Income Tax Act s. 127(9)(m): SR&ED Claims Require Prescribed Forms

The definition of “investment tax credit” in subsection 127(9) runs for several pages, but for SR&ED claimants its most consequential words sit in paragraph (m) of the closing language: no amount enters a taxpayer’s ITC unless a prescribed form containing prescribed information (in practice Form T661 and Schedule T2SCH31, or T2038 for individuals) is filed within one year after the filing-due date for the claim year. This is the statutory basis of the SR&ED reporting deadline. An otherwise perfect claim filed after that date earns no credit, and CRA has no discretion to extend it.

Text of the Provision

127(9) “investment tax credit” of a taxpayer at the end of a taxation year means the amount, if any, by which the total of

(a) the total of all amounts each of which is the specified percentage of the capital cost to the taxpayer of certified property or qualified property acquired by the taxpayer in the year,

(a.1) 20% of the amount by which the taxpayer’s SR&ED qualified expenditure pool at the end of the year exceeds the total of all amounts each of which is the super-allowance benefit amount for the year in respect of the taxpayer in respect of a province,

… [paragraphs (a.2) to (k), covering other credit types, additions and deductions, are omitted here but appear in the PDF] …

except that no amount shall be included in the total determined under any of paragraphs (a) to (e.2) in respect of an outlay, expense or expenditure that would, if this Act were read without reference to subsections 127(26) and 78(4), be made or incurred by the taxpayer in the course of earning income in a particular taxation year, and no amount shall be added under paragraph (b) in computing the taxpayer’s investment tax credit at the end of a particular taxation year in respect of an outlay, expense or expenditure made or incurred by a trust or a partnership in the course of earning income, if

(l) any of the income is exempt income or is exempt from tax under this Part,

(m) the taxpayer does not file with the Minister a prescribed form containing prescribed information in respect of the amount on or before the day that is one year after the taxpayer’s filing-due date for the particular year;

Source: Income Tax Act (Canada), subsection 127(9), definition “investment tax credit” (opening words, paragraphs (a) and (a.1), closing words and paragraphs (l)–(m)), as consolidated May 14, 2010. Archived excerpt; subsequent amendments (including later changes to the credit rate in paragraph (a.1)) are not reflected. For the current text see the Income Tax Act at Justice Laws.