19 September 2012 External T.I. 2012-0455781E5 - Disclosure of Taxpayer 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. Whether the Minister can arbitrarily assess a defunct corporation.
2. Whether the Minister can disclose a corporation's tax information to a third party.
3. What claims might the Crown have on assets that have been escheated.
4. Whether the Minister can disclose that the defunct corporation owes any provincial tax.

Position: 1. Yes.
2. The Minister is barred from making such disclosure.
3.The Minister cannot disclose such to a third party.
4. The Minister cannot disclose such to a third party.

Reasons: 1. Pursuant to subsection 152(7) ITA, the Minister may raise an assessment where, for one, no return has been filed.
2 - 4. Section 241 of the ITA precludes the Minister from disclosing such information to a third party.

XXXXXXXXXX
2012-045578
Lindsay Frank
(613) 957-2097

Attention: XXXXXXXXXX

September 19, 2012

Dear XXXXXXXXXX:

Re: Disclosure of Taxpayer Information

We are replying to your letter of July13, 2012, in which you are seeking taxpayer information about a defunct corporation. That information would assist a mortgagee in recovering title insurance.

You have advised that the corporation, registered under the Business Corporations Act (Ontario), owned real property in that locality. It transferred the property to another corporation (the “transferee corporation”), which mortgaged the property. The mortgagee purchased title insurance. The transferee corporation defaulted on the mortgage. When the mortgagee attempted to realise its security, it learned that, prior to the transfer, the transferor corporation was struck from the corporate registry. The transferee corporation is also struck. Both corporations were controlled by the same principals, whose whereabouts are unknown.

You state further that when a corporation is struck, its property escheats to the Crown. As the property had already escheated to the Crown when the purported transfer was made, the transferee corporation’s title to the property is defective.

Furthermore, you state that your firm has two steps for the mortgagee to consider for collecting the insurance. The transferor corporation must be revived. Additionally, the mortgagee must apply under the Escheats Act to obtain an order-in-council for conferral of its appropriate rights. However, the effectiveness of both options requires disclosure of the transferor corporation’s tax information. While an interested third party could revive the corporation, it would be unable to access to the corporation’s tax information. Furthermore, obtaining the order-in-council requires the consent of the provincial tax authorities, and to obtain such consent, it must be demonstrated that the corporation owes no taxes. The questions, which you pose, are as follows:

1. Can the Minister arbitrarily assess the defunct transferor corporation?
2. What is the transferor corporation’s tax liability?
3. What claims might the Crown have with respect to the assets that have escheated to the Crown?
4. Can the CRA provide a statement that the transferor corporation has no outstanding provincial taxes?

The answers to the questions fall within the ambit of section 241 of the Income Tax Act (the “Act”), which forbids the Minister, save for exceptional circumstances described therein, from disclosing taxpayer information. Subsection 241(10) defines “taxpayer information” as information of any kind, and in any form, relating to one or more taxpayers. Such information is obtained by, or on behalf of, the Minister for the purposes of the Act, or is prepared from such information. However, information that does not directly or indirectly reveal the identity of a taxpayer is not included in the definition of “taxpayer information”. In light of the definition, it follows that the Minister cannot disclose the corporation’s information that you are seeking in questions 2, 3, and 4.

With regard to your first question, however, we would note that, for the reasons that follow, the dissolution of a corporation does not bar the Minister from assessing the corporation. First, under paragraph 242(1)(b) of the Business Corporations Act (Ontario), a civil, criminal, or administrative action or proceeding may be brought against a corporation after its dissolution, as if the corporation had not been dissolved. Second, in Dominion of Canada General Insurance Co. v. The Queen, [1984] C.T.C. 190, 84 D.T.C. 6196 (F.C.T.D.), it was held that the issuance of a notice of assessment is an administrative action or proceeding.

Accordingly, where the Minister has knowledge that a corporation has not filed a return, an assessment under subsection 152(7) of the Act may be issued, based on information that the Minister has about the taxpayer. Subsection 152(8) of the Act deems such an assessment to be valid and binding, subject to being varied on objection or appeal. Nonetheless, if the Minister were to assess the transferor corporation, that information can only be disclosed with the taxpayer’s written consent, pursuant to paragraph 241(5)(b).

Should you have any questions or require additional information, please do not hesitate to telephone Lindsay Frank at the number provided at the outset of this letter.

Terry Young CA
Manager
Administrative Law Section
International Division
Income Tax Rulings Directorate