Boguski - Tax Court rejects the first attempt by CRA to use the expanded s. 174 application procedure
In 2013, s. 174 was expanded so that it could be used to request a determination by the Tax Court on questions involving a large group of unrelated taxpayers who entered into similar transactions with a third party. CRA sought to have the Tax Court make a determination as to the validity of Canadian development expense claims by 81 different taxpayers respecting their purchase of rights from a resource company.
D’Arcy J first excluded about half of the named taxpayers on the grounds that the Minister had failed to establish that they had filed valid notices of objection to denials of CDE for the indicated taxation years. This still left 42 taxpayers as to whom D’Arcy J determined that directing a hearing of the s. 174 question would be “significantly more expensive and time-consuming than proceedings that would otherwise occur under the Court’s Lead Case Rules” given the large number of participants, the likely confusion for the self-represented litigants and the effective requirement for them to travel to Winnipeg for a hearing rather than having any appeal held close to home. He also found that the attempted use of s. 174 by CRA was an abuse of process, in part, because it effectively amounted to an attempted end run around jurisprudence limiting the scope of Rule 58 applications.
It appears to be contemplated that the main issue will be largely decided later through the two lead taxpayers going before the Tax Court.
Neal Armstrong. Summary of Boguski v. The Queen, 2018 TCC 236 under s. 174(3).