News of Note

S. 149.1(4)(d) authorizes the Minister to revoke the registration of a private foundation that has “incurred debts” subject to specified exclusions including “debts incurred in the course of administering charitable activities.” In finding that indebtedness incurred by a private foundation to make payments to qualified donees did not come within this exclusion, CRA stated:

[T[he making of gifts by a foundation in the course of charitable activities carried on by it, and the making of gifts to qualified donees are two activities that are mutually exclusive. As such … it is not possible for a foundation to make a gift to a qualified donee in the course of carrying on of its own charitable activities.

Neal Armstrong. Summary of 8 May 2009 Internal T.I. 2009-0309401I7 under s. 149.1(4)(d).

On March 15, 2020, those CRA employees performing critical functions (Category 1 employees) were directed to continue such work, but from home, if possible, until April 5, 2020. This date has now been extended to May 1, 2020. Other employees (whose work has been identified as important but not as a critical service) are directed to work from home (and not to come into the office except, perhaps, to pick up their audit laptop or other equipment) where they are equipped to do so and where their child or parent care responsibilities do not preclude this.

The list of (Category 1) critical services has been expanded to include clearance certificates, “time-sensitive income tax ruling requests and technical interpretations” and “operat[ing] call centres in the areas of GST/HST rulings, registered plans, and registered charities.” See the National COVID-19 Business Continuity Plan.

Neal Armstrong. Summary of COVID-19: Information for Canada Revenue Agency employees: 30 March 2020: Work restrictions for critical and non-critical services under s. 152(1).

CRA has announced that although “The deadline for businesses to file their [GST/HST] returns is unchanged … the CRA won’t impose penalties where a return is filed late provided that it is filed by June 30th.”

The already-announced deferral of remittance obligations until June 30 also applies to quarterly instalments (i.e., no late interest charges). However, “Excise taxes and duties are still required to be remitted by their prescribed due dates,” although of course CRA retains the discretion to waive interest charges “on a case by case basis.”

“GST/HST returns that are filed electronically will be processed unless they require client contact or additional review,” whereas “Paper copies of GST/HST returns will not be processed until normal operations resume.” This electronic processing means that refund claims can be paid automatically through My Business Account. However, although point-of-sale and public service body rebates can be processed automatically, electronically filed housing and general rebate applications “are manually assessed and won’t be processed until operations resume.”

Neal Armstrong. Summary of Deferral of GST/HST Tax Remittances (COVID-19 Measures) 31 March 2020 CRA Webpage under ETA s. 281.1(1).

Jarvis found that where the predominant purpose of a particular inquiry is the determination of a penal liability (e.g., under s. 239 of the ITA), CRA officials may not have recourse to the inspection and requirement tools in the ITA. Contrary to the Superior Court (one level below), the Quebec Court of Appeal found that the Court of Quebec (two levels below) had not made any reversible errors in invalidating evidence obtained in a search and seizure of a Quebec registrant (BT Céramiques), which was believed to have fraudulently claimed input tax credits and corrupted CRA officials. CRA had reasonable grounds, at its commencement of the audit in question, to proceed with a criminal investigation rather than merely initiating a tax audit, and while the evidence sought during the audit could be used to establish tax payable, the totality of the evidence demonstrated an interest in acquiring information on the criminal liability of the taxpayers and CRA employees. It was also relevant that the same Director headed up both the Montreal Special Enforcement Program (whose mandate was to determine the civil liability of those engaged in criminal activities) which performed the audit, and the Criminal Investigations Program, which investigated tax evasion with a view to bringing charges and which took over after completion of the audit, including preparing a search warrant.

Copies of the seized documents had, in turn, been provided by CRA to the ARQ, which brought its own tax evasion charges. In affirming the decision of the Court of Quebec to also exclude, pursuant to s. 24 of the Charter, use of such evidence by the ARQ, Dufresne JCA stated):

[It] simply could not take advantage of the proceeds of the illegally obtained warrants. If this shortcut were allowed, the risk of abuse would be great, since one state agency could, in all events, take advantage of the other's searches, regardless of the legality of the means used to obtain them.

Neal Armstrong. Summary of BT Céramiques Inc. v. Agence du revenu du Québec, 2020 QCCA 402 under Charter, s. 8, s. 231.1(1), and Charter s. 24(1).