, 11, 17, 30, 57 or 58 that is

(2) The portion of Class 17 in Schedule II to the Regulations that is before paragraph (a) is replaced by the following:

CLASS 17

(8 per cent)

Property that would otherwise be included in another class in this Schedule (other than property included in classes 57 or 58) that is

(3) The portion of Class 41 in Schedule II to the Regulations that is before paragraph (a) is replaced by the following:

CLASS 41

(25 per cent)

Property (other than property included in Class 41.1, 41.2, 57 or 58)

(4) The portion of Class 41.1 in Schedule II to the Regulations that is before paragraph (a) is replaced by the following:

CLASS 41.1

(25 per cent)

Oil sands property (other than specified oil sands property or property included in Class 57 or 58)

(5) The portion of Class 41.2 in Schedule II to the Regulations that is before paragraph (a) is replaced by the following:

CLASS 41.2

(25 per cent)

Property, other than specified oil sands property, eligible mine development property or property included in Class 57 or 58,

(6) The portion of Class 43 in Schedule II to the Regulations that is before paragraph (a) is replaced by the following:

CLASS 43

(30 per cent)

Property acquired after February 25, 1992 (other than property included in Class 57 or 58),

(7) The portion of Class 49 in Schedule II to the Regulations that is before paragraph (a) is replaced by the following:

CLASS 49

(8 per cent)

Property (other than property included in Class 57 or 58) that is a pipeline, including control and monitoring devices, valves and other equipment ancillary to the pipeline, that

(8) The portion of Class 53 in Schedule II to the Regulations that is before paragraph (a) is replaced by the following:

CLASS 53

Property acquired after 2015 and before 2026 (other than property included in Classes 57 or 58) that is not included in Class 29, but that would otherwise be included in that class if

(9) Schedule II to the Regulations is amended by adding the following after Class 56:

CLASS 57

(8 per cent)

Property that is part of a CCUS project of a taxpayer and that is

(a) equipment that is not required for hydrogen production, natural gas processing or acid gas injection and that

(i) is to be used solely for capturing carbon dioxide

(A) that would otherwise be released into the atmosphere, or

(B) directly from the ambient air,

(ii) prepares or compresses captured carbon for transportation, or,

(iii) is power or heat production equipment that solely supports the CCUS process,

(b) equipment that is to be used solely for transportation of captured carbon,

(c) equipment that is to be used solely for storage of captured carbon in a geological formation (other than for enhanced oil recovery),

(d) monitoring and control equipment that is to be used solely for the functioning of any equipment described in paragraphs (a) to (c),

(e) a building or other structure all or substantially all of which is used, or to be used, for the installation or operation of equipment described in paragraphs (a) to (d), or

(f) property that is used solely to

(i) convert another property that would not otherwise be described in any of paragraphs (a) to (e) if the conversion causes the other property to satisfy the description under any of paragraphs (a) to (e), or

(ii) refurbish property described in any of paragraphs (a) to (e).

CLASS 58

(20 per cent)

Property that is part of a CCUS project of a taxpayer, and that is

(a) equipment to be used solely for using carbon dioxide in industrial production (including for enhanced oil recovery),

(b) monitoring and control equipment to be used solely for the functioning of equipment included in paragraph (a),

(c) a building or other structure all or substantially all of which is used, or to be used, for the installation or operation of equipment described in paragraph (a) or (b), or

(d) property that is used solely to

(ii) refurbish property described in any of paragraphs (a) to (c).

CLASS 59

(100 per cent)

Property that is an expenditure incurred by the taxpayer after 2021 and that is

(a) for the purpose of determining the existence, location, extent or quality of a geological formation to permanently store captured carbon (other than for enhanced oil recovery) in Canada, including such an expense that is

(i) a geological, geophysical or geochemical expense, or

(ii) an expense for environmental studies or community consultations, including studies or consultations that are undertaken to obtain a right, licence or privilege for the purpose of determining the existence, location, extent or quality of a geological formation to permanently store captured carbon (other than for enhanced oil recovery); and

(b) an expense other than an expense

(i) incurred in drilling or completing an oil or gas well or in building a temporary access road to, or preparing a site in respect of, any such well, or

(i) described in Class 60.

CLASS 60

(30 per cent)

Property that is an expenditure incurred after 2021 by the taxpayer in

(a) drilling or converting a well in Canada for the permanent storage of captured carbon (other than for enhanced oil recovery),

(b) drilling or completing a well for the permanent storage of captured carbon (other than for enhanced oil recovery) in Canada, building a temporary access road to the well or preparing a site in respect of the well, or

(c) drilling or converting a well in Canada for the purposes of monitoring pressure changes or other phenomena in captured carbon permanently stored in a geological formation (other than for enhanced oil recovery).

(10) Subsections (1) to (9) are deemed to have come into force on January 1, 2022.

1 (1) Subparagraph (a)(i) of the definition qualified zero-emission technology manufacturing activities in section 5202 of the Regulations is amended by adding the following after Clause (E):

(E.1) air-source heat pump equipment designed for space or water heating,

(2) Subsection (1) is deemed to have come into force on January 1, 2022.

2 (1) Clause (d)(i)(A) of Class 43.1 in Schedule II to the Regulations is amended by striking out “or” at the end of subclause (I), by striking out “and” at the end of subclause (II), by adding “or” at the end of subclause (II) and by adding the following after subclause (II):

(III) equipment that is part of an air-source heat pump system that transfers heat from the outside air, including refrigerant piping, energy conversion equipment, thermal energy storage equipment, control equipment and equipment designed to enable the system to interface with other heating and cooling equipment, and

(2) Clause (d)(i)(B) of Class 43.1 in Schedule II to the Regulations is replaced by the following:

(B) it is not a building, part of a building (other than a solar collector that is not a window and that is integrated into a building), energy equipment that backs up equipment described in subclause (A)(I), (II) or (III) nor equipment that distributes heated or cooled air or water in a building,

(3) Subsections (1) and (2) apply to property acquired after April 6, 2022 that has not been used or acquired for use before April 7, 2022.

1 (1) The description of L in the definition of cumulative Canadian exploration expense in subsection 66.1(6) of the Act is replaced by the following:

L is that portion of the total of all amounts each of which was deducted by the taxpayer under subsection 127(5) or (6) for a taxation year that ended before that time and that can reasonably be attributed to a qualified Canadian exploration expenditure, a pre-production mining expenditure, a flow-through mining expenditure or a flow-through critical mineral mining expenditure (each expenditure within the meaning assigned by subsection 127(9)) made in a preceding taxation year, and

(2) Subsection (1) is deemed to have come into force on April 7, 2022.

