Owens Corning – Tax Court of Canada finds that its lack of jurisdiction over downward transfer-pricing adjustments applies to FAPI adjustments

The Minister reassessed to increase the foreign accrual property income (FAPI) of the taxpayer by denying the deduction of a royalty paid by a controlled foreign affiliate (“Coop2”) of the taxpayer to a non-arm's length holder of intellectual property. The taxpayer agreed that the decisions in Dow Chemical and Meglobal established that a downward transfer pricing adjustment to decrease the effect of the above adjustment would require a discretionary decision of the Minister under s. 247(10) over which the Tax Court had no jurisdiction. However, the taxpayer argued that it was not seeking a downward pricing adjustment but rather simply looking to properly calculate its FAPI.

In finding that there was no merit in "this attempted recharacterization," Graham J stated:

If, as part of calculating its income, the Appellant wanted to use subsection 247(2) to make a downwards transfer pricing adjustment to its FAPI, then it was up to the Appellant, not Coop2, to apply to the Minister for permission to do so. The Appellant faced the exact same restrictions on downward transfer pricing adjustments that any Canadian resident faces when calculating their income.

Neal Armstrong. Summaries of Owens Corning Canada Holdings ULC v. The King, 2026 TCC 60 under s. 247(10) and s. 95(2)(f).