Principal Issues:
1. Whether there is a time limit within which the Minister is required to make an initial determination under subsection 152(3.4) of an amount deemed by subsection 125.7(2), (2.1), or (2.2) to be an overpayment of Part I tax?
2. Whether section 125.7 can be interpreted such that:
a. an eligible entity is not precluded from being a “qualifying entity” if it files separate section 125.7 applications on a payroll account-by-payroll account basis (RP-account basis) that aggregate to an overall deemed overpayment for a qualifying period; and if so
b. whether upward and downward adjustments may be made between such payroll account (RP account) applications provided that the overall deemed overpayment for the qualifying period is not adjusted above the total amount of benefit claimed by the eligible entity for the qualifying period?
3. Whether there is an issue with respect to the validity of the Notices of Determination (NOD) previously issued under subsection 152(3.4) on an RP-account basis?
4. Whether a redetermination made under subsection 152(3.4) of an amount deemed by subsection 125.7(2), (2.1), or (2.2) to be an overpayment of Part I tax is subject to a “normal redetermination period” described in subsection 152(3.1), modified as the circumstances require?
5. The impact of subsection 125.7(16) on:
a. the deadline for a taxpayer to file a section 125.7 application;
b. the Minister’s ability to redetermine amounts upon receiving a request to amend a section 125.7 application; and
c. the deadline to amend or revoke an election made under section 125.7.
6. Confirmation of the recourse available to a taxpayer if they disagree with the Minister’s decision to deny a subsection 125.7(16) request to extend the deadline to file a section 125.7 application.
7. Whether subsections 160.1(1) and (3) apply to an excess CEWS, CERS, or CRHP refund made under subsection 164(1.6)?
Position:
1. No.
2a. Yes.
2b. Yes.
3. No.
4. Yes.
5a. It extends the deadline to file a section 125.7 application.
5b. It has no impact on requesting an amendment to a section 125.7 application.
5c. It has no impact on requesting an amendment or revocation of an election made under section 125.7.
6. Judicial review is the proper recourse.
7. Yes.
Reasons:
1. Although an initial 152(3.4) determination is dependant on a taxpayer’s submission of a section 125.7 application, in our view, the use of the words “at any time” means that an initial determination of the taxpayer’s deemed overpayment for a qualifying period under subsection 152(3.4) is not dependant upon the filing of a return of income or the assessing of any Part I tax payable for the relevant taxation year. There is no specific deadline in the Act to make this initial determination.
2a. In our view, an eligible entity that files separate section 125.7 applications on a RP-account basis that aggregate to an overall deemed overpayment for a qualifying period, rather than one single wage subsidy application for the qualifying period, should be considered to have made an application for the qualifying period in the prescribed form and manner as required by paragraph (a) of the definition “qualifying entity”. In addition, in our view, it is appropriate to interpret the reference to an application in paragraph (a) of the definition “qualifying entity” as referring to the total of the wage subsidy applications by RP account filed by the eligible entity for the qualifying period.
2b. Any offsetting of upward or downward adjustments between various RP accounts through redeterminations would be appropriate in certain circumstances, provided that the overall deemed overpayment does not exceed the amount claimed in the applications filed within the deadline for the qualifying period.
3. It is our view that where the determination of an eligible entity’s wage subsidy claim for a CEWS benefit, computed using all of its eligible employees and eligible remuneration (and other required criteria specified in section 125.7), can be reconciled with each wage subsidy application, the NOD issued for each RP account should be considered to be valid under subsection 152(8).
4. In our view, using a modified version of subsection 152(3.1), the “normal redetermination period” (within which a redetermination may be issued under subsection 152(3.4) with respect to a qualifying period) would end three (or four) years after the earlier of the date of sending the original notice under subsection 152(3.4) stating the amount deemed to be an overpayment on account of the taxpayer’s Part I tax liability that arose during the qualifying period, or stating that no such overpayment exists. In addition, the Minister may make a subsection 152(3.4) redetermination of a deemed overpayment under subsection 125.7(2), (2.1), or (2.2) for a qualifying period, or notify a taxpayer that no such overpayment exists, after the taxpayer’s “normal redetermination period” for the qualifying period only to the extent that it is allowed for by subsection 152(4), (4.01), (4.2), (4.3), (5), or (9), modified as the circumstances require.
5a. If an eligible entity has already filed a section 125.7 application for a qualifying period within its specified deadline, that eligible entity would not need an extension of the time to file that application under subsection 125.7(16). Where an eligible entity has not filed a section 125.7 application for a qualifying period within its specified deadline, subsection 125.7(16) provides the Minister with the discretionary authority to extend that deadline when determining if the eligible entity to has met the definition “qualifying entity”, “qualifying renter”, or “qualifying recovery entity”, as the case may be. Such an extension would allow the eligible entity to file an application for a qualifying period (taking into consideration any section 125.7 elections in respect of that qualifying period) to receive a refund of the amount deemed to be an overpayment of Part I tax under subsection 125.7(2), (2.1), or (2.2), respectively.
5b. Any redetermination under subsection 152(3.4) is made at the discretion of the Minister and would have to consider the restrictions of subsections 152(3.1) and (4), modified as the circumstances require. This would include the consideration of a “normal redetermination period.” Subsection 125.7(16) makes no reference to, and has no impact on, a taxpayer’s “normal redetermination period” for a qualifying period.
5c. In our view, subsection 125.7(16) applies to initially filed applications; it does not apply to requests to amend applications. As such, in our view, subsection 125.7(16) does not provide the Minister with the discretion to allow an eligible entity to amend or revoke a previously made election under section 125.7.
6. As with other discretionary decisions, the taxpayer ultimately apply for judicial review of that decision to the Federal Court within 30 days of the date of receipt of the CRA decision.
7. If an excess refund of a subsection 125.7(2), (2.1), or (2.2) deemed overpayment for a qualifying period is provided to a taxpayer under subsection 164(1.6), that excess may be determined and assessed at any time under subsections 160.1(1) and (3), respectively.