2 (1) Subparagraph 127(5)(a)(i) of the Act is replaced by the following:

(i) the taxpayer’s investment tax credit at the end of the year in respect of property acquired before the end of the year, of the taxpayer’s apprenticeship expenditure for the year or a preceding taxation year, of the taxpayer’s flow-through mining expenditure for the year or a preceding taxation year, of the taxpayer’s flow-through critical mineral mining expenditure for the year or a preceding taxation year, of the taxpayer’s pre-production mining expenditure for the year or a preceding taxation year or of the taxpayer’s SR&ED qualified expenditure pool at the end of the year or at the end of a preceding taxation year, and

(2) Clause 127(5)(a)(ii)(A) of the Act is replaced by the following:

(A) the taxpayer’s investment tax credit at the end of the year in respect of property acquired in a subsequent taxation year, of the taxpayer’s apprenticeship expenditure for a subsequent taxation year, of the taxpayer’s flow-through mining expenditure for a subsequent taxation year, of the taxpayer’s flow-through critical mineral mining expenditure for a subsequent taxation year, of the taxpayer’s pre-production mining expenditure for a subsequent taxation year or of the taxpayer’s SR&ED qualified expenditure pool at the end of the subsequent taxation year to the extent that an investment tax credit was not deductible under this subsection for the subsequent taxation year, and

(3) Subsection 127(9) of the Act is amended by adding the following in alphabetical order:

critical mineral means

(a) copper,

(b) nickel,

(d) cobalt,

(e) graphite,

(f) a rare earth element,

(g) scandium,

(h) titanium,

(i) gallium,

(j) vanadium,

(k) tellurium,

(l) magnesium,

(m) zinc,

(n) a platinum group metal, or

(o) uranium; (minéral critique)

flow-through critical mineral mining expenditure of a taxpayer for a taxation year means an expense deemed by subsection 66(12.61) (or by subsection 66(18) as a consequence of the application of subsection 66(12.61) to the partnership, referred to in paragraph (c) of this definition, of which the taxpayer is a member) to be incurred by the taxpayer in the year

(a) that is a Canadian exploration expense incurred by a corporation after April 7, 2022 in conducting mining exploration activity from or above the surface of the earth primarily targeting critical minerals,

(b) that

(i) is an expense described in paragraph (f) of the definition Canadian exploration expense in subsection 66.1(6), and

(ii) is not an expense in respect of

(A) trenching, if one of the purposes of the trenching is to carry out preliminary sampling (other than specified sampling),

(B) digging test pits (other than for the purpose of carrying out specified sampling), and

(c) an amount in respect of which is renounced in accordance with subsection 66(12.6) by the corporation to the taxpayer (or a partnership of which the taxpayer is a member) under an agreement described in that subsection and made after April 7, 2022 and on or before March 31, 2027,

(d) that is not an expense that was renounced under subsection 66(12.6) to the corporation (or a partnership of which the corporation is a member), unless that renunciation was under an agreement described in that subsection and made after April 7, 2022 and on or before March 31, 2027,

(e) that, in respect of an agreement described in paragraph (c), a qualified engineer or geoscientist certifies in prescribed manner and form that the expense will be incurred pursuant to an exploration plan that primarily targets critical minerals, if the qualified engineer or geoscientist

(i) completed the certification no more than 12 months before the time that the agreement is made, and

(ii) acted reasonably, in their professional capacity, in completing the certification, and

(f) that is not an expense that the taxpayer has included under paragraph (a.2) of the definition of investment tax credit in the computation of its investment tax credit in respect of which the taxpayer has, at any time, sought a deduction under subsection (5); (dépense minière de minéral critique déterminée)

qualified engineer or geoscientist means an individual who

(a) is an engineer or geoscientist with a university degree, or equivalent accreditation, in an area of geoscience, or engineering, relating to mineral exploration or mining,

(b) has at least five years of experience in mineral exploration, mine development or operation, or mineral project assessment, or any combination of these, that is relevant to their professional degree or area of practice,

(c) has experience relevant to the subject matter of the exploration project and the certification described in paragraph (e) of the definition of flow-through critical mineral mining expenditure, and

(d) is in good standing with a professional association that has the authority or recognition by statute in a jurisdiction of Canada to regulate the profession of engineering or geoscience in Canada; (ingénieur ou géoscientifique qualifié)

(4) The definition flow-through mining expenditure in subsection 127(9) of the Act is amended by striking out “and” at the end of paragraph (c), by adding the word “and” at the end of paragraph (d) and by adding the following after paragraph (d):

(e) that is not an expense that the taxpayer has included under paragraph (a.21) of the definition of investment tax credit in the computation of its investment tax credit in respect of which the taxpayer has, at any time, sought a deduction under subsection (5);

(5) The definition investment tax credit in subsection 127(9) of the Act is amended by adding the following paragraph after paragraph (a.2):

(a.21) where the taxpayer is an individual (other than a trust), 30% of the taxpayer’s flow-through critical mineral mining expenditures for the year,

(6) Subsection 127(11.1) of the Act is amended by adding the following after paragraph (c.2):

(c.21) the amount of a taxpayer’s flow-through critical mineral mining expenditure for a taxation year is deemed to be the amount of the taxpayer’s flow-through critical mineral mining expenditure for the year as otherwise determined less the amount of any government assistance or non-government assistance in respect of expenses included in determining the taxpayer’s flow-through critical mineral mining expenditure for the year that, at the time of the filing of the taxpayer’s return of income for the year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive;

(7) Subsections (1) to (6) are deemed to have come into force on April 7, 2022.

3 (1) Paragraph 152(4)(b) of the Act is amended by adding the following after subparagraph (v):

(v.1) is made in respect of an amount deducted under subsection 127(5) in respect of a flow-through critical mineral mining expenditure as defined in subsection 127(9),

(2) Subsection (1) is deemed to have come into force on April 7, 2022.

1 (1) Paragraph 66(12.6)(a) of the Act is replaced by the following:

(a) the assistance that the corporation has received, is entitled to receive or can reasonably be expected to receive at any time, and that can reasonably be related to the specified expenses or to Canadian exploration activities to which the specified expenses relate (other than assistance that can reasonably be related to expenses referred to in any of paragraphs (b) to (b.2)),

(2) Subsection 66(12.6) of the Act is amended by striking out “and” at the end of paragraph (b.1) and by adding the following after the paragraph:

(b.2) if the agreement is made after March 2023, all specified expenses that are not described in paragraph (b) or (b.1) and that would be Canadian exploration expenses if

(i) the definition Canadian exploration expense in subsection 66.1(6) were read without reference to its paragraph (g.1), and

(ii) the definition mineral resource in subsection 248(1) were read without reference to its paragraphs (a) and (d), and

(3) Paragraph 66(12.62)(a) of the Act is replaced by the following:

(a) the assistance that the corporation has received, is entitled to receive, or can reasonably be expected to receive at any time, and that can reasonably be related to the specified expenses or to Canadian development activities to which the specified expenses relate (other than assistance that can reasonably be related to expenses referred to in any of paragraphs (b) to (b.2)),

(4) Subsection 66(12.62) of the Act is amended by striking out “and” at the end of paragraph (b.1) and by adding the following after paragraph (b.1):

(b.2) if the agreement is made after March 2023, all specified expenses that are not described in paragraph (b) or (b.1) and that would be Canadian development expenses if the definition mineral resource in subsection 248(1) were read without reference to its paragraphs (a) and (d), and

(5) Subsections (1) and (3) apply in respect of flow-through share agreements made after March 2023.

1 (1) The first formula in paragraph 125(5.1)(a) of the Act is replaced by the following:

A × B/$90,000

(2) Subsection (1) applies to taxation years that begin on or after April 7, 2022.

1 (1) Subsection 18(9.02) of the Act is replaced by the following:

Application of subsection (9) to insurers

(9.02) For the purpose of subsection (9), an outlay or expense made or incurred by an insurer in a taxation year on account of the acquisition of an insurance policy at any time prior to the issuance of the policy is deemed to be an expense incurred as consideration for services rendered in the particular year that the policy is issued.

(2) Subsection (1) applies to taxation years that begin after 2022.

