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BILL NO. 18





Government Bill




4th Session, 56th General Assembly
Nova Scotia
45 Elizabeth II, 1996




An Act Respecting

Certain Financial Measures





The Honourable J. Bernard Boudreau, Q.C.
Minister of Finance




Halifax
Printed by Queen's Printer for Nova Scotia







Explanatory Notes

Clause 1 sets out the short title of the Bill.

Clause 2 provides that machinery and equipment will not be taxed on and after April 1, 1998, and provides that the Minister of Finance will compensate municipalities for any loss of tax revenue.

Clause 3 provides that, effective April 1, 1996, a municipality may annually, by resolution, levy a farm acreage tax not exceeding $2.10 per acre.

Clause 4 provides that the maximum eligible investment to which the equity tax credit applies is the amount prescribed by regulation.

Clause 5 makes a change necessary to enable an investment in a community economic-development corporation to meet requirements imposed by the federal government for RRSP eligibility.

Clause 6 broadens the base of permitted investments for a community economic-development corporation.

Clause 7 provides that the Province will provide a 20% guarantee on investments in a qualifying community economic-development corporation.

Clause 8 makes a change necessary as a result of increasing the holding period for shares in a labour-sponsored venture-capital corporation from four years to eight years.

Clause 9 reduces from 20% to 15% the tax credit for investing in a labour-sponsored venture-capital corporation and reduces the maximum share purchase from $5,000 to $3,500. These changes apply to shares purchased on or after April 26, 1996.

Clause 10 increases the holding period for shares in a labour-sponsored venture-capital corporation from four years to eight years.

Clauses 11 to 14

(a) legislate a requirement for a balanced budget for the 1996-97 and subsequent fiscal years;

(b) require that any surplus shall be used to reduce the public debt of the Province or reduce taxes, or both;

(c) provide that an additional appropriation can only be made after a resolution is passed by the House of Assembly authorizing the expenditure; and

(d) make a number of consequential amendments to the Expenditure Control Act.

Clause 15 reduces, effective July 1, 1997, the Nova Scotia income tax rate from 59.5% to 57.5% of federal tax payable.

Clause 16 provides an effective date to calculate interest when the research and development tax credit is applied against other liabilities or paid to a corporation.

Clause 17 makes the necessary changes in the Income Tax Act to reflect the changes made in the labour-sponsored venture-capital tax credit in Clause 9. In addition, Clause 17 increases the holding period for shares from four to eight years.

Clause 18 provides that any unused tax credit with respect to prospectus filing expenses may be carried forward seven years and applied against tax otherwise payable. This change applies to the 1996 and subsequent taxation years.

Clause 19 provides a tax credit with respect to certain expenses incurred by a corporation in becoming ISO14000 certified. The tax credit is 25% of eligible expenditures to a maximum of $150,000 of eligible expenditures. This tax credit applies to eligible expenditures made by a corporation after 1995.

Clause 20 requires the Minister of Finance to submit quarterly financial reports to the House of Assembly.

Clause 21 provides that no financial transaction shall be completed unless that borrowing reduces the percentage of the public debt held in foreign currencies. This restriction will apply until the percentage of the public debt held in foreign currencies is 20% or less of the total public debt of the Province.

Clause 22 provides that where assets of the Crown are sold, the net proceeds of the sale shall be used to reduce the public debt of the Province.

Clause 23 requires a Crown corporation to annually submit to the House of Assembly for approval its business plan and any proposed public financing and table in the House of Assembly audited financial statements for the preceding fiscal year.

Clause 24 reduces, effective April 26, 1996, the tax on propane fuel from 13.5 cents per litre to 7 cents per litre.

Clause 25 extends to March 31, 1997, the tax rebate to first-time home buyers.






