CPA Canada comments on the “reportable uncertain tax treatment” rules

Draft s. 237.5 requires corporations above the rather small size threshold to annually report “reportable uncertain tax treatment” - generally respecting situations where their GAAP financial statements reflect uncertain tax treatment. Comments of CPA Canada include:

• The “reportable uncertain tax treatment” definition should be adjusted to clarify that the reporting requirement applies only to Canadian income tax (rather than, say, foreign income tax) uncertainties.
• There are some uncertainties as to whether such reporting extends to tax credits that have not been fully booked (e.g., because there is not yet reasonable assurance that all the conditions will be met.)
• There should not be continued reporting requirement arising on the same issue, transaction or series of transactions (e.g., multiple penalties should not arise where CRA already was provided with the required information).
• S. 237.5(8) references a requirement to potentially report to CRA “any information” relating to any transaction etc. to which the reportable uncertain tax treatment relates. It should be clarified that this applies only to factual information - and not subjective information that was used to determine whether an uncertain tax treatment should be reflected in the financial statements.
• Where, for example, a corporation with a March 31, 2022 year end engaged in a transaction in March 2022 that was not determined to create an uncertain tax position until a judicial decision in December 2022, it nonetheless could be required to report this unknown uncertainty when filing its 2022 return by September 2022. Off-calendar taxation years should be addressed.

Neal Armstrong. Summaries of CPA Canada, “Uncertain Tax Treatments (“UTT Proposals”),” 5 April 2022 Joint Committee Submission under s. 237.5(1) – reportable uncertain tax treatment, reporting corporation, s. 237.5(2) and s. 237.5(8).