2 (1) Subparagraphs 138(3)(a)(i) and (ii) of the Act are replaced by the following:

(i) any amount that the insurer claims as a policy reserve for the year in respect of its groups of contracts at the end of the year that are life insurance policies in Canada, not exceeding the total of amounts that the insurer is allowed by regulation to deduct in respect of those groups,

(2) Paragraph 138(4)(b) of the Act is replaced by the following:

(b) the amount prescribed in respect of the insurer for the year in respect of its groups of contracts at the end of the year that are life insurance policies in Canada; and

(3) The portion of subsection 138(11.92) of the Act before paragraph (c), and after paragraph (b), is replaced by the following:

to a person (in this subsection referred to as the “purchaser”) and obligations in respect of the business or line of business, as the case may be, in respect of which a reserve may be claimed under subparagraph (3)(a)(i) or paragraph 20(7)(c) (in this subsection referred to as the “obligations”) were assumed by the purchaser, the following rules apply:

(4) The definitions base year, deposit accounting insurance policy, excluded policy, reserve transition amount and transition year in subsection 138(12) of the Act are replaced by the following:

base year of an insurer means the insurer’s taxation year that immediately precedes its transition year; (année de base)

deposit accounting insurance policy in respect of an insurer’s taxation year means an insurance policy of the insurer that, according to International Financial Reporting Standards, is not an insurance contract for that taxation year. (police d’assurance à comptabilité de dépôt )

excluded policy in respect of an insurer’s base year means an insurance policy of the insurer that would be a deposit accounting insurance policy for the insurer’s base year if International Financial Reporting Standards applied for that base year. (police exclue)

reserve transition amount of an insurer, in respect of an insurance business carried on by it in its transition year, means the positive or negative amount determined by the formula

A + B − C − D

where

A is the maximum amount that the insurer would be permitted to claim under subparagraph 138(3)(a)(i) for its base year in respect of a policy reserve for its groups of life insurance policies in Canada at the end of the base year if

(a) the International Financial Reporting Standards that applied to the insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, and

(b) sections 1404 and 1406 of the Regulations were read in respect of the insurer’s base year as it reads in respect of its transition year;

B is the maximum amount that the insurer would be permitted to claim under paragraph 20(7)(c) for its base year in respect of a policy reserve for its groups of insurance policies at the end of the base year if

(a) the International Financial Reporting Standards that applied to the insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, and

(b) sections 1400 and 1402 of the Regulations were read in respect of the insurer’s base year as it reads in respect of its transition year;

C is the maximum amount that the insurer is permitted to claim under subparagraphs 138(3)(a)(i) and (ii) (as they read in their application to taxation years that begin before 2023) as a policy reserve for its base year; and

D is the maximum amount that the insurer is permitted to claim under paragraph 20(7)(c) as a policy reserve for its base year. (montant transitoire)

transition year of an insurer means the insurer’s first taxation year that begins after 2022. (année transitoire)

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

contractual service margin for a group of insurance policies of an insurer, or a group of reinsurance contracts held by the insurer, at the end of a taxation year, means the greater of the amount of the contractual service margin

(a) that would be reported at the end of the taxation year in respect of the group of contracts if it were determined without reference to

(i) projected income, sales and capital taxes (other than the tax payable under Part XII.3) and cash flows in respect of funds withheld by the insurer,

(ii) amounts payable that are deductible for the taxation year, or a previous taxation year, in computing income under Part I, and

(iii) amounts receivable to the extent they have been included for the taxation year, or a previous taxation year, in computing income under Part I; and

(b) that would be determined at the end of the taxation year in respect of the group of contracts in accordance with International Financial Reporting Standards using reasonable assumptions in the circumstances if it was determined without reference to

(i) projected income, sales and capital taxes (other than the tax payable under Part XII.3) and cash flows in respect of funds withheld by the insurer,

(ii) amounts payable that are deductible for the taxation year, or a previous taxation year, in computing income under Part I, and

(iii) amounts receivable to the extent they have been included for the taxation year, or a previous taxation year, in computing income under Part I. (marge sur services contractuels)

group of insurance policies and group of reinsurance contracts means a group of contracts, that only includes insurance policies or reinsurance contracts, as the case may be, determined according to International Financial Reporting Standards and is a group for the purpose of determining an amount or item of an insurer that is reported as at the end of the insurer’s taxation year. (groupe de polices d’assurance) (groupe de contrats de réassurance)

liability for incurred claims for a group of insurance policies of an insurer at the end of a taxation year, means the lesser of the positive or negative amount of the liability for incurred claims under the group of insurance policies

(a) that would be reported at the end of the taxation year if the liability was determined without reference to

(i) projected income, sales and capital taxes (other than the tax payable under Part XII.3),

(ii) amounts payable that are deductible for the taxation year, or a previous taxation year, in computing income under Part I, and

(iii) amounts receivable to the extent they have been included for the taxation year, or a previous taxation year, in computing income under Part I; and

(b) that would be determined at the end of the taxation year in accordance with International Financial Reporting Standards using reasonable assumptions in the circumstances if the liability was reported without reference to

(i) projected income, sales and capital taxes (other than the tax payable under Part XII.3),

(ii) amounts payable that are deductible for the taxation year, or a previous taxation year, in computing income under Part I, and

(iii) amounts receivable to the extent they have been included for the taxation year, or a previous taxation year, in computing income under Part I. (passif au titre des sinistres survenus)

liability for remaining coverage for a group of insurance policies of an insurer at the end of a taxation year, means the lesser of the positive or negative amount of the liability for remaining coverage under the group of insurance policies

(a) that would be reported at the end of the taxation year if the liability was determined without reference to

(i) projected income, sales and capital taxes (other than the tax payable under Part XII.3),

(ii) amounts payable that are deductible for the taxation year, or a previous taxation year, in computing income under Part I, and

(iii) amounts receivable to the extent they have been included for the taxation year, or a previous taxation year, in computing income under Part I; and

(i) projected income, sales and capital taxes (other than the tax payable under Part XII.3),

(ii) amounts payable that are deductible for the taxation year, or a previous taxation year, in computing income under Part I, and

(iii) amounts receivable to the extent they have been included for the taxation year, or a previous taxation year, in computing income under Part I. (passif au titre de la couverture restante)

policyholders’ liabilities, of an insurer at the end of a taxation year, means the amount or item reported as policyholders’ liabilities as at the end of the year. (obligation envers les titulaires de polices)

reinsurance contract held amount for a group of reinsurance contracts held by an insurer at the end of a taxation year, means the lesser of the positive or negative amount for that group

(a) that would be reported at the end of the taxation year as an asset if the amount was determined without reference to

(i) projected income, sales and capital taxes (other than the tax payable under Part XII.3) and cash flows in respect of funds withheld by the insurer,

(ii) amounts payable that are deductible for the taxation year, or a previous taxation year, in computing income under Part I, and

(iii) amounts receivable to the extent they have been included for the taxation year, or a previous taxation year, in computing income under Part I; and

(i) projected income, sales and capital taxes (other than the tax payable under Part XII.3) and cash flows in respect of funds withheld by the insurer,

(ii) amounts payable that are deductible for the taxation year, or a previous taxation year, in computing income under Part I, and

(iii) amounts receivable to the extent they have been included for the taxation year, or a previous taxation year, in computing income under Part I. (montant au titre des contrats de réassurance détenus)

relevant authority of an insurer means

(a) the Superintendent of Financial Institutions, if the insurer is required by law to report to the Superintendent of Financial Institutions; and

(b) in any other case, the Superintendent of Insurance or other similar officer or authority of the province under whose laws the insurer is incorporated. (autorité compétente)

(6) Section 138 of the Act is amended by adding the following after subsection (12):

IFRS reference

(12.1) Except as otherwise provided, references to International Financial Reporting Standards in this section refer to the International Financial Reporting Standards adopted by the Accounting Standards Board and effective for years that begin on or after January 1, 2023.

