8 June 2005 Internal T.I. 2005-0129791I7 - Indian remission order and fairness package

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: Is a request for an income tax refund pursuant to a Remission Order subject to the 10-year limitation period contained in the Fairness Provisions?

Position: No.

Reasons: A Remission Order is issued under the authority of the Financial Administration Act. In the absence of any specific wording to the contrary in the terms of the Order, it is not subject to the statute barring provisions of the Income Tax Act. A request for a refund pursuant to a Remission Order is not subject to the 10-year limitation affecting applications for fairness.

			June 8, 2005

	WINNIPEG TAXATION CENTRE		HEADQUARTERS
				Income Tax Rulings
	Attention:  Dave Harron			  Directorate
				Renée Shields
(613) 948-5273

				2005-012979

Indian Remission Orders and the Fairness Provisions

This is in response to your electronic correspondence of May 9, 2005 inquiring about the interaction, if any, between Indian Remission Orders and the Fairness Provisions of the Income Tax Act (the "Act"). In particular, your inquiry relates to the recent amendments to the Fairness Provisions, which provide that the Minister's discretion may only be exercised with respect to calendar years ending in the 10 years preceding the taxpayer's request. Previously, such requests could be considered with respect to years as far back as 1985.

The Fairness Provisions, contained in subsections 152(4.2), 220(3.1) and 220(3.2) of the Act give the Minister discretion to

? Cancel & waive penalties and interest;
? Accept late-filed, amended or revoked income tax elections and
? Issue income tax refunds (to individuals and testamentary trust only) beyond the normal 3-year period

Generally speaking, the Canada Revenue Agency will only consider remission requests involving situations of extreme hardship, incorrect departmental action or advice, financial setback coupled with extenuating factors or unintended results of the legislation. There are a number of Remission Orders in effect that apply to remit tax owing on certain income of status Indians in various settlements across the country. As we discussed (Shields/Harron), the effective dates of these Remission Orders are varied. Examples relevant to this situation might be:

? the Indian and Bands on Certain Indian Settlements Remission Order SI/92-102, as amended by SI/94-145, which remits income tax payable by status Indians on income earned on 12 different settlements from 1992 onward and

? the Indian Settlements Remission Order SI/2000-69 remits income tax payable by status Indians on income earned on 5 different settlements from 1994 onward for 2 settlements and from 1998 onward for 3 settlements.

The issue regarding which you have requested our comments is possibly best described by a simple example. Let us assume that a status Indian filed a T1 tax return for the 1992 taxation year and paid the taxes owing. He subsequently discovers that the income tax payable was subject to a Remission Order and in 2005 contacts the Canada Revenue Agency to obtain a refund of taxes paid. Your question is whether this request would be subject to the Fairness Provisions and therefore fall outside of the 10-year window for consideration or whether the Remission Order applies independently of this regime.

The Governor in Council issues a Remission Order under the authority of the Financial Administration Act. As such, in the absence of specific wording to the contrary contained in its terms, it is not subject to the statute barring provisions of the Act. This means that a taxpayer making a request such as that described above would be entitled to action by the CRA.

With respect to the mechanics of processing such a request, we consulted with Mr. Ed Williams of the Processing Systems Section of the Individual Returns and Payments Processing Directorate of the Assessment and Client Services Branch. He confirmed that his area would be responsible for processing requests of this nature. Mr. Williams can be reached at (613) 954-2928.

We trust that these comments will be of assistance.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

Roxane Brazeau-LeBlond, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch