2019-0802931E5 OBRITC definition of “affiliated”

Principal Issues: What is the meaning of the term “affiliated” in subsection 38(7) and 38(8) of Regulation 37/09 of the Ontario Taxation Act for designation of an organization as an Eligible Research Institute (“ERI”) for purposes of the OBRITC?

Position: Ordinary meaning.

Reasons: See below.

Author: Couvrette, Amanda
Section: Section 97 of TA; Subsections 38(7) and 38(8) of Regulation 37/09 of the TA; 251.1 of the Section 97 of TA; Subsections 38(7) and 38(8) of Regulation 37/09 of the TA; 251.1 of the Act

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                                                                                             2019-080293
                                                                                             Amanda Couvrette, CPA, CA

January 5, 2022

Dear XXXXXXXXXX

Re: Meaning of “affiliated” for purposes of the Ontario Business Research Institute Tax Credit

This is in reply to your email of March 28, 2019, in which you requested our views regarding the meaning of the term “affiliated” contained in subsections 38(7) and 38(8) of Regulation 37/09 of the Ontario Taxation Act, 2007 (“Ontario Act”) with respect to the definition of an “eligible research institute” (“ERI”) for purposes of the “Ontario Business Research Institute Tax Credit” (“OBRITC”). You are wondering if any reliance should be placed on the definition of “affiliated persons” found in section 251.1 of the Income Tax Act (“Federal Act”).

Our comments

This technical interpretation provides general comments about the provisions of the Ontario Act, the Federal Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R11, Advance Income Tax Rulings and Technical Interpretations.

The definition of an ERI in subsection 97(27) of the Ontario Act defines the entities that are an ERI for purposes of the OBRITC. The term “affiliated” is used in subsections 38(7) of Regulation 37/09 of the Ontario Act and in subsection 38(8) of Regulation 37/09 of the Ontario Act which essentially provides criteria for certain organizations to be an ERI.

Subparagraph 38(7)(1)(ii) provides that one of the requirements for a non-profit organization to be an ERI is that it be affiliated with a university or college referred to in clause (a) of the definition of ERI in subsection 97(27) and that it has entered into an exchange of information agreement with the university or college under which teaching staff, students and research fellows of the university or college may actively participate in and receive educational benefits from the scientific research and experimental development activities carried out by the non-profit organization.

Subparagraph 38(8)(b)(ii) provides that one of the requirements for a hospital research institute to be an ERI is that it be affiliated with a hospital referred to in clause (a) and that it has entered into an agreement with the hospital under which teaching staff from the hospital and students in the health professions may actively participate in and receive educational benefits from the scientific research and experimental development activities carried out by the corporation.

Subsection 251.1(1) of the Federal Act provides a definition of “affiliated persons” or “persons affiliated with each other” for the purposes of the Federal Act. However, the term “affiliated” is not defined in the Ontario Act for the purposes of the OBRITC. Subparagraph 38(7)(1)(ii) and subparagraph 38(8)(b)(ii) do not refer to “affiliated persons” or “persons affiliated with each other,” rather, indicate that some form of collaboration is required between the organization requesting to be an ERI and certain universities or hospitals. Therefore, it is our view that the term “affiliated” would have its ordinary meaning (e.g., dictionary definition) for purposes of the OBRITC.

We trust our comments will be of assistance.

Yours truly,

Sandro D’Angelo, CPA, CMA
Acting Manager
Business Income and Capital Transactions
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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