Amount or item reported

(12.2) A reference in subsections (12) and 138.1(1) of the Act and Parts XIV, XXIV and LXXXVI of the Income Tax Regulations to an amount or item that is reported, or that would be reported, of an insurer as at the end of a taxation year means

(a) if the insurer is the Canada Mortgage and Housing Corporation or a foreign affiliate of a taxpayer resident in Canada, the amount that is reported, or that would be reported, in its financial statements for the year if those statements were prepared in accordance with International Financial Reporting Standards;

(b) if paragraph (a) does not apply and reporting by the insurer to the insurer's relevant authority is required at the end of the year, an amount that is reported, or that would be reported, as at the end of the year, in the insurer's non-consolidated balance sheet accepted by the insurer's relevant authority;

(c) if paragraphs (a) and (b) do not apply and the insurer is, throughout the year, subject to the supervision of its relevant authority, an amount that is reported, or that would be reported, in a non-consolidated balance sheet that is prepared in a manner consistent with the requirements that would have applied had reporting to the insurer's relevant authority been required at the end of the year; and

(d) in any other case, nil.

(7) Subsections 138(16) to (17.1) of the Act are replaced by the following:

Transition year income inclusion

(16) There shall be included in computing an insurer’s income for its transition year from an insurance business carried on by it in the transition year, the positive amount, if any, of the insurer’s reserve transition amount in respect of that insurance business.

Transition year income deduction

(17) There shall be deducted in computing an insurer’s income for its transition year from an insurance business carried on by it in the transition year, the absolute value of the negative amount, if any, of the insurer’s reserve transition amount in respect of that insurance business.

IFRS transition — reversals

(17.1) In applying subsections (18) and (19) to an insurer for a taxation year of the insurer in respect of International Financial Reporting Standards,

(a) the reference to “policy reserve” in C 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 insurer’s excluded policies”; and

(b) element D of the formula in the definition reserve transition amount in subsection (12) is to be read as follows:

D is the amount determined by the formula

E − F

where

E is the maximum amount that the insurer is permitted to claim under paragraph 20(7)(c) as a policy reserve determined without reference to the insurer’s excluded policies, and

F is the amount of policy acquisition costs of the insurer that is not deductible, but in the absence of subsection 18(9.02) (as it read in the base year) would have been deductible, in the base year or a preceding taxation year.

(8) The portion of subsection 138(18) of the Act before the description of B is replaced by the following:

Transition year income inclusion reversal

(18) If an amount has been included under subsection (16) in computing an insurer’s income for its transition year from an insurance business carried on by it, there shall be deducted in computing the insurer’s income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula

A × B/1825

where

A is the amount included under subsection (16) in computing the insurer’s income for the transition year from that insurance business; and

(9) The portion of subsection 138(19) of the Act before the description of B is replaced by the following:

Transition year income deduction reversal

(19) If an amount has been deducted under subsection (17) in computing an insurer’s income for its transition year from an insurance business carried on by it, there shall be included in computing the insurer’s income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula

A × B/1825

where

A is the amount deducted under subsection (17) in computing the insurer’s income for the transition year from that insurance business; and

(10) Subsection 138(20) of the Act is replaced by the following:

Winding-up

(20) If an insurer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent carries on an insurance business, in applying subsections (18) and (19) in computing the income of the insurer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the insurer were distributed to the parent on the winding-up,

(a) the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the insurer in respect of

(i) any amount included under subsection (16) or deducted under subsection (17) in computing the insurer’s income from an insurance business for its transition year,

(ii) any amount deducted under subsection (18) or included under subsection (19) in computing the insurer’s income from an insurance business for a taxation year of the insurer that begins before the start day, and

(iii) any amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the start day or a subsequent day and on which the parent carries on an insurance business — be required to be deducted or included, in respect of any of those days, under subsection (18) or (19) in computing the insurer’s income from an insurance business; and

(b) the insurer is, in respect of each of its particular taxation years, to determine the value for B in the formulas in subsections (18) and (19) without reference to the start day and days after the start day.

(11) Subsection 138(21) of the Act is replaced by the following:

Amalgamations

(21) If there is an amalgamation (within the meaning assigned by subsection 87(1)) of an insurer with one or more other corporations to form one corporation (referred to in this subsection as the “new corporation”), and immediately after the amalgamation the new corporation carries on an insurance business, in applying subsections (18) and (19) in computing the income of the new corporation for particular taxation years of the new corporation that begin on or after the day on which the amalgamation occurred, the new corporation is, on and after that day, deemed to be the same corporation as and a continuation of the insurer in respect of

(a) any amount included under subsection (16) or deducted under subsection (17) in computing the insurer’s income from an insurance business for its transition year;

(b) any amount deducted under subsection (18) or included under subsection (19) in computing the insurer’s income from an insurance business for a taxation year that begins before the day on which the amalgamation occurred; and

(c) any amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the day on which the amalgamation occurred or a subsequent day and on which the new corporation carries on an insurance business — be required to be deducted or included, in respect of any of those days, under subsection (18) or (19) in computing the insurer’s income from an insurance business.

(12) The portion of subsection 138(22) of the Act before paragraph (a) is replaced by the following:

Application of subsection (23)

(22) Subsection (23) applies if, at any time, an insurer (referred to in this subsection and subsection (23) as the “transferor”) transfers, to a corporation (referred to in this subsection and subsection (23) as the “transferee”) that is related to the transferor, property in respect of an insurance business carried on by the transferor (referred to in this subsection and subsection (23) as the “transferred business”) and

(13) Paragraph 138(22)(b) of the Act is replaced by the following:

(b) subsection 85(1) applies to the transfer, the transfer includes all or substantially all of the property and liabilities of the transferred business and, immediately after the transfer, the transferee carries on an insurance business.

(14) Subparagraph 138(23)(a)(iii) of the Act is replaced by the following:

(iii) any amount that would — in the absence of this subsection and if the transferor existed and carried on an insurance business on each day that includes that time or is a subsequent day and on which the transferee carries on an insurance business — be required to be deducted or included, in respect of any of those days, under subsection (18) or (19) in computing the transferor’s income that can reasonably be attributed to the transferred business; and

(15) Subsection 138(24) of the Act is replaced by the following:

Ceasing to carry on business

(24) If at any time an insurer ceases to carry on all or substantially all of an insurance business (referred to in this subsection as the “discontinued business”), and none of subsections (20) to (22) apply,

(a) there shall be deducted, in computing the insurer’s income from the discontinued business for the insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula

A – B

where

A is the amount included under subsection (16) in computing the insurer’s income from the discontinued business for its transition year, and

B is the total of all amounts each of which is an amount deducted under subsection (18) in computing the insurer’s income from the discontinued business for a taxation year that began before that time; and

(b) there shall be included, in computing the insurer’s income from the discontinued business for the insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula

C – D

where

C is the amount deducted under subsection (17) in computing the insurer’s income from the discontinued business for its transition year, and

D is the total of all amounts each of which is an amount included under subsection (19) in computing the insurer’s income from the discontinued business for a taxation year that began before that time.

