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. What is the meaning of the words “promoting” and “supporting” as it applies to the various eligible activities described in subparagraphs (b)(iv), (vi) and (xx) of the QTHE definition in subsection 8901.1(2) of the Regulations?
2. Whether providing special event equipment consulting services and selling audio, video, lighting and stage equipment to event hosts would be considered eligible activities described in either or both of subparagraphs (b)(iv) and (xx) of the QTHE definition for purposes of determining whether a particular eligible entity is a QTHE.
Position: 1. Based on a textual, contextual, and purposive approach to interpreting the meaning of the words “promoting” and “supporting” in subparagraphs (b)(iv), (vi), (xx), and of subsection 8901.1(2) of the Regulations, it is our view that the activities of an eligible entity that fall within the meaning of these terms should be those that involve the provision of a service in respect of an activity described in these subparagraphs. The meaning of “promoting” is also relevant in the context of subparagraphs (b)(xix), and (xxi).
2. It is a question of fact whether the eligible entity’s activities would be considered eligible activities described in either or both of subparagraphs (b)(iv) and (xx) of the QTHE definition.
Reasons: Textual, contextual and purposive analysis of the relevant provisions of the QTHE definition.
Mr. Ryan Wallace Income Tax Rulings Directorate
Dedicated Telephone Service Christina Foggia, CPA, CA
Canada Revenue Agency
Ryan.Wallace@cra-arc.gc.ca
2022-092311
May 16, 2022
Dear Mr. Wallace:
Re: Meaning of “promoting” and “supporting” in the QTHE definition
We are writing in response to your question regarding the Tourism and Hospitality Recovery Program (“THRP”) under section 125.7 of the Income Tax Act (the “Act”). Your question concerns the qualifying tourism or hospitality entity (“QTHE”) definition, which for purposes of subsection 125.7(1) of the Act, has the meaning assigned by subsection 8901.1(2) of the Income Tax Regulations (the “Regulations”).
More specifically, you inquired about the meaning of the word “supporting” as it applies to the various eligible activities described in subparagraphs (b)(iv), (vi), and (xx) of the QTHE definition in subsection 8901.1(2) of the Regulations. You have asked whether providing special event equipment consulting services and selling audio, video, lighting, and stage equipment to event hosts would be considered an eligible activity described in either or both of subparagraphs (b)(iv) and (xx) of the QTHE definition for purposes of determining whether a particular eligible entity is a QTHE.
You have also inquired about the meaning of the word “promoting”, which is used in the same subparagraphs of the QTHE definition mentioned above, in addition to subparagraphs (b)(xix) and (xxi) of the QTHE definition.
An “eligible entity”, as defined in subsection 125.7(1) of the Act, that is a QTHE within the meaning assigned by subsection 8901.1(2) of the Regulations (the “QTHE definition”), may be eligible for the THRP.
The two conditions that must be met for an eligible entity to be a QTHE are contained in paragraphs (a) and (b) of the QTHE definition. The first condition requires that the eligible entity has a “prior year revenue decline”, greater than or equal to 40% (herein referred to as “Condition 1”). The second condition requires that the total of all amounts, each of which is the eligible entity’s “qualifying revenue” for the “prior reference period” for any of the first “qualifying period” to the thirteenth qualifying period (but including only one of the tenth qualifying period or the eleventh qualifying period) was earned primarily (footnote 1) from carrying on one or more of the eligible activities described in subparagraphs (b)(i) to (xxi) of the QTHE definition (herein referred to as “Condition 2”). All of the above mentioned terms are defined in subsection 125.7(1) of the Act. Whether a particular eligible entity is a QTHE is a question of fact.
In subparagraphs (b)(iv), (vi) and (xx) of the QTHE definition, the eligible activities that may qualify for purposes of the QTHE definition are expanded by the use of the words “promoting” and “supporting”. For example, subparagraph (b)(iv) provides that organizing, promoting, hosting, supporting or participating in events that meet the artistic or cultural interests of their patrons, including live performances or exhibits intended for public viewing is an eligible activity for purposes of the determining whether Condition 2 of the QTHE definition is met. Thus, an eligible entity that may not directly carry on an eligible activity referred to in these subparagraphs but instead promote or support these activities may qualify.
