10 September 2012 External T.I. 2012-0449821E5 - Eligible dividend designation

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 our position expressed in document 2006-0217891Z0 related to the designation of eligible dividends paid by a public corporation would still apply to the designation of a portion of a dividend.

Position: Yes.

XXXXXXXXXX 2012-044982
Katie Campbell
(613) 957-2126

Dear Ms. XXXXXXXXXX:

This is in reply to your email of May 30, 2012 wherein you requested our views regarding the notification of an eligible dividend paid by a public corporation pursuant to subsection 89(14) of the Act. (footnote 1) You have asked whether the methods of notification described in the December 20, 2006 news release titled “Designation of Eligible Dividends” (2006-0217891Z0) (“2006 Press Release”) related to public corporations would be acceptable where only a portion of the dividend will be designated as an eligible dividend pursuant to amended subsection 89(14) (footnote 2) .

For 2007 and subsequent years, our administrative policy is that notification of eligible dividends pursuant to subsection 89(14) must be before or at the time the dividend is paid using an acceptable method as described in our 2006 Press Release as follows:

“For 2007 and subsequent taxation years, for public corporations, we will accept that notification has been made if, before or at the time the dividends are paid, a designation is made stating that all dividends are eligible dividends unless indicated otherwise. Acceptable methods of making a designation are posting a notice on the corporation's website, and in corporate quarterly or annual reports or shareholder publications. We will consider that a notice posted on a corporate website is notification that an eligible dividend is paid to shareholders until the notice is removed. Similarly, a notice in an annual or quarterly report that an eligible dividend has been paid is considered valid for that year or quarter, respectively. Alternatively, if a public corporation issues a press release announcing the declaration of a dividend, a statement in the press release indicating that the dividend is an eligible dividend will be sufficient proof that notification was given to each shareholder.”

We confirm that the methods of notification related to public corporations for 2007 and later taxation years, described in the 2006 Press Release, would be acceptable where only a portion of the dividend will be designated as an eligible dividend pursuant to amended subsection 89(14).

Our comments are provided in accordance with the practice outlined in paragraph 22 of Information Circular IC 70-6R5, dated May 17, 2002.

Yours truly,

David Palamar
Reorganizations Section I
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained
in the original document are shown below instead:

1 The Act means the Income Tax Act R.S.C. 1985 (5th Supp.) c.1 as amended from time to time and consolidated to the date of this letter and, unless otherwise expressly stated, every statutory reference herein is a reference to the relevant provision of the Act.

2 Subsection 89(14) was amended by bill C-38 which received Royal Assent on June 29, 2012.