At the 2017 IFA Roundtable, CRA announced that it will allow Delaware & Florida LLPs and LLLPs formed before April 26, 2017 to continue filing as partnerships, provided none of the following applies:
- The entity or one or more of its members takes inconsistent positions for a taxation year, or from one to another, as between partnership and corporate treatment;
- There is a significant change in its membership or activities; or
- It facilitates abusive tax avoidance.
CRA clarified the grandfathering relief.
The following filings or registrations by such partnerships based on the announcement at the 2016 IFA Conference that they were corporations would not be considered as “inconsistent positions” (re the 1st condition): the “protective filing” of T1134s or T106s; being assigned a Business Number; or filing a T2 return.
Re the 2nd condition, a transfer of membership between parties not dealing at arm’s length or the issuance of additional memberships to them will not be considered a “significant change”.
Where any of the three conditions occurs in a year ending after the IFA 2017 pronouncement, CRA may issue assessments respecting that and subsequent, but not prior, taxation years based on the corporate status.
The fact that an LLC was converted before April 26, 2017 to a Delaware & Florida LLP or LLLP would not prevent it from accessing the grandfathering relief.
The above relief will be applied to LLPs and LLLPs of other jurisdictions having similar (corporate) attributes where they were set up before April 26, 2017.