The words “promoting” and “supporting” are not defined in the Act. Where the legislation does not define a term, we generally rely on case law and the ordinary meaning (such as dictionary definitions). The ordinary meaning of the word “promoting” refers to an activity that is likely to enhance, move forward, further or encourage a particular cause, business, venture, or aim which may lead to growth, increased volume and public awareness. The ordinary meaning of the word “supporting” refers to an activity that provides help or assistance to a recipient to achieve a specific result. The Supreme Court of Canada said, in paragraph 47 of the decision Canada Trustco Mortgage Co. v. Canada (2005 SCC 54), that “[e]ven where the meaning of particular provisions may not appear to be ambiguous at first glance, statutory context and purpose may reveal or resolve latent ambiguities.” Accordingly, the words “promoting” and “supporting” should be given a meaning that is consistent with their ordinary meaning and the context and purpose of the QTHE definition and the provisions in section 125.7 of the Act.
In the context of subparagraphs (b)(iv), (vi), and (xx) of the QTHE definition, the words surrounding “promoting” and “supporting” (i.e., organizing, planning, promoting, hosting, supporting, or participating) each implies an activity that is in the nature of a service as opposed to an activity that is in the nature of selling goods. Further, according to backgrounders released by the Department of Finance on November 24th, 2021 (footnote 2) and December 17th, 2021 (footnote 3) , the purpose of the THRP rules is to provide targeted support to tourism and hospitality businesses that are still suffering and facing hardship due to the COVID-19 pandemic. It is our general understanding that businesses that operate in these industries are generally those that offer a service and not the sales of a product. Therefore, based on a textual, contextual, and purposive approach to interpreting the meaning of the words “promoting” and “supporting” in subparagraphs (b)(iv), (vi), (xix), (xx) and (xxi) of the QTHE definition, it is our view that the activities of an eligible entity that fall within the meaning of these terms should be those that involve the provision of a service in respect of an event or activity described in these subparagraphs and would generally not include an activity that involves selling goods. Whether an eligible entity’s activities involve the provision of a service rather than selling goods in respect of an event or activity described in subparagraphs (b)(iv), (vi), (xix), (xx), and (xxi) of the QTHE definition is a question of fact which must be resolved in light of all the circumstances and particulars of each case.
In the situation you described, it is a question of fact whether the eligible entity’s activities would be considered eligible activities described in either or both of subparagraphs (b)(iv) and (xx) of the QTHE definition. Based on the meaning of “supporting” established above, the equipment consulting services described could constitute “supporting” activities within the meaning of the term, since it appears to be an activity that is in the nature of a service that provides help or assistance that is directly associated with the operation of a special event. On the other hand, the sale of special event equipment would generally not constitute “supporting” activities within the established meaning of the term. With that said, to be an eligible supporting activity, the consulting services must provide assistance in respect of an event or activity described in subparagraphs (b)(iv), (vi), or (xx) of the QTHE definition; not all consulting services will meet these requirements. Therefore, assuming Condition 1 of the QTHE definition is otherwise met, it is our view that the particular eligible entity may be a QTHE if the total of all amounts, each of which is the eligible entity’s qualifying revenue for the prior reference period for any of the first qualifying period to the thirteenth qualifying period (but including only one of the tenth qualifying period or the eleventh qualifying period) was earned primarily from providing equipment consulting services for conventions or similar events that fall within either or both of subparagraphs (b)(iv) or (xx) of subsection 8901.1(2) of the Regulations (i.e., Condition 2 is met). The qualifying revenue related to the sale of special event equipment would generally not be earned from carrying on an eligible activity described in either or both of subparagraphs (b)(iv) and (xx) of the QTHE definition.
We trust our comments will be of assistance.
Yours truly,
Amanda Couvrette CPA, CA
Manager
Business Income and Capital Transactions
Income Tax Rulings Directorate
FOOTNOTES
Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:
1 The word “primarily” generally means more than 50% for income tax purposes.
2 https://www.canada.ca/en/department-finance/news/2021/11/types-of-business-eligible-for-the-tourism-and-hospitality-recovery-program.html
3 https://www.canada.ca/en/department-finance/news/2021/12/legislation-to-create-jobs-and-implement-targeted-covid-19-support-receives-royal-assent.html
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