1 August 2007 Internal T.I. 2007-0239941I7 - Subsection 188.1(9) Penalty for False Information

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: 1) The meaning of the phrase "is liable for their taxation year that includes that time". 2) Time restriction for assessment of penalty.

Position: 1) To attribute the penalty to a particular taxation year. 2) None.

Reasons: Legislation

									August 1, 2007

	Compliance Programs Branch				HEADQUARTERS
	International and Large Business Directorate	Income Tax Rulings
		   							Directorate
									Helen Zelobowski
	Attention:  Shawna O'Brien 				(613)957-3494

									2007-023994

Subsection 188.1(9) Penalty

We are writing in respect of an E-mail request from you, dated June 7, 2007, for our comments regarding the application of penalties under subsection 188.1(9) of Part V of the Income Tax Act (the "Act"). Your questions are in respect of a hypothetical situation where a person, who is not an officer, employee, official, or agent of a charity, prepared a donation receipt on February 1, 2006 that included a false statement.

Processing of the Penalty

One question raised in your submission is whether the phrase "is liable for their taxation year that includes that time" in subsection 188.1(9) means that, in the above-noted hypothetical example, the Agency would open up the person's 2006 T1 tax return and include a penalty.

The purpose of this phrase in subsection 188.1(9) is to attribute the penalty to a particular taxation year of the person (or of the registered charity where the person is an officer, employee, official or agent of a registered charity), but not to any tax return of the person in respect of taxes payable under Part 1 of the Act. In the example above, the Agency would not open up the person's 2006 T1 Tax Return to include the penalty, but would simply assess the person with a penalty under Part V of the Act in respect of the person's 2006 taxation year.

Assessment Period

You have also enquired what happens if the person's T1 Tax Return for the particular taxation year is either statute-barred or was not filed.

As the penalty under subsection 188.1(9) is not in respect of an individual's T1 Tax Return, whether or not the Return is statute-barred or filed is irrelevant. Furthermore, there is no time restriction for the assessment of the penalty under subsection 188.1(9). Subsection 152(4) of the Act provides that the Minister may at any time make an assessment or reassessment of tax, interest or penalties as long as it is within the taxpayer's normal reassessment period. The requirement to be within the normal reassessment period only applies to tax, penalties and interest assessed in respect of the individual's T1 Tax Return. For other cases, the use of the words "at any time" in subsection 152(4) means there is no limitation period. Pursuant to subsection 189(8) of the Act, section 152 also applies in respect of amounts assessed under Part V.

Applicability of Subsection 188.1(9)

Subsection 188.1(9) is applicable to taxation years that commence after March 22, 2004, which in the case of an individual, would normally be the 2005 taxation year.

We trust that these comments will be of assistance.

Yours truly,

F. Lee Workman
Manager
Charitable and Financial Institution Sectors
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch