News of Note
CRA finds that wind turbine workers are not Red Seal workers for ITC purposes
Email this ContentWind turbine workers who install a company’s wind turbines on a project perform a variety of specialized duties, including some duties that could theoretically be otherwise performed by construction craft workers, millwrights and concrete finishers, but their duties in fact are not performed by such tradespeople, nor by any other federally, territorially or provincially-registered tradespeople. In order for the company to maximize clean energy credits, the formula for a particular installation taxation year embedded in s. 127.46(5)(a) requires (on a “reasonable efforts” basis) that the ratio of hours worked by apprentices registered in a Red Seal trade to total hours worked by Red Seal workers be at least 10%. For the definition of “Red Seal worker” in s. 127.46(1) to apply, it is required that their “duties are, or are equivalent to, those duties normally performed by workers in a Red Seal trade.” The Red Seal program is a national program that sets common standards to assess the skills of tradespeople across Canada.
In concluding that the wind turbine workers did not need to be included in the denominator of the above formula, CRA noted that such workers “were not trained or certified by the Red Seal Program or any equivalent provincially or territorially designated trade program, because no such program exists” so that “the duties performed by the wind turbine workers cannot be said to be ‘duties normally performed by workers in a Red Seal trade’.”
Neal Armstrong. Summary of 23 April 2025 External T.I. 2024-1046391E5 under s. 127.46(1) – red seal worker.
CRA indicates that the vendor’s agreed reimbursement of the sold corporation’s legal costs of a failed suit in consideration for a dividend had the suit succeeded, likely was non-deductible
An individual agreed to sell all the shares of a corporation except that he also agreed with the purchaser that he would retain a preferred share in that corporation on which he would receive a dividend equal to a percentage of any damages award to the corporation in its action against a 3rd party for lost profits – but that if the law suit was unsuccessful, he would reimburse the corporation for certain of its legal fees. The corporation received an unfavourable decision in the action, and the individual reimbursed legal fees related to the litigation - and also requested the redemption of his preferred share.
In finding that the individual (Mr. A) likely could not deduct his reimbursement payment, CRA stated:
… Mr. A's undertaking to reimburse the legal costs of the corporation only took effect if the corporation received an unfavourable decision … . This court decision then eliminated any possibility of dividend income … . In short … it becomes difficult … to demonstrate the existence of a sufficient link between the expense and Mr. A's source of property income.
This is debatable. The purpose for incurring the reimbursement obligation might instead relate back to the individual’s purpose at the time of the agreement, namely, generating the prospective dividend income.
Neal Armstrong. Summaries of 26 February 2025 Internal T.I. 2023-0985151I7 F under s. 18(1)(a) – legal fees and s. 42(1)(b)(ii).
CRA indicates that periods where hydrogen continues to be produced by a clean hydrogen project are not disregarded for s. 127.48 ITC purposes
Some aspects of the investment tax credit (ITC) rules in s. 127.48 for clean hydrogen projects, such as compliance reporting to CRA regarding the project’s “actual carbon intensity" and whether there should be a recapture of the ITCs under s. 127.48(18), turn in part on the concept of an “operating year,” defined to “disregard … any period during which the project is not operating”, so that, for example, if it did not operate for one month, the operating year might be 13 months.
CRA indicated that where hydrogen continued to be produced by the project in the period described in each of the following scenarios, the project would be considered to be operating, so that such period would not be disregarded in determining the cumulative 365-day period set out in the “operating year” definition:
- The carbon capture and storage plant is shut down, but the hydrogen continues to be produced.
- The supply of the eligible renewable hydrocarbon is disrupted, but the hydrogen continues to be produced using a different eligible hydrocarbon.
- Dedicated wind turbines are down, but the hydrogen continues to be produced by using electricity from the electrical utility grid.
Neal Armstrong. Summary of 24 June 2025 External T.I. 2025-1063501E5 under s. 127.48(1) – operating year.
CRA expands its discussion of crypto mining groups
CRA has published a revised version of its Notice on cryptoasset mining. This notice has been updated to clarify the types of crypto mining arrangements that would be indicative of a person and a mining pool operator not being members of the same mining group for the purposes of s. 188.2. Being members of the same mining group could have the effect of deeming otherwise-taxable supplies made by the person to the operator not to be taxable supplies.
A “mining group” is a group of persons who agree to contribute property or services to perform mining activities together and who share mining payments in respect of the mining activities.
CRA considers that a person shares mining payments when the person shares in the risk of success in the mining activities of the group. Accordingly, where a person earns compensation that is determined based on an estimate of potential mining payments and the amounts are not adjusted to the actual mining payments, the person may not be considered to share in the mining payments.
