CRA rules that 100% of the income and non-capital losses of a pipeline reclamation trust are allocable to the pipeline company

The NEB has been requiring pipeline companies to set up reclamation trusts to be funded by monthly contributions to the trust made by the pipeline companies based on identifiable charges therefor collected from their customers. CRA has provided three quite similar ruling letters indicating that the trust is a qualifying environmental trust, and that the contributions are deductible under s. 20(1)(ss).

The reclamation trust is a discretionary trust whose beneficiaries also include a federal not-for-profit corporation maintaining funds for the reclamation of abandoned pipelines in Canada, a.k.a., the Orphan Pipeline Fund. This concept of “beneficiary” is somewhat illusory as the trust deed specifies that “distributions from the ACo Reclamation Trust to a Beneficiary or a third party are to be made for the sole purpose of discharging the Beneficiary’s Reclamation Obligations.” CRA ruled that the pipeline company’s reasonable share of income or non-capital of the reclamation trust under s. 107.3(1) for purposes of computing its income and taxable income is 100%.

Neal Armstrong. Summary of 2015 Ruling 2015-0619281R3 under s. 211.6(1) - qualifying environmental trust.