Section 149.2 — Income Tax Act: Material and insignificant interests

In this section and section 149.1, a person has, at any time, a material interest in respect of a class of shares of the capital stock of a corporation if, at that time, the percentage of the shares of that class held by the person exceeds 0.5% of all the issued and outstanding shares of that class, or the fair market value of the shares so held exceeds $100,000; and a private foundation has, at any time, an insignificant interest in respect of a class of shares of the capital stock of a corporation if, at that time, the percentage of shares of that class held by the private foundation does not exceed 2% of all the issued and outstanding shares of that class. If a private foundation or a relevant person in respect of the private foundation has engaged in one or more transactions or series of transactions or events, a purpose of which may reasonably be considered to be to avoid the application of the definition material transaction , each of those transactions or series of transactions or events is deemed to be a material transaction. For the purposes of the definition equity percentage , and subparagraph (b)(iii) of the definition exempt shares , in subsection 149.1(1), a person who, if paragraph 251(5)(b) applied would be deemed by that paragraph to have the same position in relation to the control of a corporation as if the person owned a share, is deemed to own the share. The net increase in the excess corporate holdings percentage of a private foundation for a taxation year, in respect of a class of shares of the capital stock of a corporation, is the number of percentage points, if any, determined by the formula A - B where A is the excess corporate holdings percentage of the private foundation at the end of the taxation year, in respect of the class, and B is 0%, if at the beginning of the taxation year the private foundation was not both a private foundation and a registered charity, or the private foundation was both a registered charity and a private foundation on March 18, 2007 and the taxation year is the first taxation year of the private foundation that begins after that date;

and in any other case, the excess corporate holdings percentage of the private foundation in respect of the class at the end of its preceding taxation year. The net decrease in the excess corporate holdings percentage of a private foundation for a taxation year, in respect of a class of shares of the capital stock of a corporation, is the number of percentage points, if any, by which the percentage determined for B in the formula in subsection (3) for the taxation year exceeds the percentage determined for A in that formula for the taxation year. For the purpose of the description of B in the definition divestment obligation percent-age in subsection 149.1(1), the net increase in the excess corporate holdings percentage of a private foundation in respect of a class of shares of the capital stock of a corporation, for a taxation year (in this subsection referred to as the “current year”) is to be allocated in the following order: first to the divestment obligation percent-age of the private foundation in respect of that class for the current year, to the extent that the private foundation has in the current year acquired for consideration shares of that class; then to the divestment obligation percent-age of the private foundation in respect of that class for its fifth subsequent taxation year, to the extent of the lesser of that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), and the percentage of the issued and outstanding shares of that class that were acquired by the private foundation in the current year by way of bequest; then to the divestment obligation percent-age of the private foundation in respect of that class for its second subsequent taxation year, to the extent of the lesser of that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a) or (b), and the total of the percentage of the issued and outstanding shares of that class that were acquired by the private foundation in the current year by way of gift, other than from a relevant person or by way of bequest, and the portion of the net increase in the excess corporate holdings percentage of the private foundation that is attributable to the redemption, acquisition or cancellation of any of the issued and outstanding shares of that class in the current year by the corporation; and then to the divestment obligation percent-age of the private foundation in respect of that class for its subsequent taxation year, to the extent of that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), (b) or (c). Notwithstanding subsection (5), on application by a private foundation, the Minister may, if the Minister believes it would be just and equitable to do so, reallocate any portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of a class of shares of the capital stock of a corporation for a taxation year, that would otherwise be allocated under subsection (5) to the private foundation’s divestment obligation percentage in respect of that class for a particular taxation year, to the private foundation’s divestment obligation percentage in respect of that class for any of the ten taxation years subsequent to the particular taxation year. For the purpose of the description of C in the definition divestment obligation percent-age in subsection 149.1(1), the net decrease in the excess corporate holdings percentage of a private foundation in respect of a class of shares of the capital stock of a corporation for a taxation year (in this subsection referred to as the “current year”) is to be allocated in the following order: first, to the divestment obligation percentage of the private foundation in respect of that class for the current year, to the extent of that divestment obligation percentage; and then to the divestment obligation percent-age of the private foundation in respect of that class for a subsequent taxation year of the private foundation (referred to in this paragraph as the “subject year”), to the extent of the lesser of that portion of the net decrease in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), or under this paragraph, to the divestment obligation percentage of the private foundation in respect of that class for a taxation year of the private foundation that precedes the subject year, and the amount of the divestment obligation percentage of the private foundation in respect of that class for the subject year, calculated as at the end of the current year and without reference to this subsection. If the original corporate holdings percent-age of a private foundation in respect of a class of shares of the capital stock of a corporation exceeds 20%, for the purpose of applying the definition “excess corporate holdings percent-age” in subsection 149.1(1) to the first taxation year of the private foundation that begins after March 18, 2007, the reference to 20% in that definition in respect of that class is to be read as the original corporate holdings percentage of the private foundation in respect of that class; taxation years of the private foundation that are after the taxation year referred to in paragraph (a) and that begin before March 19, 2012, the reference to 20% in that definition in respect of that class is to be read as the greater of 20%, and the lesser of the total corporate holdings percent-age of the private foundation in respect of the class at the end of the immediately preceding taxation year, and the original corporate holdings percentage in respect of that class; taxation years of the private foundation that begin after March 18, 2012 and before March 19, 2017, the reference to 20% in that definition in respect of that class is to be read as the greater of 20%, and the lesser of the total corporate holdings percentage of the private foundation in respect of the class at the end of the preceding taxation year, and the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 20%; taxation years of the private foundation that begin after March 18, 2017 and before March 19, 2022, the reference to 20% in that definition in respect of that class is to be read as the greater of 20%, and the lesser of the total corporate holdings percent-age of the private foundation in respect of the class at the end of the preceding taxation year, and the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 40%; and taxation years of the private foundation that begin after March 18, 2022 and before March 19, 2027, the reference to 20% in that definition in respect of that class is to be read as the greater of 20%, and the lesser of the total corporate holdings percentage of the private foundation in respect of the class at the end of the preceding taxation year, and the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 60%. Subsection (10) applies for the purposes of applying section 149.1 and subsections (8) and 188.1(3.1) to a private foundation at a particular time if, both on March 18, 2007 and at the particular time, the private foundation was the sole trustee of a trust, or was a majority interest beneficiary (within the meaning assigned by section 251.1) of a trust more than 50% of the trustees of which were the private foundation and one or more relevant persons in respect of the private foundation; and the trust held one or more shares of a class of the capital stock of a corporation. If this subsection applies at a particular time to a private foundation in respect of shares of a class of the capital stock of a corporation held by a trust, the private foundation is deemed to hold at the particular time that number of those shares as is determined by the formula A × B/C where A is the lesser of the number of those shares held by the trust on March 18, 2007 and the number so held at the particular time; B is the total fair market value of all interests held by the private foundation in the trust at the particular time; and C is the total fair market value of all property held by the trust at the particular time. For the purpose of subsection (10), if the amount of income or capital of a trust that a person may receive as a beneficiary under the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, that person is deemed to have fully exercised, or to have failed to exercise, the power, as the case may be.