(16) Subsection 138(25) of the Act is replaced by the following:

Ceasing to exist

(25) If at any time an insurer that carried on an insurance business ceases to exist (otherwise than as a result of a winding-up or amalgamation described in subsection (20) or (21)), for the purposes of subsection (24), the insurer is deemed to have ceased to carry on the insurance business at the earlier of

(a) the time (determined without reference to this subsection) at which the insurer ceased to carry on the insurance business, and

(b) the time that is immediately before the end of the last taxation year of the insurer that ended at or before the time at which the insurer ceased to exist.

(17) Subsection 138(26) of the Act is repealed.

(18) Subsections (1) to (17) apply to taxation years that begin after 2022.

3 (1) The portion of subsection 138.1(1) of the Act before paragraph (a) is replaced by the following:

Rules relating to segregated funds

138.1 (1) In respect of life insurance policies for which all or any part of an insurer’s reserves vary in amount depending on the fair market value of a specified group of properties that is reported to a relevant authority (as defined in subsection 138(12)) as a segregated fund (in this section referred to as a “segregated fund”), for the purposes of this Part, the following rules apply:

(2) Subsection (1) applies to taxation years that begin after 2022.

4 (1) The definition transition year in subsection 142.51(1) of the Act is replaced by the following:

transition year of a taxpayer means the taxpayer’s first taxation year that begins after 2022. (année transitoire)

(2) Subsections 142.51(2) and (3) of the Act are replaced by the following:

Transition year income inclusion

(2) If a taxpayer is an insurer in its transition year, there shall be included in computing the taxpayer’s income for its transition year the absolute value of the negative amount, if any, of the taxpayer’s transition amount.

Transition year income deduction

(3) If a taxpayer is an insurer in its transition year, there shall be deducted in computing the taxpayer’s income for its transition year the positive amount, if any, of the taxpayer’s transition amount.

(3) The portion of subsection 142.51(4) of the Act before the formula is replaced by the following:

Transition year income inclusion reversal

(4) If an amount has been included under subsection (2) in computing a taxpayer’s income for its transition year there shall be deducted in computing the taxpayer’s income for each particular taxation year of the taxpayer that ends after the beginning of the transition year, and in which particular taxation year the taxpayer is an insurer, the amount determined by the formula

(4) Subsection 142.51(5) of the Act before the formula is replaced by the following:

Transition year income deduction reversal

(5) If an amount has been deducted under subsection (3) in computing a taxpayer’s income for its transition year, there shall be included in computing the taxpayer’s income, for each particular taxation year of the taxpayer ending after the beginning of the transition year, and in which particular taxation year the taxpayer is an insurer, the amount determined by the formula

(5) The portion of subsection 142.51(6) of the Act before paragraph (a) is replaced by the following:

Winding-up

(6) If a taxpayer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent is an insurer, in applying subsections (4) and (5) in computing the income of the taxpayer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the taxpayer were distributed to the parent on the winding-up,

(6) Subparagraph 142.51(6)(a)(iii) of the Act is replaced by the following:

(iii) any amount that would — in the absence of this subsection and if the taxpayer existed and was an insurer on each day that is the start day or a subsequent day and on which the parent is an insurer — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the taxpayer’s income for its transition year; and

(7) The portion of subsection 142.51(7) of the Act before paragraph (a) is replaced by the following:

Amalgamations

(7) If there is an amalgamation (within the meaning assigned by subsection 87(1)) of a taxpayer with one or more other corporations to form one corporation (referred to in this subsection as the “new corporation”), and immediately after the amalgamation the new corporation is an insurer, in applying subsections (4) and (5) in computing the income of the new corporation for particular taxation years of the new corporation that begin on or after the day on which the amalgamation occurred, the new corporation is, on and after that day, deemed to be the same corporation as and a continuation of the taxpayer in respect of

(8) Paragraph 142.51(7)(c) of the Act is replaced by the following:

(c) any amount that would — in the absence of this subsection and if the taxpayer existed and was an insurer on each day that is the day on which the amalgamation occurred or a subsequent day and on which the new corporation is an insurer — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the taxpayer’s income.

(9) Paragraph 142.51(8)(b) of the Act is replaced by the following:

(10) Subparagraph 142.51(9)(a)(iii) of the Act is replaced by the following:

(iii) any amount that would — in the absence of this subsection and if the transferor existed and was an insurer on each day that includes that time or is a subsequent day and on which the transferee is an insurer — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the transferor’s income that can reasonably be attributed to the transferred business; and

(11) Subsection 142.51(10) of the Act is repealed.

(12) The portion of subsection 142.51(11) of the Act before paragraph (a) is replaced by the following:

Ceasing to carry on a business

(11) If at any time, a taxpayer ceases to be an insurer

(13) The portion of subsection 142.51(12) of the Act before paragraph (b) is replaced by the following:

Ceasing to exist

(12) If at any time a taxpayer ceases to exist (otherwise than as a result of a merger to which subsection 87(2) applies or a winding-up to which subsection 88(1) applies), for the purposes of subsection (11), the taxpayer is deemed to have ceased to be an insurer at the earlier of

(a) the time (determined without reference to this subsection) at which the taxpayer ceased to be an insurer, and

(14) Section 142.51 of the Act is amended by adding the following after subsection (12):

Ceasing to be mark-to-market property

(13) Subsection (13.1) applies to a taxpayer for a particular taxation year of the taxpayer if

(a) the taxpayer holds a transition property in the particular taxation year;

(b) the property was a mark-to-market property of the taxpayer for the taxation year preceding the particular taxation year; and

Ceasing to be mark-to-market property

(13.1) If this subsection applies to a taxpayer for a particular taxation year of the taxpayer, for purposes of this section

(a) the taxpayer is deemed to have ceased to be an insurer at the particular time that is the beginning of the particular taxation year; and

(b) the time immediately before the particular time shall be deemed to be the end of the taxation year that ends immediately before the particular taxation year.

(15) Subsections (1) to (14) apply to taxation years that begin after 2022.

5 (1) Subsection 181(1) of the Act is amended by adding the following in alphabetical order:

contractual service margin for a group of insurance policies of an insurer, or a group of reinsurance contracts held by the insurer, at the end of a taxation year, has the same meaning as in subsection 138(12). (marge sur services contractuels)

group of insurance policies and group of reinsurance contracts have the same meaning as in subsection 138(12). (groupe de polices d’assurance) (groupe de contrats de réassurance)

policyholders’ liabilities of an insurer at the end of a taxation year has the same meaning as in subsection 138(12). (obligation envers les titulaires de polices)

reinsurance contract held amount for a group of reinsurance contracts held by an insurer at the end of a taxation year has the same meaning as in subsection 138(12). (montant au titre des contrats de réassurance détenus)

(2) Subsection (1) applies to taxation years that begin after 2022

6 (1) Paragraphs 181.3(3)(b) and (c) of the Act are replaced by the following:

(b) in the case of an insurance corporation that was resident in Canada at any time in the year and carried on a life insurance business at any time in the year, the amount determined by the formula

A + B + (0.9 × C) − (0.9 × D) − E

where

A is the amount of the corporation’s long-term debt at the end of the year,

B is the total amount, at the end of the year, of the corporation’s

(i) capital stock (or, in the case of an insurance corporation incorporated without share capital, the amount of its members’ contributions),

(ii) retained earnings,

(iii) accumulated other comprehensive income,

(iv) policyholders’ liabilities,

(v) contributed surplus, and

(vi) any other surpluses,

C is the total of all amounts each of which is the contractual service margin for a group of insurance policies of the corporation at the end of the year other than a group of segregated fund policies,

D is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the corporation at the end of the year, that is

