News of Note
We have translated 6 more CRA interpretations
Email this ContentWe have translated 6 further CRA interpretations released in January of 2003 and December of 2002. Their descriptors and links appear below.
These are additions to our set of 2,571 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 20 ¾ years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
Whitecap Energy – Alberta Court of King’s Bench finds that the Attorney General could revive a dissolved corporation for the purpose of making a s. 160 assessment of the shareholder
An Alberta corporation (Whitecap) had been wound up into its sole shareholder. The Attorney General sought to revive Whitecap pursuant to s. 208 of the Business Corporations Act (Alberta) in order that Whitecap could be assessed by CRA. That, in turn, would permit an assessment of the shareholder under ITA s. 160. Principally at issue was whether the Attorney General had standing as an “interested party,” which was relevantly defined to “mean … a creditor of a dissolved corporation … or …a person designated as an interested person by an order of the Court.”
In finding that the Attorney General was not a “creditor,” Schlosser J stated:
Taxpayers remain liable for tax when income is earned … . notwithstanding that no return is filed. The liability does not become a debt until the taxes are assessed … .
However, in finding that he should exercise his discretion to designate the Attorney General, he stated:
[T]he Attorney General of Canada has a valid interest in revival and seeks this remedy in furtherance of its valid interest for a legitimate purpose; which is to convert liability for taxes into a debt.
The revival application was granted.
Somewhat in contrast, the CBCA definition of an “interested person” (s. 209(6)) is an “includes” rather than “means” definition that does not explicitly refer to a person designated in the discretion of the court.
Neal Armstrong. Summary of Canada (Attorney General) v 18335898 Alberta Ltd (Whitecap Energy Inc), 2023 ABKB 357 under CBCA s. 209(6).
CRA confirms that an intermunicipal management board is a corporation
A municipality may acquire an interest in a Canadian renewable energy project through an intermunicipal management board (“IMB”), which acquires an interest in the limited partnership owning the project assets and selling the electricity generated. In order for the LP to claim accelerated CCA without restriction by the Canadian specified energy property rules, Reg. 1100(26)(b) requires that all partners be “corporations” the principal business of which is the sale, distribution or production of electricity (or other enumerated activities), or other qualifying partnerships.
After noting that the (apparently Quebec) statutory provisions governing an IMB are similar to those governing a CBCA corporation, including providing that the IMB is a legal person (“personne morale”), has limited liability, except in relation to certain borrowings, has a board of directors and is governed by by-laws and resolutions – and the interests in it carry voting rights, CRA concluded that such an IMB qualifies as a corporation. It went on to indicate that whether the principal-business test adverted to above was satisfied was a question of fact on which it had insufficient particulars.
Neal Armstrong. Summary of 26 May 2023 External T.I. 2022-0946411E5 under Reg. 1100(26)(b).
Income Tax Severed Letters 30 August 2023
This morning's release of three severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Thomas – Federal Court allows the provision of new evidence on an application for judicial review
The taxpayer’s request for waiver of interest and penalties regarding her late filing of T1135 forms, based on the medical situation of her and her husband, was denied (at two levels) on the grounds that such situation did not prevent her from filing those forms on time.
O’Reilly J found that it was appropriate for him to consider new evidence provided by the taxpayer, namely, that her parallel request for relief regarding late GST filings had been accepted by CRA, and correspondence showing that “she acted fairly promptly” in seeking to address her late filings, notwithstanding the findings of the CRA decision makers to the contrary. He applied the finding in Association of Universities (2012 FCA 22) that new evidence was admissible “when the evidence shows that there was an absence of evidence before the decision-maker on a particular point.”
O’Reilly J found that the departure from the reverse decision on the GST side “was the result of faulty inferences from the evidence that rendered the conclusion unreasonable”, and allowed the request for judicial review.
Neal Armstrong. Summary of Thomas v. Canada (Attorney General), 2023 FC 1110 under s. 220(3.1).
