Principal Issues: 1. Whether the Taxpayer is entitled to a deduction for reimbursement payments made to its parent corporation under section 32.1 on the basis that the reimbursement payments are contributions to an EBP in respect of the Taxpayer's employees. 2. If not, is the Taxpayer entitled to a deduction for the reimbursement payments under any other provision of the Act?
Position: 1. No. 2. Yes.
Reasons: 1. The reimbursement payments are not EBP contributions. The payments are not a proxy for the contributions made to the EBP by the parent corporation (given the significant differences in the amount and timing), nor is the recharge agreement part of the EBP. 2. The reimbursement payments are deductible as an ordinary business expense in computing the Taxpayer's income under section 9, subject to the general limitations of the Act such as section 18, section 67 and subsection 78(4).