An Act Respecting

Certain Financial Measures



Be it enacted by the Governor and Assembly as follows:

1 This Act may be cited as the Financial Measures (1996) Act.

PART I
ASSESSMENT ACT

2 (1) Section 43A of Chapter 23 of the Revised Statutes, 1989, the Assessment Act, as enacted by Chapter 24 of the Acts of 1990, is amended by adding immediately after subsection (3) the following subsections:

(4) Notwithstanding Sections 4, 42 and 43, machinery and equipment shall be taxed

(a) in the 1996 municipal taxation year, on two thirds; and

(b) in the 1997 municipal taxation year, on one third,

of the value for which it was assessed on the assessment roll filed for the purpose of the 1996 municipal taxation year.

(5) Machinery and equipment is not taxable property on and after the first day of April, 1998.

(6) On or before the first day of May in each year the Minister of Finance shall pay to a municipality the difference between the taxes levied pursuant to subsections (4) and (5) and the taxes that would have been levied pursuant to subsection (2) if subsections (4) and (5) had not been enacted.

(2) Subsection (1) has effect on and after April 1, 1996.

3 (1) Subsections 46(3), (4), (4A), (4B) and (5) of Chapter 23 are repealed and the following subsections substituted:

(3) Notwithstanding subsection (1), a municipality may annually, by resolution, levy a farm acreage tax not exceeding two dollars and ten cents per acre on all land to which this Section applies.

(4) The farm acreage tax is a lien upon the farm property in the same manner and with the same effect as other rates and taxes under this Act and shall be paid and may be collected in the manner provided in this Act for the collection of other rates and taxes.

(2) Subsection (1) has effect on and after April 1, 1996.

PART II
EQUITY TAX CREDIT ACT

4 (1) Clause 8(3)(e) of Chapter 3 of the Acts of 1993, the Equity Tax Credit Act, as amended by Chapter 2 of the Acts of 1995, is further amended by striking out "nine thousand dollars" in the last line and substituting "the amount, if any, prescribed by regulation".

(2) Subsection (1) applies to the 1996 and subsequent taxation years.

5 Subsection 11(2) of Chapter 3 is amended by adding immediately after clause (b) the following clause:

(ba) the constitution of the corporation provides that no individual owns or controls more than ten per cent of the shares of the corporation as defined by subclause (i) of clause (h) of Section 2;

6 Clause 12(e) of Chapter 3 is amended by

(a) striking out "equity" in the ninth line and substituting "specified"; and

(b) striking out "businesses" in the ninth line and substituting "local business entities".

7 Chapter 3 is further amended by adding immediately after Section 13 the following Section:

13A (1) Twenty per cent of the amount invested in eligible investments of a community economic-development corporation shall be guaranteed by the Province.

(2) The Governor in Council may make regulations prescribing the method of guaranteeing eligible investments, determining the areas of the Province in which a guarantee may be given and determining the duration of any guarantee given.

(3) The exercise by the Governor in Council of the authority contained in subsection (2) is regulations within the meaning of the Regulations Act.

8 (1) Section 16 of Chapter 3 is amended by striking out ", 9" in the first line.

(2) Subsection (1) has effect on and after April 26, 1996.

9 (1) Subsection 18(1) of Chapter 3 is amended by striking out "twenty" in the seventh line and substituting "fifteen".

(2) Clause 18(3)(d) of Chapter 3 is amended by striking out "one thousand" in the last line and substituting "five hundred and twenty-five".

(3) Subsections (1) and (2) apply to shares purchased on and after April 26, 1996.

10 (1) Chapter 3 is further amended by adding immediately after Section 18 the following Section:

18A (1) Where an individual has received directly or indirectly, the benefit of a tax credit in respect of which the person is not entitled, the amount of the benefit is payable forthwith by that person to the Minister.

(2) A person who disposes of a share in respect of which a tax credit has been allowed within eight years from the date of purchase shall repay to the Minister

(a) an amount equal to the tax credits received in respect of those shares, including interest thereon where prescribed by regulation; or

(b) a lesser amount determined pursuant to the regulations in prescribed circumstances.

(2) Subsection (1) applies to shares purchased on and after April 26, 1996.

PART III
EXPENDITURE CONTROL ACT

11 Section 2 of Chapter 4 of the Acts of 1993, the Expenditure Control Act, is repealed.

12 Chapter 4 is further amended by adding the heading "PART I" immediately after Section 4.

13 Section 9 of Chapter 4 is amended by striking out "Act" in the third line and substituting "Part".

14 Chapter 4 is further amended by adding immediately after Section 9 the following Sections and heading:

10 Notwithstanding anything contained in this Part, this Part does not apply to the 1996-97 and 1997-98 fiscal years of the Province.

PART II

11 For greater certainty, this Part applies to the 1996-97 and subsequent fiscal years of the Province.

12 (1) In each and every fiscal year of the Province commencing with the 1996-97 fiscal year, the amount appropriated by the Legislature for net capital expenditures and net program operating expenditures shall not exceed the amount of revenue forecast to be received by the Minister for that fiscal year.

(2) Notwithstanding subsection (1), an amount may be expended in a fiscal year for net capital expenditures and net program operating expenditures that is no more than one per cent more than the amount appropriated by the Legislature for those expenditures.

(3) Where net capital expenditures and net program operating expenditures for a fiscal year exceed the total revenues for that year, the resulting deficit shall be recovered no later than the end of the second fiscal year following the fiscal year in which the deficit occurred by a reduction in expenditures or an increase in revenue, or both, over that period.

(4) Where the amount of revenue to be received by the Minister in a fiscal year exceeds the amount appropriated by the Legislature for net capital expenditures and net program operating expenditures for that year, the resulting surplus shall, after accounting for any recoveries required pursuant to subsection (3), be used to reduce the public debt of the Province or reduce taxes, or both.

13 Where net capital expenditures and net program operating expenditures for a fiscal year exceed the amount authorized to be spent pursuant to Section 12, the expenditures in excess of the amount authorized by subsections 12(1) and (2) may only be made after a resolution has been passed by the House of Assembly authorizing the expenditure.

PART IV
INCOME TAX ACT

15 (1) Subsection 4(5) of Chapter 217 of the Revised Statutes, 1989, the Income Tax Act, as amended by Chapter 10 of the Acts of 1990, is further amended by striking out "59.5" in the last line and substituting "57.5".

(2) Subsection (1) has effect on and after July 1, 1997.

16 Section 6 of Chapter 217, as amended by Chapter 10 of the Acts of 1990, Chapter 9 of the Acts of 1994 and Chapter 2 of the Acts of 1995, is further amended by adding immediately after subsection (2B) the following subsection:

(2C) There is deemed to have been paid on account of tax payable under the Federal Act by a taxpayer, other than a taxpayer exempt from tax, for a taxation year, where the taxpayer is an individual, on the individual's balance due date for the year and, where the taxpayer is a corporation, on the day referred to in paragraph 157(1)(b) of the Federal Act on or before which the remainder of the taxes payable under this Part for the year by the taxpayer would be required to be paid if such a remainder were payable, the amount, if any, by which

(a) the taxpayer's tax credit calculated under subsection (1) for the year,

exceeds

(b) the amount deducted, pursuant to subsection (2), in computing the taxpayer's tax payable under this Part for the year.

17 (1) Clause 13B(2)(b) of Chapter 217, as enacted by Chapter 3 of the Acts of 1993, is amended by striking out "one thousand" and substituting "five hundred and twenty-five".

(2) Subsection 13B(4) of Chapter 217 is repealed and the following subsection substituted:

(4) A taxpayer is not entitled to a deduction pursuant to this Section unless the taxpayer files a return

(a) within three years after the end of the taxation year to which the deduction pertains for eligible shares purchased on or before the twenty-fifth day of April, 1996; or

(b) within seven years after the end of the taxation year to which the deduction pertains for eligible shares purchased after the twenty-fifth day of April, 1996.

(3) Subsection (1) applies to the 1996 and subsequent taxation years.

18 (1) Section 13D of Chapter 217, as enacted by Chapter 2 of the Acts of 1995, is amended by adding immediately after subsection (4) the following subsection:

(4A) Where a corporation

(a) has been issued a tax certificate pursuant to this Section; and

(b) the amount of the tax credit exceeds the amount of tax payable by the corporation for the taxation year,

the corporation may carry forward and deduct any unused balance of the tax credit from tax otherwise payable by the corporation in any one or more of the corporation's seven subsequent taxation years.

