Income Tax Act s. 127.1(2): Definition of Excluded Corporation

Refundable SR&ED credits are not available to an “excluded corporation”. The definition in subsection 127.1(2) captures corporations controlled (directly or indirectly, in any manner whatever) by tax-exempt persons, governments, municipalities or other public authorities, along with corporations related to such persons. Spin-offs from universities, hospitals and Crown entities need to review this definition before counting on a refund.

Text of the Provision

127.1(2) In this section,

“excluded corporation” for a taxation year means a corporation that is, at any time in the year,

(a) controlled directly or indirectly, in any manner whatever, by

(i) one or more persons exempt from tax under this Part by virtue of section 149,

(ii) Her Majesty in right of a province, a Canadian municipality or any other public authority, or

(iii) any combination of persons each of whom is a person referred to in subparagraph (i) or (ii), or

(b) related to any person referred to in paragraph (a);

Source: Income Tax Act (Canada), subsection 127.1(2), definition “excluded corporation”, as consolidated May 14, 2010. Archived excerpt; subsequent amendments are not reflected. For the current text see the Income Tax Act at Justice Laws.