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.
Principal Issues: Whether the discretionary power of the Canada Revenue Agency ("CRA") to assess or reassess a taxpayer can be limited when a taxpayer duly files a waiver with the Minister. Whether the legislation, jurisprudence or the CRA's administrative position allows a taxpayer to be reassessed in accordance with the outcome of a test case raising identical factual and legal issues by filing a waiver with the Minister.
Position: Where there is a change in a previous interpretation or position, including a change resulting from a court decision, and the change is beneficial to taxpayers, the CRA's published position is that it is usually effective for all future assessments and reassessments. The only prior years that can be reassessed, as the result of the change in position, are those years for which a notice of objection had been filed and is still outstanding, and those years for which a notice of objection can still be filed. Under subsection 152(4), the Minister has the discretionary authority to reassess tax, interest or penalties within the "normal reassessment period," and also outside the normal reassessment period provided the conditions described in paragraph 152(4)(a) or (b) have been met. However, in some situations, the CRA may agree with a particular taxpayer that he or she will be assessed or reassessed in accordance with the outcome of a test case based on similar facts and issues of law. In such a situation, the taxpayer would normally file waivers in prescribed form in respect of the relevant years to ensure that the Minister is not precluded from assessing or reassessing because of the time limit contained in subsection 152(3.1). The Minister would be required to assess or reassess by reason of the agreement entered into between the taxpayer and the CRA, and not by reason of the waiver filed with the Minister. If there is no such agreement, the Minister may refuse to exercise his discretionary authority under subsection 152(4) to assess or reassess, in accordance with the position stated above.
Reasons: Wording of the Act and previous positions.
2004-008525
XXXXXXXXXX S. Prud'Homme
(613) 957-8975
September 14, 2004
Dear XXXXXXXXXX:
Re: Technical Interpretation Request - Subsection 152(4) and other provisions of the Income Tax Act
This is in reply to your letter dated July 13, 2004 in which you requested our views regarding the right of a taxpayer to be reassessed in accordance with the principles established in a test case based on similar facts and issues of law, where such taxpayer has not filed a notice of objection to protect its right to object, and ultimately appeal the disputed assessment of its tax, interest and penalties.
More specifically, you asked whether the discretionary power of the Canada Revenue Agency ("CRA") to assess or reassess a taxpayer can be limited when a taxpayer duly files a waiver with the Minister. In other words, you asked whether the legislation, jurisprudence or the CRA's administrative position allows a taxpayer to be reassessed in accordance with the outcome of a test case raising identical factual and legal issues by filing a waiver with the Minister.
Furthermore, where a taxpayer has filed a notice of objection regarding the issues raised in a test case for some years, but has filed a waiver for the other years, you also asked whether the CRA would only reassess the years for which a notice of objection was filed by the taxpayer.
Unless otherwise stated, every reference herein to a section, subsection or paragraph is a reference to the relevant provision of the Income Tax Act (the "Act").
Where there is a change in a previous interpretation or position, including a change resulting from a court decision, and the change is beneficial to taxpayers, the CRA's published position is that it is usually effective for all future assessments and reassessments. The only prior years that can be reassessed, as the result of the change in position, are those years for which a notice of objection had been filed and is still outstanding, and those years for which a notice of objection can still be filed.
Under subsection 152(4), the Minister has the discretionary authority to make an assessment, reassessment or additional assessment of tax, interest or penalties within the "normal reassessment period" as defined in subsection 152(3.1), and also outside the normal reassessment period provided the conditions described in paragraph 152(4)(a) or (b) have been met.
However, in some situations, the CRA may agree with a particular taxpayer that he or she will be assessed or reassessed in accordance with the outcome of a test case based on similar facts and issues of law. In such a situation, the taxpayer would normally file waivers in prescribed form in respect of the relevant years to ensure that the Minister is not precluded from assessing or reassessing because of the time limit contained in subsection 152(3.1). It should be noted that under subparagraphs 152(4)(a)(ii) and 152(4.01)(a)(ii), the Minister's power to assess or reassess after the taxpayer's normal reassessment period can be exercised only to the extent that is can reasonably be regarded as relating to a matter specified in the waiver filed with the Minister in respect of the particular year.
In circumstances as described in the above paragraph, we are of the view that the Minister would be required to assess or reassess by reason of the agreement entered into between the taxpayer and the CRA, and not by reason of the waiver filed with the Minister.
Finally, you also asked whether the CRA would only reassess the years for which a notice of objection was filed by the taxpayer, where a taxpayer has filed a notice of objection regarding the issues raised in a test case for some years, but has filed a waiver for the other years. In such a situation, one would have to determine whether the CRA has effectively agreed to assess or reassess the particular taxpayer based on the outcome of a test case in respect of the taxation years for which waivers were filed. If there is no such agreement, the Minister may refuse to exercise his discretionary authority under subsection 152(4) to assess or reassess, in accordance with the position stated above with respect to changes in interpretation resulting from court decisions.
We trust that our comments will be of assistance.
Yours truly,
Stéphane Prud'Homme, LL.B. M.Fisc.
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Planning Branch
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