Bank of America – Federal Court finds that it was fair and reasonable for CRA to deny relief from a mistake attributed to outsourcing all of a tax department

BANA outsourced all its Canadian tax department in 2018 to EY. The last tax employee, shortly before her departure in July 2018, told BANA and EY that BANA’s adjusted tax credit amounts (ATCAs) had never exceeded $500,000 in any two consecutive fiscal years, so that it was not expected to be a qualifying institution (QI). Starting in June 2019, BANA discovered that this was incorrect, and in June and December of the following year, it filed late applications pursuant to ETA s. 141.02(19)(b)(ii) to be permitted to use a method for computing its input tax credits (ITCs) for its four most recent fiscal years that would result in ITCs that exceeded the minimum otherwise applicable under s. 141.02(8)(d) of 12% of its GST on its residual inputs.

In denying the applications, the CRA delegate recognized BANA and EY as highly sophisticated entities and considered that a high degree of care and diligence was to be expected, and that this had not been demonstrated in their merely accepting a statement from a departing employee that was inconsistent with BANA’s completed tax filings.

In dismissing the BANA appeal, Elliott J found this decision to be fair and reasonable. In this regard she noted inter alia that she could not agree that the delegate’s “emphasis on due diligence was misplaced” and indicated that the downsizing and outsourcing of the BANA tax department “were not extenuating circumstances beyond their control”.

Neal Armstrong. Summary of Bank of America, National Association v. Attorney General of Canada 2023 FC 1496 under ETA s. 141.02(19)(b)(ii).