(i) if no portion of the contractual service margin for the group is in respect of a risk under a segregated fund policy, the contractual service margin for the group, and

(ii) in any other case, the amount that would be the contractual service margin for the group if the contractual service margin were determined excluding any portion of the contractual service margin that is in respect of the reinsurance of risks under segregated fund policies, and

E is the amount of any deficit deducted in computing the shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year;

(c) in the case of an insurance corporation that was resident in Canada at any time in the year and throughout the year did not carry on a life insurance business, the amount determined by the formula

A + B + (0.9 × C) − (0.9 × D) + E − F − G

where

A is the amount of the corporation’s long-term debt at the end of the year,

B is the total amount, at the end of the year, of the corporation’s

(i) capital stock (or, in the case of an insurance corporation incorporated without share capital, the amount of its members’ contributions),

(ii) retained earnings,

(iii) accumulated other comprehensive income,

(iv) policyholders’ liabilities,

(v) contributed surplus, and

(vi) any other surpluses,

C is total of all amounts each of which is the contractual service margin for a group of insurance policies of the corporation at the end of the year that is in respect of

(i) non-cancellable or guaranteed renewable accident and sickness policies in respect of accident and sickness insurance (as defined in subsection 1408(1) of the Regulations),

(ii) mortgage insurance (as defined in subsection 1408(1) of the Regulations), or

(iii) title insurance (as defined in subsection 1408(1) of the Regulations),

D is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the corporation at the end of the year, that is

(i) the contractual service margin for the group, if no portion of the contractual service margin is in respect of a risk under an insurance policy other than an insurance policy that is in respect of

(A) non-cancellable or guaranteed renewable accident and sickness policies in respect of accident and sickness insurance (as defined in subsection 1408(1) of the Regulations),

(B) mortgage insurance (as defined in subsection 1408(1) of the Regulations), or

(ii) in any other case, the amount that would be the contractual service margin for the group if the contractual service margin were determined excluding any portion that is in respect of the reinsurance of risks under policies other than those described in any of clauses (i)(A) to (C),

E is the amount of its reserves for the year, except to the extent that they

(i) were deducted in computing its income under Part I for the year, or

(ii) are reserves in respect of the contractual service margin for a group of insurance policies of the corporation at the end of the year,

F is the total of all amounts each of which is the reinsurance contract held amount for a group of reinsurance contracts held by the corporation at the end of the year, to the extent the amount can be reasonably regarded as being included in the amount determined under element E, and

G is the amount of any deficit deducted in computing the shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year;

(2) Subparagraph 181.3(3)(d)(iv) of the Act is amended by adding “and” to the end of clause (C) and by replacing clauses (D) to (F) with the following:

(F) is the total of all amounts each of which is the reinsurance contract held amount for a group of reinsurance contracts held by the corporation at the end of the year, to the extent the amount can be reasonably regarded as being included in the amount determined under clause (A); and

(3) Subsections (1) and (2) apply to taxation years that begin after 2022.

7 (1) Subsection 190(1) of the Act is amended by adding the following in alphabetical order:

group of insurance policies and group of reinsurance contracts have the same meaning as in subsection 138(12). (groupe de polices d’assurance) (groupe de contrats de réassurance)

policyholders’ liabilities of an insurer at the end of a taxation year has the same meaning as in subsection 138(12). (obligation envers les titulaires de polices)

(2) Subsection (1) applies to taxation years that begin after 2022.

8 (1) Paragraph 190.13(b) of the Act is replaced by the following:

(b) in the case of a life insurance corporation that was resident in Canada at any time in the year, the amount determined by the formula

A + B + (0.9 × C) − (0.9 × D) − E

where

A is the amount of the corporation’s long-term debt at the end of the year,

B is the total amount, at the end of the year, of the corporation’s

(i) capital stock (or, in the case of an insurance corporation incorporated without share capital, the amount of its members’ contributions),

(ii) retained earnings,

(iii) accumulated other comprehensive income,

(iv) policyholders’ liabilities,

(v) contributed surplus, and

(vi) any other surpluses,

D is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the corporation at the end of the year, that is

(i) if no portion of the contractual service margin for the group is in respect of a risk under a segregated fund policy, the contractual service margin for the group, and

(2) Subsection (1) applies to taxation years that begin after 2022.

9 (1) Paragraphs 309.1(b) and (c) of the Regulations are replaced by the following:

(b) there shall be included the insurer’s maximum tax actuarial reserve for the immediately preceding taxation year in respect of participating life insurance policies in Canada;

(c) there shall not be included any amount in respect of the insurer’s participating life insurance policies in Canada that was deducted under subparagraph 138(3)(a)(i) of the Act in computing its income for the immediately preceding taxation year;

(2) Paragraph 309.1(e) of the Regulations is replaced by the following:

(e) there shall be deducted the insurer’s maximum tax actuarial reserve for the year in respect of participating life insurance policies in Canada;

(3) Paragraph 309.1(g) of the Regulations is replaced by the following:

(g) except as otherwise provided in paragraph (e), no deduction shall be made in respect of a reserve deductible under subparagraph 138(3)(a)(i) of the Act in computing the insurer’s income for the year; and

(4) Subsection (1) applies to taxation years that begin after 2023.

(5) Subsections (2) and (3) apply to taxation years that begin after 2022.

10 (1) Subsection 1400(3) of the Regulations is replaced by the following:

(3) For the purposes of paragraphs (1)(a) and (2)(a), the amount determined under this subsection in respect of an insurer for a taxation year is the positive or negative amount determined by the formula

A + B + (0.95 × C) − (0.9 × D) + E + F + G − (H − (0.9 × I))

where

A is the total of all amounts each of which is the liability for remaining coverage for a group of insurance policies of the insurer at the end of the year other than a group of life insurance policies;

B is the total of all amounts each of which is an amount, in respect of a group of insurance policies of the insurer at the end of the year other than a group of life insurance policies, that is

(a) the liability for incurred claims for the group, if no portion of the liability for incurred claims is in respect of insurance policies other than insurance policies in respect of which

(i) a claim that was incurred before the end of the year has been reported to the insurer before the end of the year,

(ii) the claim is in respect of damages for personal injury or death, and

(iii) the insurer has agreed to a structured settlement of the claim, and

(b) in any other case, the amount that would be the liability for incurred claims for the group if the liability for incurred claims were determined excluding insurance policies other than insurance policies that meet the conditions in subparagraphs (a)(i) to (iii);

C is the total of all amounts each of which is an amount, in respect of a group of insurance policies of the insurer at the end of the year other than a group of life insurance policies, that is

(a) the liability for incurred claims for the group, if no portion of the liability for incurred claims is in respect of insurance policies that meet the conditions in subparagraphs (a)(i) to (iii) of element B; and

(b) in any other case, the amount that would be the liability for incurred claims for the group if the liability for incurred claims were determined excluding insurance policies that meet the conditions in subparagraphs (a)(i) to (iii) of element B;

D is the total of all amounts each of which is the contractual service margin for a group of insurance policies of the insurer at the end of the year that is in respect of

(a) non-cancellable or guaranteed renewable accident and sickness policies that are in respect of accident and sickness insurance,

(b) mortgage insurance, or

E is an amount in respect of policies that insure a fidelity risk, a surety risk, a nuclear risk, or a risk related to a financial loss of a lender on a loan made on the security of real property, equal to the lesser of

(a) the total of the reported reserves of the insurer at the end of the year in respect of such risks (other than an amount included in A, B, C, D or F), and

(b) a reasonable amount as a reserve determined as at the end of the year in respect of such risks (other than an amount included in A, B, C, D or F);

F is the amount of a guarantee fund at the end of the year provided for under an agreement in writing between the insurer and Her Majesty in right of Canada under which Her Majesty has agreed to guarantee the obligations of the insurer under a policy that insures a risk related to a financial loss of a lender on a loan made on the security of real property;

G is an amount in respect of policies that insure earthquake risks in Canada equal to the lesser of

(a) the portion of the reported reserve of the insurer at the end of the year in respect of those risks that is attributable to accumulations from premiums in respect of those risks (other than an amount included in A, B, C, D, E or F), and

(b) a reasonable amount as a reserve determined at the end of the year in respect of those risks (other than an amount included in A, B, C, D, E or F);

H is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of a risk under life insurance policies, the reinsurance contract held amount for the group, and

(b) in any other case, the amount that would be the reinsurance contract held amount for the group if the amount were determined excluding any portion of that amount that is in respect of the reinsurance of a risk under life insurance policies; and

I is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) if no portion of the contractual service margin for the group is in respect of the reinsurance of a risk under a policy other than a policy described in paragraph (a), or a policy in respect of insurance described in paragraph (b) or (c) of element D, the contractual service margin for the group, and

(b) in any other case, the amount that would be the contractual service margin for the group if the contractual service margin were determined excluding any portion of the contractual service margin other than that portion that is in respect of the reinsurance of a risk under a policy described in paragraph (a), and a policy in respect of insurance described in paragraph (b) or (c) of element D.

(2) Subsection 1400(4) of the Regulations is repealed.

(3) Subsections (1) and (2) apply to taxation years that begin after 2022.

11 (1) Section 1402 of the Regulations is replaced by the following:

1402 Any amount determined under

(a) section 1401 shall be determined net of relevant reinsurance recoverable amounts; and

(b) section 1400 or 1401 shall be determined without reference to any amount in respect of a deposit accounting insurance policy.

(2) Subsection (1) applies to taxation years that begin after 2022.

12 (1) The portion of subsection 1404(1) of the Regulations before paragraph (a) is replaced by the following:

1404 (1) For the purpose of subparagraph 138(3)(a)(i) of the Act, there may be deducted, in computing a life insurer’s income from carrying on its life insurance business in Canada for a taxation year in respect of its groups of contracts at the end of the year that are life insurance policies in Canada, the amount the insurer claims, not exceeding

(2) The portion of subsection 1404(2) of the Regulations before paragraph (a) is replaced by the following:

(2) For the purpose of paragraph 138(4)(b) of the Act, the amount prescribed in respect of an insurer for a taxation year, in respect of its groups of contracts at the end of the year that are life insurance policies in Canada, is

(3) Subsection 1404(3) of the Regulations is replaced by the following:

(3) For the purposes of paragraphs (1)(a) and (2)(a), the amount determined under this subsection in respect of an insurer for a taxation year, for groups of life insurance policies in Canada of the insurer at the end of the year, is the positive or negative amount determined by the formula

A + B − (0.9 × C) − (D − (0.9 × E))

where

A is the total of all amounts each of which is the liability for remaining coverage for a group of life insurance policies in Canada of the insurer at the end of the year;

B is the total of all amounts each of which is the liability for incurred claims for a group of life insurance policies in Canada of the insurer at the end of the year;

C is the total of all amounts each of which is the contractual service margin for a group of life insurance policies in Canada (other than a group of segregated fund policies) of the insurer at the end of the year;

D is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of a risk under an insurance policy other than a life insurance policy in Canada, the reinsurance contract held amount for the group; and

(b) in any other case, the amount that would be the reinsurance contract held amount for the group if the amount were determined excluding any portion that is in respect of the reinsurance of a risk under an insurance policy other than a life insurance policy in Canada; and

E is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) if no portion of the contractual service margin for the group is in respect of the reinsurance of a risk under an insurance policy other than a life insurance policy in Canada that is not a segregated fund policy, the contractual service margin for the group; and

(b) in any other case, the amount that would be the contractual service margin for the group if the contractual service margin were determined excluding any portion that is in respect of the reinsurance of a risk under insurance policies other than a life insurance policy in Canada that is not a segregated fund policy.

(4) Subsections (1) to (3) apply to taxation years that begin after 2022.

13 (1) Section 1405 of the Regulations is repealed.

(2) Subsection (1) applies to taxation years that begin after 2022.

14 (1) The portion of section 1406 of the Regulations before paragraph (b) is replaced by the following:

1406 Any amount determined under section 1404 shall be determined

(2) Subsection (1) applies to taxation years that begin after 2022.

15 (1) Section 1407 of the Regulations is replaced by the following:

1407 For greater certainty, any amount referred to in or determined under section 1404 may be equal to, or less than, nil.

(2) Subsection (1) applies to taxation years that begin after 2022.

16 (1) The definitions claim liability, extended motor vehicle warranty, general amending provision, policy liability, post-1995 life insurance policy, post-1995 non-cancellable or guaranteed renewable accident and sickness policy, pre-1996 life insurance policy, pre-1996 non-cancellable or guaranteed renewable accident and sickness policy and reinsurance commission in subsection 1408(1) of the Regulations are repealed.

(2) The definitions relevant authority and reported reserve in subsection 1408(1) of the Regulations are replaced by the following:

relevant authority of an insurer has the same meaning as in subsection 138(12) of the Act. (autorité compétente)

reported reserve of an insurer at the end of a taxation year in respect of a policy that insures an earthquake risk in Canada, or a fidelity risk, a nuclear risk or a risk related to a financial loss of a lender on a loan made on the security of real property, means the amount equal to the positive or negative amount of the reserve reported at the end of the year. (provision déclarée)

(3) Subsection 1408(1) of the Regulations is amended by adding the following in alphabetical order:

accident and sickness insurance has the same meaning as in the Schedule to the Insurance Companies Act. (assurance accident et maladie)

group of insurance policies and group of reinsurance contracts have the same meaning as in subsection 138(12) of the Act. (groupe de polices d’assurance) (groupe de contrats de réassurance)

liability for incurred claims for of a group of insurance policies of an insurer at the end of a taxation year has the same meaning as in subsection 138(12) of the Act. (passif au titre des sinistres survenus)

liability for remaining coverage for a group of insurance policies of an insurer at the end of a taxation year has the same meaning as in subsection 138(12) of the Act. (passif au titre de la couverture restante)

mortgage insurance has the same meaning as in the Schedule to the Insurance Companies Act.(assurance hypothécaire)

reinsurance contract held amount for a group of reinsurance contracts held by an insurer at the end of a taxation year has the same meaning as in subsection 138(12) of the Act. (montant au titre des contrats de réassurance détenus)

title insurance has the same meaning as in the Schedule to the Insurance Companies Act. (assurance de titres)

(4) Subsections 1408(2), (4), (7) and (8) of the Regulations are repealed.

(5) Subsections (1) to (4) apply to taxation years that begin after 2022.

17 (1) The definitions Canadian outstanding premiums, foreign policy loan, mean Canadian outstanding premiums, mean policy loans, outstanding premiums and reinsurance recoverable in subsection 2400(1) of the Regulations are repealed.

(2) The definition “Canadian investment property” in subsection 2400(1) of the Regulations is amended by striking out “; or” at the end of paragraph (h), adding “.” at the end of paragraph (h) and repealing paragraph (i).

