OTHER MEASURES

Federal Concordance

Ontario will implement measures to parallel the following measures introduced in the Federal budget of March 23, 2004:

• Increasing the carry forward period for non-capital losses from seven to ten years.
• Limiting the deductibility of fines and penalties, patronage dividends and unused charitable donations.
• Amending the general anti-avoidance rule and the affiliated persons rules.
• It is also proposed that the associated corporations rule for the purposes of the $2 million expenditure limit relating to the refundable portion of the federal investment tax credit for qualifying scientific research and experimental development expenditures would also apply to the Ontario Innovation Tax Credit.

Ontario Commercialization Investment Funds (OCIF)

Ontario Commercialization Investment Funds would be established to raise capital from institutional, corporate, and accredited investors for purposes of making capital available to eligible publicly funded research institutes for the commercialization of intellectual property derived from scientific research. An OCIF must be sponsored by a research institute that qualifies under the Ontario Business-Research Institute Tax Credit. Such institutions include universities, colleges of applied arts and technology, Centres of Excellence and hospital research institutes in Ontario. Each institute would be permitted to sponsor only one OCIF. Certain other conditions must be satisfied in order to qualify.

Each investor would be required to purchase at least $25,000. A grant equal to 30 per cent of eligible investments made in a year, to the extent that the investments are supported by new capital raised by the OCIF, would be provided to the OCIF after it invests in seed-stage businesses whose primary asset is intellectual property. The grant would be payable once a year upon application by the OCIF.

The grants would support up to $30 million of capital raised by OCIFs per year if that capital is fully invested in eligible investments. Restrictions would be placed on the number of registrations of capitalized OCIFs per year and on the annual amount of grant available to each OCIF.

Registration of new OCIFs will be allowed until the end of 2006; no new grants will be available after 2008.

An OCIF will not be permitted to pay dividends or redeem any shares within four years after issuance of its shares.

Labour Sponsored Investment Funds (LSIF)

The LSIF program has been operating since 1991. As a result of their growth, the capital available to LSIFs is spread among too many LSIFs and many of the existing funds are too small to be viable long-term investors.

Accordingly, the province is implementing a moratorium on new LSIF registrations as of the date of this Budget. Existing LSIFs will be permitted to continue operations and raise capital while consultations are undertaken to determine appropriate changes to the program.

Certain changes are being suggested to the existing program, such as:

• Introducing rules to permit the amalgamation of LSIFs through asset purchases.
• Amending the investment requirements that LSIFs must offset 70 per cent of realized losses deducted from investment requirements with a maximum of 70 per cent of realized gains.
• LSIFs will be permitted to invest up to 25 per cent of their investments in a year in publicly listed companies, based on the greater of either their current or previous years' investments.
• LSIFs will also be allowed to control investee companies, be permitted to choose either August 31 or December 31 as the date on which their investment requirement would be determined (for research oriented investment funds only), change the calculation of the provincial LSIF tax credit to conform to the federal methodology, and will not be required to count investments in holding companies against their investment requirements.

Waiver Provisions

Legislative provisions currently exist under the Corporations Tax Act and Employer Health Tax Act to codify the Minister of Finance's policy of accepting waivers from taxpayers in instances where the period for taxes owing is about to become statute-barred. To ensure consistency in the acceptance of waivers, amendments will be made to the Fuel Tax Act, Gasoline Tax Act, Land Transfer Tax Act, Retail Sales Tax Act and Tobacco Tax Act.

Dissolution of Corporate Charters for Unpaid Tax Debts

The Business Corporations Act will be amended to allow for the dissolution of corporations and the withholding of clearance certificates for revivals, transfers of assets or dissolutions where tax debts are owed to the Minister of Finance. The proposed amendments will apply to the Employer Health Tax Act, Fuel Tax Act, Gasoline Tax Act, Land Transfer Tax Act, Retail Sales Tax Act and Tobacco Tax Act.

Returns and Payments by Alternative Channels

Amendments will be proposed to ensure that electronic services can be accommodated across all statutes. The Ministry of Finance will implement an automated online service system to expedite gasoline tax refunds to reserve gasoline retailers for tax-exempt sales to First Nations individuals.