Xu – Tax Court of Canada finds that an informal letter attaching documents and containing only a brief request for adjustment qualified as an objection
The taxpayers were assessed to deny the new residential rental unit rebate. Two weeks later, the taxpayers provided much of that supplemental information along with a covering letter, which stated that it was “to request a re-assessment of case #50499531,” and spoke with a CRA representative. In finding that the taxpayers’ submission qualified as an objection sufficient for the purposes of ETA s. 301(1.1), Bocock J stated:
The form [of the submission] was not usual, but there is no prescribed form.
… The submission, dated two weeks after the notice of reassessment, while not perfectly detailed, was sufficient to initiate the objection process responsive to an audit and conclusions already in active dispute.
Neal Armstrong. Summary of Xu v. The King, 2022 TCC 108 under ETA s. 301(1.1).
CRA indicates that no arrears interest would arise where non-capital loss carryforwards eliminated a tax payable balance arising from reassessments
A taxpayer reported a capital loss in year 1 of $50 million, which was applied to offset a $1 million capital gain realized in year 1 and a $49 million capital gain realized in year 2. When CRA denied the capital loss, the taxpayer requested that a non-capital loss balance in existence in year 1 be carried forward to offset both taxable capital gains.
CRA noted that s. 161(7) – which contemplates that where there is a carryback of a loss to eliminate a tax payable balance for a taxation year, interest generally will accrue on that balance until a specified effective date of the carryback – does not apply to a low carryforward. Here, provided that the loss carryforward eliminated the tax payable balance otherwise arising from the capital loss denial, no arrears interest would be charged on that assessment.
Neal Armstrong. Summary of 11 May 2023 Internal T.I. 2022-0936701I7 under s. 161(1).
Nicoll – Tax Court of Canada finds that a “streamlined” system for handling travel allowances had the effect of making them taxable
The collective agreement between a boilermakers union and a group of employers was amended to provide a “streamlined” system that eliminated the need for receipts for travel allowances paid to the employees: they were paid a straight sum based on the distance between a standardized central point (Burnaby City Hall) and the job site, irrespective of the actual starting location of the employee or of the employers’ premises.
Wong J found that this change had the effect of making the travel allowances fully taxable pursuant to s. 6(1)(b)(vii) or ss. 6(1)(b)(vii.1) and (x). Furthermore, although the employees could still claim their actual travel expenses pursuant to s. 8(1)(h) and (h.1), they had no receipts. Their allowances were fully taxable with no offsetting deductions.
Neal Armstrong. Summaries of Nicoll v. The King, 2023 TCC 116 under s. 6(1)(b)(vii) and s. 6(1)(vii.1).
We have translated 7 more CRA interpretations
We have translated 7 further CRA interpretations released in February and January of 2003. Their descriptors and links appear below.
These are additions to our set of 2,565 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 20 ½ years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
The Joint Committee recommends that the Act be amended to exclude unconditionally repayable loans from "government assistance"
CAE indicated that a government loan lacking sufficient "ordinary commercial terms" – including one that was made otherwise than to promote the governmental commercial interests or that has a below-market interest rate – will be considered "government assistance" within the meaning of ss. 12(1)(x) and 127(9).
As an example of an implication, the mandates of each of the Business Development Bank of Canada, Canada Infrastructure Bank, Export Development Canada, and Farm Credit Canada include providing loan financing to projects which are desirable for socio-political reasons and which may not have fully commercial terms – thereby resulting in such loans being treated as government assistance so as to cause such projects to not be economically viable due to the increased tax burden.
The Joint Committee recommends an amendment to exclude unconditionally repayable loans from "government assistance" for s. 12(1)(x) and 127(9) purposes and that Finance issue a comfort letter.
Neal Armstrong. Summary of Joint Committee, "Impact of CAE case", 11 August 2023 Submission of the Joint Committee under s. 127(9) – government assistance.