15 March 1983 Income Tax Severed Letter

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

March 15, 1993 Registration Division Pension & Profit Sharing Plans Section

Mr. Bob Gowling

March 15, 1983

M.E. Bartley

RE: Supplementary Unemployment Benefit Plans
        XXXX
        Your memo of March 1
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We understand that by agreement dated February 27, 1974

(a) The Supplementary Unemployment Benefit Plans No. 1 and No. 2 of XXXX were cancelled, and

(b) the trust funds which were established to provide the payments required by those Plans were set aside to increase certain disability pension payments and to provide other benefits as might be agreed upon between the company and the unions which represent its employees.

In these circumstances you have questioned whether or not the trusts retain their tax-free status.

Paragraph 145(1)(b) of the Act denies the status of a "supplementary unemployment benefit plan" to any plan which provides for payments other than those in respect of lay-off for any temporary or indefinite period. Only those which qualify within paragraph 145(1)(b) are eligible for registration under paragraph 145(1)(a). We see nothing which provides for revocation of registration in any circumstances but since paragraph 145(1) (a) deals with registration on an annual basis that is not likely a problem. That is, the situation is similar to that of registered pension plans and the commentary in paragraph S of Information Circular 72-13R7, Employees' Pension Plan, ought to be relevant.

In our opinion the plans ceased to qualify within paragraph 145(1)(b) of the Act on February 27, 1974. As a consequence they ceased to qualify for registration, and without registration paragraph 149(1)(q) of the Act no longer operates to make them non-taxable. The agreement of that date provides that the contributions would be made thereafter to improve the benefits provided under a disability plan but without information as to its terms, we can offer no opinion as to the tax consequences of making those contributions.

You referred also to paragraphs 2(3)(b) and 2(8) of Information Circular 72-5R, but since both of those are administrative rules and there is nothing in our files on the subject, we can offer no useful comment.

Your files #01076, #01077 and #01078 are returned herewith.

for Director Non-Corporate Rulings Division

Enclosure MEB:ta