For example, where a person is paid by the mining pool operator for the contribution of computing resources by the person and the payment is based on the expected value of the number of blocks validated, calculated based on the expected block subsidy (or the expected block subsidy and expected transactions fees), regardless of whether the activity gives rise to an actual block subsidy or transaction fee, the person is considered to bear no risk in the success of earning the block subsidy and transaction fees so that inter alia its services to the operator generally are taxable supplies rather than being deemed under s. 188.2 not to be supplies.
Neal Armstrong. Revised summaries of GST/HST Notice No. 324, "Mining Assets in respect of Cryptoassets" June 2025 under ETA s. 188.2(5) and s. 123(1) – consideration.
Income Tax Severed Letters 9 July 2025
This morning's release of five severed letters from the Income Tax Rulings Directorate is now available for your viewing.
CRA indicates that use of vacant land as a golf range in the somewhat distant past was not exclusive and direct use to meet the objectives of a golf club for s. 149(5)(e)(ii) purposes
A golf club relying on the s. 149(1)(l) exemption sold a severed parcel of land in 2024 that had been owned for 35 years (1990 to 2024) and used as a golf range for 5 of those years (1998-2002), and otherwise was vacant. In finding that the gain was not exempted pursuant to the exemption in s. 149(5)(e)(ii) for “property used exclusively for and directly in the course of providing the dining, recreational or sporting facilities provided” by the golf club for its members, CRA stated that s. 149(5)(e)(ii) “is intended to only exclude taxable capital gains from property that is required and used exclusively to meet the objectives of the tax-exempt NPO” and that the limited historical use in this case was “insufficient to meet the threshold of being property used exclusively for and directly in the course of providing facilities to members.”
Neal Armstrong. Summary of 6 May 2025 External T.I. 2024-1031071E5 under s. 149(5)(e)(ii).
CRA indicates that the 4-unit per title requirement for the PBRH rebate cannot be satisfied through combining title immediately after the purchase
The PBRH (new rental housing) rebate was not available regarding the acquisition of a newly-constructed block of four separately titled properties, each consisting of two dwelling units intended for long-term residential use, since only two (rather than four) residential units per title did not qualify as a multiple unit residential complex for PBRH purposes. Furthermore, this issue could not be remedied by consolidating the block of dwelling units into a single title after the purchase, since this test was not met at the time of the purchase.
Neal Armstrong. Summary of 11 October 2024 GST/HST Interpretation 247959 under Real Property (GST/HST) Regulations, s. 4(2)(a).
GST/HST Severed Letters November 2024
This morning's release of three severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their November 2024 release) is now available for your viewing.
Harika - Tax Court of Canada finds that s. 152(4)(a)(i) effectively refers to a misrepresentation “of fact”, which is engaged by an unreasonable filing position
The taxpayer, who had been assessed beyond the normal reassessment period to treat a real estate gain as business income rather than a capital gain, moved to have the Crown’s Reply struck on the basis that such reporting could not be a misrepresentation for purposes of s. 152(4)(a)(i), because misrepresentation (in light of the French version) meant a misrepresentation of fact, whereas the characterization of the gain was a question of mixed fact and law.
Before rejecting this request, Gagnon J stated:
[B]oth language versions of the provision are equivalent and indeed refer to a misrepresentation of the facts. …
[T]he word “misrepresentation” in English, alone, encapsulates the concept of a false, misleading, wrong or incorrect representation in relation to facts. …
… Because the filing position of a taxpayer involves the disclosing, reporting or characterization of the taxpayer’s underlying factual situation, any false, misleading, incorrect or incomplete disclosure, reporting, or characterization of those facts could constitute a misrepresentation [of the facts]. …
[A] reasonable filing position would be one where, upon review of all of the facts and circumstances that underlie a taxpayer’s situation (fully and accurately addressed), the Minister and the taxpayer could arrive at reasonable—albeit different—conclusions or positions based on a characterization of (or an application of the law to) such facts. Indeed, such an instance would be what [Inwest] has termed a mere “difference of opinion between the CRA and the taxpayer” .. .
[T]he Court cannot agree with the Appellant’s proposition that a question of income versus capital necessarily amounts to a mere difference of opinion. The reasonableness of the Appellant’s filing position—and relatedly, whether a misrepresentation has been made—ought properly to be put before the trial judge.
Neal Armstrong. Summary of Harika v. The King, 2025 TCC 81 under s. 152(4)(a)(i).
We have translated 7 more CRA interpretations
We have translated a CRA interpretation released last week and a further 6 CRA interpretations released in June of 2000. Their descriptors and links appear below.
These are additions to our set of 3,247 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 25 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
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Neal H. Armstrong editor and contributor