2015-0578041E5 Designation of an ERI

Principal Issues: Client wishes to be designated as an Eligible Research Institute (ERI) for purposes of the OBRI tax credit.

Position: Review of documentation submitted fulfils the requirements for being designated as an ERI.

Reasons: Legislation

Author: Robertson, George
Section: 97(27) of TA; 38(7), (8), & (11) of Regulation 37/09 of TA; 149(1)(f)

June 10, 2015

XXXXXXXXXX                                2015-057804
                                                        George A. Robertson, CPA, CMA

Dear XXXXXXXXXX:

Re:   Application for Designation as an Eligible Research Institute

This is in reply to your letter of March 15, 2015 where you requested that XXXXXXXXXX be designated as an Eligible Research Institute (“ERI”) for purposes of clause (d) of the definition of that term in subsection 97(27) of the Taxation Act, 2007(Ontario) (the “TA”).

The authority to grant or deny the designation is exercised pursuant to subsection 38(11) of Regulation 37/09 of the TA. Where a collection agreement is in effect, the Minister of National Revenue may exercise the powers and duties of the Ontario Minister of Finance pursuant to subsection 161(3) of the TA. Where the designation is granted, the decision is based on the information provided and representations made by the particular entity, its officers or directors and/or its authorized representatives. Changes in the organization or the activities carried on by the entity may affect its status as an ERI.

Based on the information you submitted my understanding of the facts is as follows.

1.    XXXXXXXXXX was incorporated in Ontario as a corporation without share capital on XXXXXXXXXX. In Supplemental Letters Patent of XXXXXXXXXX, the name was changed to XXXXXXXXXX (the “Institute”). Prior to XXXXXXXXXX, the Institute was a division of XXXXXXXXXX.

2.    You indicate that the Institute currently is, and since XXXXXXXXXX, has been, a “registered charity” within the meaning of paragraphs 248(1) and 149(1)(f) of the Income Tax Act (“the Act”). You also maintain that the Institute will continue to be operated as a registered charity.

3.    By Canada Revenue Agency’s (“CRA”) letter dated September 28, 2010 (document # 2010-037381), the Institute was granted status as an “approved research institute” pursuant to subsection 37(7) of the Act for the purposes of clause 37(1)(a)(ii)(B) of the Act. Such approval was effective from XXXXXXXXXX

4.    The Institute entered into an adherence agreement (“Adherence Agreement”) on XXXXXXXXXX with the XXXXXXXXXX and the XXXXXXXXXX. The Adherence Agreement essentially provided a continuing framework for the parties’ shared mission of XXXXXXXXXX education and research activities that existed under the affiliation agreement that existed between the XXXXXXXXXX and the XXXXXXXXXX when the Institute was a division of the XXXXXXXXXX.

5.    Pursuant to XXXXXXXXXX of the Adherence Agreement, the parties acknowledge that the Institute is affiliated with the XXXXXXXXXX and the XXXXXXXXXX as XXXXXXXXXX, via the Institute’s being

“bound and to comply with all application provisions of the affiliation agreement between the XXXXXXXXXX and the XXXXXXXXXX date XXXXXXXXXX, as fully as if it [the Institute] had originally been a party to the affiliation agreement with the XXXXXXXXXX.”

6.    The Institute’s basic objects, as described in its Letters Patent, are to,

“carry on or promote XXXXXXXXXX scientific research and experimental development (including basic and XXXXXXXXXX research to produce scientific knowledge that contributes to the XXXXXXXXXX) at, or in conjunction with, the XXXXXXXXXX and the XXXXXXXXXX, for the benefit of the general public”.

7.    The XXXXXXXXXX is an ERI under paragraph 97(27)(d) of the TA and paragraph 37(8)(a) of Regulation 37/09 of the TA.

8.    The Institute is not primarily funded by businesses or industries operating in the private sector.

9.    The Institute has the appropriate facilities and services at its own premises and has qualified employees who have sufficient expertise and experience to conduct scientific research and experimental development (“SR&ED”) as defined in subsection 248(1) of the Act.

*     The Institute and the XXXXXXXXXX entered into a lease agreement on XXXXXXXXXX, where the Institute uses and will continue to use the space previously used while it operated as a division of the XXXXXXXXXX, to carry on its SR&ED activities.  The lease agreement will provide for rent payment rates that do not exceed commercial rates.

*     The Institute uses and will continue to use the same cutting-edge equipment that was used or available for use to the Division to carry on its SR&ED activities, in addition to having access to equipment that must be owned by the XXXXXXXXXX because of legislation related to XXXXXXXXXX. Where the Institute is required to use equipment that is owned by the XXXXXXXXXX such equipment will be rented to the Institute at rates that do not exceed commercial rates.

*     The Institute’s fact sheet as of XXXXXXXXXX shows the Institute having XXXXXXXXXX scientists and XXXXXXXXXX-scientists, with a total of XXXXXXXXXX research staff (including more than XXXXXXXXXX support staff and XXXXXXXXXX trainees – XXXXXXXXXX and students). XXXXXXXXXX of these scientists currently hold Canada Research Chairs, one of the most prestigious research awards granted by the federal government.

Approval

Provided that the above statements constitute a complete and accurate disclosure of all of the relevant facts, and provided that the Institute continues to operate as a registered charity conducting SR&ED as described above, I am pleased to advise that, pursuant to the authority granted under subsections 38(11) and (12) of Regulation 37/09 of the TA, the Institute is hereby approved as an ERI effective as XXXXXXXXXX, for the purposes of clause (d) the definition of that term in subsection 97(27) of the TA.

Yours sincerely,

Rick Stewart
Assistant Commissioner
Legislative Policy and Regulatory Affairs Branch

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