The federal and provincial interest relief provisions may not dovetail

Observations of Michael Lubetsky on the federal and provincial interest relief provisions include:

• CRA offers no guidance regarding interest relief under s. 220(3.1), and the Federal Court jurisprudence has gone both ways, where a taxpayer is reassessed, carries back losses from subsequent taxation years to offset the reassessed amounts and interest runs under s. 161(7) for the entire period up to 30 days after the taxpayer requested the loss carryback
• In practice, CRA simply applies any decision with regard to interest relief under s. 220(3.1) to any related amounts due to an Agreeing Province, and if the taxpayer seeks judicial review of an CRA decision, the review generally does not distinguish between the federal and provincial portions of the interest.
• The above approach is consistent with a non-tax case (Société des acadiens).
• Differences in the Quebec regime include that where Revenue Quebec grants a cancellation of interest that results in a refund to the taxpayer, interest is paid by RQ on the refund for the entire period that the refunded amounts were in its possession, in contrast with the federal regime, where refund interest only starts to accrue 30 days after the taxpayer requests interest relief.
• On the other hand, even though the Quebec statute does not specify any limit on the number of years of interest that RQ can waive, administratively (and questionably), RQ adheres to the same 10-year time limit provided in ITA s. 220(3.1).
• If CRA waives interest on the basis that its reassessment had been unduly delayed for reasons attributable to it, RQ will not follow suit with the Quebec assessment since the delay was not its fault.
• Because the Alberta Corporate Tax Act contains no privative clause akin to ITA s. 165(1.2), a taxpayer may be able to challenge an Alberta interest-relief decision in the context of an ordinary tax appeal rather than instituting judicial review procedures.

Neal Armstrong. Summary of Michael H. Lubetsky, "Interest Relief under the Federal and Provincial Regimes", Tax Litigation, Vol. XX, No. 1, 2015, p. 1182 under s. 220(3.1).