(3) The definition “investment property” in subsection 2400(1) of the Regulations is amended by adding “or” at the end of paragraph (c), striking out “; or” at the end of paragraph (d), adding “.” at the end of paragraph (d) and repealing paragraph (e).

(4) The definitions Canadian reserve liabilities, property and casualty surplus, weighted Canadian liabilities and weighted total liabilities in subsection 2400(1) of the Regulations are replaced by the following:

Canadian reserve liabilities of an insurer at the end of a taxation year means the amount determined by the formula

A − (0.9 × B) − (C − (0.9 × D))

where

(a) life insurance policies in Canada;

(b) fire insurance policies issued or effected in respect of property situated in Canada; and

(c) insurance policies of any other class covering risks ordinarily within Canada at the time the policy was issued or effected;

B is the total of all amounts each of which is, in respect of a group of insurance policies of the insurer at the end of the year,

(a) the contractual service margin for the group, if no portion of the contractual service margin is in respect of a policy other than a policy that meets the following conditions:

(i) it is described in any of paragraphs (a) to (c) of element A,

(ii) it is a

(A) life insurance policy in Canada,

(B) policy that insures risk in respect of a financial loss of a lender on a loan made on the security of real property,

(C) non-cancellable or guaranteed renewable accident and sickness policy in respect of accident and sickness insurance (as defined in subsection 1408(1)), or

(D) policy in respect of title insurance (as defined in subsection 1408(1)), and

(iii) it is not a segregated fund policy; and

(b) in any other case, the amount that would be the contractual service margin for the group, if the amount excluded the portion that is in respect of policies other than policies that meet the conditions in subparagraphs (a)(i) to (iii).

C is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) the reinsurance contract held amount for the group, if no portion of the reinsurance contract held amount is in respect of the reinsurance of

(i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of element B, or

(ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

(b) in any other case, the amount that would be the reinsurance contract held amount for the group if the amount were determined excluding any portion that is in respect of the reinsurance of either

(i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of element B, or

(ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply; and

D is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) if no portion of the contractual service margin for the group is in respect of a risk under a policy other than a policy that meets the conditions under subparagraphs (a)(i) to (iii) of element B, the contractual service margin for the group, and

(b) in any other case, the amount that would be the contractual service margin for the group if the amount were determined excluding any portion that is in respect of the reinsurance of a risk under a policy other than a policy that meets the conditions under subparagraphs (a)(i) to (iii) of element B. (passif de réserve canadienne)

property and casualty surplus of an insurer for a taxation year means the amount determined by the formula

0.075 × (A + B + C + D − E − F) + 0.5 × (G + H)

where

A is the total of all amounts each of which is the liability for remaining coverage for a group of insurance policies of the insurer at the end of the year that is in respect of property and casualty insurance;

B is the total of all amounts each of which is the liability for remaining coverage for a group of insurance policies of the insurer at the end of the preceding taxation year that is in respect of property and casualty insurance;

C is the total of all amounts each of which is the liability for incurred claims for a group of insurance policies of the insurer at the end of the year that is in respect of property and casualty insurance;

D is the total of all amounts each of which is the liability for incurred claims for a group of insurance policies of the insurer at the end of the preceding taxation year that is in respect of property and casualty insurance;

E is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of a risk under a policy other than a policy that is in respect of property and casualty insurance, the reinsurance contract held amount for the group, and

(b) in any other case, the amount that would be the reinsurance contract held amount for the group if the reinsurance contract held amount were determined excluding any portion that is in respect of the reinsurance of a risk under a policy other than policies in respect of property and casualty insurance;

F is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the preceding taxation year, that is

G is the insurer’s investment valuation reserve as at the end of the year in respect of its property and casualty insurance business; and

H is the insurer’s investment valuation reserve as at the end of its preceding taxation year in respect of its property and casualty insurance business. (excédent provenant de l’assurance de dommages)

weighted Canadian liabilities of an insurer as at the end of a taxation year means the amount determined by the formula

(3 × A) + B

where

A is the amount determined by the formula

C − (0.9 × D) − (E − (0.9 × F))

where

C is the total of all amounts each of which is an amount in respect of an insurance business carried on by the insurer in Canada and that is reported as a liability (other than policyholders’ liabilities or a liability for an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply) as at the end of the year in respect of

(a) a life insurance policy in Canada (other than an annuity), or

(b) an accident and sickness insurance policy,

D is the total of all amounts each of which is an amount, in respect of a group of insurance policies of the insurer at the end of the year, that is

(a) the contractual service margin for the group, if no portion of the contractual service margin is in respect of a policy other than a policy that meets the following conditions:

(i) it is described in paragraph (a) or (b) of element C,

(ii) it is a

(A) life insurance policy, or

(B) non-cancellable or guaranteed renewable accident and sickness policy in respect of accident and sickness insurance (as defined in subsection 1408(1)), and

(iii) it is not a segregated fund policy; and

(b) in any other case, the amount that would be the contractual service margin for the group, if the amount were determined excluding any portion that is in respect of a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iii);

E is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) the reinsurance contract held amount for the group, if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of

(i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of element D, or

(ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

(b) in any other case, the amount that would be the reinsurance contract held amount for the group if the amount were determined excluding any portion that is in respect of the reinsurance of either

(i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of element D, or

(ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

F is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) if no portion of the contractual service margin for the group is in respect of the reinsurance of a risk under a policy other than a policy that meets the conditions under subparagraphs (a)(i) to (iii) of element D, the contractual service margin for the group, and

B is the amount determined by the formula

G − (0.9 × H) − (I − (0.9 ×J))

where

G is the total of all amounts each of which is an amount that is in respect of an insurance business carried on by the insurer in Canada and that is reported as a liability (other than policyholders’ liabilities or a liability for an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply) as at the end of the year of the insurer except to the extent the liability is in respect of

(a) an insurance policy described in paragraph (a) or (b) of element C, or

(b) a debt incurred or assumed by the insurer to acquire a property of the insurer,

H is the total of all amounts each of which is an amount, in respect of a group of insurance policies of the insurer at the end of the year, that is

(a) the contractual service margin for the group, if no portion of the contractual service margin is in respect of a policy other than a policy that meets the following conditions:

(i) it is not described in paragraph (a) or (b) of element C,

(ii) it is

(A) a life insurance policy,

(B) a policy in respect of mortgage insurance (as defined in subsection 1408(1)), or

(iii) it is not a segregated fund policy; and

I is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) the reinsurance contract held amount for the group, if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of

(i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of element H, or

(ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

(b) in any other case, the amount that would be the reinsurance contract held amount for the group, if the amount were determined excluding any portion that is in respect of the reinsurance of either

(i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of element H, or

(ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

J is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is

(a) if no portion of the contractual service margin for the group is in respect of a risk under a policy other than a policy that meets the condition under subparagraphs (a)(i) to (iii) of element H, the contractual service margin for the group, and

(b) in any other case, the amount that would be the contractual service margin for the group, if the amount were determined excluding any portion that is in respect of the reinsurance of a risk under a policy other than a policy that meets the conditions under subparagraphs (a)(i) to (iii) of element H. (passif canadien pondéré)

weighted total liabilities of an insurer as at the end of a taxation year means the amount determined by the formula

(3 × A) + B

where

A is the amount determined by the formula

C − (0.9 × D) − (E − (0.9 × F))

where

C is the total of all amounts each of which is an amount in respect of an insurance business carried on by the insurer and that is reported as a liability (other than policyholders’ liabilities or a liability for an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply) as at the end of the year in respect of

(a) a life insurance policy (other than an annuity), or