(2) Subsection (1) applies to the 1996 and subsequent taxation years.

19 Chapter 217 is further amended by adding immediately after Section 13E the following heading and Section:

DIVISION FE - ISO14000 CERTIFICATION

13F (1) In this Section, "eligible expenditure" means an expenditure made after 1995 by a corporation with a permanent establishment in the Province with respect to audit, training and documentation expenses necessary for the corporation to become ISO14000 certified.

(2) A corporation that has made eligible expenditures in a taxation year may apply to the Minister of Finance, at the time and in the manner prescribed by the Minister of Finance, for a tax credit equal to twenty-five per cent of the lesser of

(a) the amount of eligible expenditures made in the taxation year; and

(b) one hundred and fifty thousand dollars.

(3) Where the Minister is satisfied that a corporation is entitled to a tax credit pursuant to this Section, the Minister shall, at the time and in the manner prescribed by the Minister, issue a tax credit certificate to the corporation.

(4) Where a corporation files with its return of income for a taxation year a tax credit certificate issued by the Minister of Finance pursuant to subsection (3), the corporation may deduct from the tax otherwise payable by the corporation under this Act the amount of the tax credit indicated on the tax credit certificate.

(5) The Governor in Council may make regulations

(a) prescribing forms for the purpose of this Section;

(b) governing any matter that may be prescribed pursuant to this Section;

(c) requiring a corporation to supply information or documents respecting any matter required in assessing compliance with this Section;

(d) respecting those expenditures that qualify as eligible expenditures for the purpose of this Section;

(e) defining any word or expression used but not defined in this Section;

(f) respecting any matter or thing the Governor in Council considers necessary or advisable to carry out effectively the intent and purpose of this Section.

PART V
PROVINCIAL FINANCE ACT

20 Chapter 365 of the Revised Statutes, 1989, the Provincial Finance Act, is amended by adding immediately after Section 8A the following Section:

8B (1) The Minister shall submit to the House of Assembly

(a) quarterly financial reports on the state of the public finances before the end of the next quarter; and

(b) such other financial or economic reports as the Minister determines.

(2) The Minister shall table the reports referred to in subsection (1) in the House of Assembly if the Assembly is then sitting or, if it is not then sitting, with the Clerk of the Assembly.

21 Chapter 365 is further amended by adding immediately after Section 52 the following Section:

52A In the 1996-97 and subsequent fiscal years of the Province no financial transaction or series of financial transactions directly affecting the public debt of the Province shall be completed unless that transaction reduces the percentage of the public debt of the Province represented by securities or obligations in currencies other than Canada until the amount of the public debt of the Province represented by securities or obligations in currencies other than Canada is twenty per cent or less of the total public debt of the Province.

22 Chapter 365 is further amended by adding immediately after Section 60 the following Section:

60A Where assets of the Crown are sold, the net proceeds of the sale shall, notwithstanding any enactment, be used to reduce the public debt of the Province.

23 Chapter 365 is further amended by adding immediately after Section 72 the following Section:

73 Commencing April 1, 1997, a crown corporation shall annually

(a) submit to the House of Assembly for approval during consideration of the Estimates its business plan and any proposed public financing; and

(b) table in the House of Assembly audited financial statements for the preceding fiscal year.

PART VI
REVENUE ACT

24 (1) Section 6 of Chapter 17 of the Acts of 1995-96, the Revenue Act, is amended by adding immediately after subsection (1) the following subsection:

(1A) Notwithstanding subsection (1), every purchaser shall pay to Her Majesty a tax at the rate of seven cents per litre, or such other rate as prescribed, on all propane fuel purchased by or delivered to such purchaser.

(2) Subsection (1) has effect on and after April 26, 1996.

25 Clause 92(2)(m) of Chapter 17 is amended by striking out "1996" in the last line and substituting "1997".


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