22 November 2000 Internal T.I. 2000-0055807 - RESP HOLIDNG COMPANY PROMOTER

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Can a holding corporation be a promoter under an RESP?

Position: Yes.

Reasons: Provided that arrangements are made to ensure that its responsibilities under the RESP are carried out by another person, there is nothing preventing a holding corporation from setting itself up as the promoter under an RESP.

									November 22, 2000

HEADQUARTERS						HEADQUARTERS
Pierre Cloutier 						M.P. Sarazin
Manager 							824-5441
Policy and Communications Division
Registered Plans Directorate  

Attention: Gary Allen						2000-005580

Holding Company as Promoter Under an RESP

We are writing to you in response to your memorandum of November 10, 2000, requesting our views as to whether a holding company may be a promoter for purposes of section 146.1 of the Income Tax Act (the "Act").

A company (the "Company") is the promoter of two registered education savings plans ("RESP") specimen plans. The Company was purchased by another company and it continues to exist as a holding company without any employees. The purchaser would like to continue to offer education savings plans under the two specimen plans with the Company as the promoter.

You have noted that a promoter is defined under the definition of education savings plan in subsection 146.1(1) of the Act to be a person or organization. For purposes of the Act, a person is defined in subsection 248(1) of the Act to include a corporation. Therefore, a holding company would appear to satisfy the definition of promoter for purposes of the Act.

One of the key elements of the definition of "education savings plan" in subsection 146.1(1) of the Act is that the promoter has the obligation to agree to pay or to cause to be paid educational assistance payments to or for one or more beneficiaries under the plan. You would like our views as to whether a holding company could fulfill its responsibilities as a promoter under an RESP.

Comments

Under the conditions for registration provisions in subsection 146.1(2) of the Act, a promoter has several administrative responsibilities which have to be carried out under the terms of the RESP. There is nothing in the Act that prevents a promoter from delegating these responsibilities to another person. This is evident from the comments made in paragraph 16 of Information Circular 93-3 wherein it states that, if the plan allows the promoter to delegate any administrative duties to another person, the plan must clearly state that the promoter has ultimate responsibility for the plan. You will note that the definition of education savings plan implies that a promoter may delegate its responsibilities when it states that the promoter agrees to cause the payment of educational assistance payments.

The determination of whether a particular RESP allows the promoter to delegate its responsibilities would require a review of the terms of the RESP. Where the terms of the RESP provide for the delegation of the promoter's responsibilities, we would have to review the arrangements made between the promoter and the other person that agrees to carry out the promoter's responsibilities to ensure that the responsibilities will, in fact, be carried out by the other person. Where the terms of the RESP do not provide for the delegation of the promoter's responsibilities, the RESP will become revocable under paragraph 146.1(12.1)(b) of the Act because the RESP ceases to comply with the provisions of the plan itself.

If you are satisfied that the arrangements between the promoter and the other person will satisfy all of the conditions of registration and the terms of the RESP allow for the delegation of the promoter's administrative duties, we should continue to accept the RESPs registered under the specimen plans even though a holding company is the promoter under the RESP.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Canada Customs and Revenue Agency's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version, or they may request a copy severed using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (613) 994-2898. A copy will be sent to you for delivery to the client.

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate