2006 Ruling 2006-0168861R3 - Share Unit Plan for Non-Employee Directors

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Will the proposed amendments to the Share Unit Plan cause it to no longer be a prescribed plan or arrangement pursuant to paragraph 6801(d) of the Regulations?

Position: No.

Reasons: The proposed amendments do not offend the requirements of paragraph 6801(d).

XXXXXXXXXX 							2006-016886

XXXXXXXXXX, 2006

Dear XXXXXXXXXX:

Re: Supplemental Income Tax Ruling
XXXXXXXXXX (the "Corporation")

This is in reply to your letters dated XXXXXXXXXX and is supplemental to our advance income tax ruling number 992209 (the "Ruling") dated XXXXXXXXXX, 1999, as well as supplemental income tax ruling 2003-000607 (the "Supplemental Ruling") dated XXXXXXXXXX, 2003.

We understand that, to the best of your knowledge and that of the above-referenced taxpayer, none of the issues involved in the supplemental ruling request is:

(i) in an earlier return of the Corporation or a related person;

(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the Corporation or a related person;

(iii) under objection by the Corporation or a related person;

(iv) before the courts or under appeal; nor,

(v) the subject of a ruling previously issued by the Directorate, other than in the Ruling or in the Supplemental Ruling.

Definitions

Certain terms are defined in the Amended Plan and for the purpose of this supplemental ruling as follows:

"Board" means the Board of Directors of the Corporation;

"Broker" means a broker independent from the Corporation that is designated by the Participant to purchase Common Shares on the open market pursuant to the Amended Plan and who is a member of the XXXXXXXXXX Stock Exchange;

"Common Share" means a common share without nominal or par value of the Corporation;

"Eligible Director" means a member of the Board who is not an employee of the Corporation, any subsidiary of the Corporation, or of a Corporation which owns more than 50% of the Common Shares of the Corporation or of a subsidiary thereof;

"Entitlement Date" has the meaning assigned in Section XXXXXXXXXX of the Amended Plan;

"Market Value" has the meaning assigned in Section XXXXXXXXXX of the Amended Plan;

"Participant" means an Eligible Director who has been credited Share Units under the Amended Plan;

"Share Unit" means a unit credited by means of a bookkeeping entry on the books of the Corporation to a Participant's account in accordance with the terms and conditions of the Amended Plan; and

"Termination Date" has the meaning assigned thereto in Section XXXXXXXXXX of the Amended Plan.

Facts

1. The Board approved certain amendments to the Corporation Share Unit Plan for Non-Employee Directors (the "Plan") on XXXXXXXXXX subject to obtaining confirmation of the rulings provided in the Ruling. The proposed Plan modifications, effective from XXXXXXXXXX, will be effected following the issuance of this Supplemental Income Tax Ruling. The Plan, as so amended, will hereafter be referred to as the "Amended Plan".

Proposed Plan Amendments

2. It is proposed that Section XXXXXXXXXX of the Plan be replaced with the following:

Section XXXXXXXXXX. Payment of Share Units

Following the Termination Date of a Participant, such Participant shall file with the Corporate Secretary a written election specifying the date of payment of his/her Share Units. This election may be made at any time before XXXXXXXXXX of the calendar year following the calendar year during which his/her Termination Date occurred. If the Participant fails to file an election by such time, such Participant shall be deemed to have filed an election on such XXXXXXXXXX. The date at which the election is filed, or deemed to be filed, is hereinafter referred to as the "Filing Date".

Within XXXXXXXXXX days from the Filing Date (except as may be determined by the Board) (the "Entitlement Date"), the Participant shall receive, at the sole discretion of the Corporation, in satisfaction of the number of Share Units recorded in the Participant's account on the Entitlement Date, one of the following: (i) a cash payment based on the Market Value of a Common Share on the Entitlement Date and net of applicable holdings; or (ii) Common Shares purchased on the open market by a Broker, in accordance with Section XXXXXXXXXX. Where Common Shares are purchased on the open market, the number of Common Shares purchased will equal the number of Share Units credited to the Participant's account, net of applicable withholdings reflected in the form of Share Units and valued at the Market Value of the Common Shares on the Entitlement Date. In addition, regardless of whether or not cash or Common Shares are used to satisfy the Participant's Share Units, the Corporation will make a cash payment to the Participant with respect to any fractional Share Units based on the Market Value on the Entitlement Date of a Common Share, net of applicable withholdings. The Corporation will pay all brokerage fees arising in connection with the acquisition of Common Shares by the Broker on the open market and may make a special cash payment to the Participant in an amount sufficient to cover any income tax liability of the Participant as a consequence of both the special cash payment for fractional Share Units and the payment of such brokerage fees by the Corporation. No payment of Share Units shall be made by the Corporation to a Participant until the Termination Date has occurred with respect to such Participant.

If the Entitlement Date would otherwise fall between the record date for a dividend on the Common Shares and the related dividend payment date, the Entitlement Date shall be the day immediately following the date of payment of such dividend for purposes of recording in the account of the Participant amounts referred to in Section XXXXXXXXXX hereof and making the calculation of Share Units contemplated by this Section XXXXXXXXXX. In the event that the Corporation is unable, by a Participant's Entitlement Date, to compute the final number of Share Units credited to such Participant's account by reason of the fact that any data required in order to compute the Market Value of a Common Share has not been made available to the Corporation, then the Entitlement Date shall be the next following trading day on which such data is made available to the Corporation.

In no event shall any payment for Share Units be made by the Corporation to a departing Participant after XXXXXXXXXX of the calendar year following the calendar year during which the Termination Date occurred.

3. It is proposed that Section XXXXXXXXXX of the Plan be replaced with the following:

Section XXXXXXXXXX. Effective Date of the Plan

The effective date of the plan shall be XXXXXXXXXX. The First Amended and Restated Plan shall be effective on XXXXXXXXXX. The Second Amended and Restated Plan shall be effective on XXXXXXXXXX. The Third Amended and Restated Plan shall be effective on XXXXXXXXXX.

Purpose of the Proposed Amendments

4. The Entitlement Date of a Participant is being modified to provide more flexibility to the Participants to file an election and specify the date of payment of their Share Units. The Participants will be allowed to request that amounts be paid out to them within the maximum allowable period for such payments, instead of the existing Plan requirement that such amounts be paid out on a quarterly basis following the Termination Date.

Ruling Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed amendments to the Plan and purpose of the proposed amendments to the Plan and provided the proposed amendments to the Plan are completed as described above, we rule as follows:

The above proposed amendments will not, in and of themselves, cause the rulings given in the Ruling or the Supplemental Ruling to cease to be binding on the Canada Revenue Agency.

The above ruling, which is based on the Income Tax Act and Regulations in their present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and is binding on the CRA provided that the proposed amendments are implemented by XXXXXXXXXX.

Yours truly,

XXXXXXXXXX
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate