Section 222

Cases

Doig v. Canada, 2011 DTC5064 [at 5725], 2011 FC 371

The taxpayer sought a declaration that he had paid taxes between the years 1971 and 1984. Zinn J. found that the limitations period in s. 222 only applies to actions commenced by the Minister, and not to the taxpayer. Instead, the general limitations period in s. 32 of the Crown Liability and Proceedings Act applies. The taxpayer was beyond this limitation period, so his application was dismissed.

Zinn J. found in the alternative that the doctrine of laches would bar the taxpayer's application. The taxpayer had allowed far too long a delay before bringing his application, knowing full well of the tax debt claimed by the CRA.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Laches 109

Boucher v. Canada, 2004 DTC 6085, 2004 FCA 47

Tax Court lacked jurisdiction to consider whether tax at issue had been withheld

The Tax Court lacked jurisdiction to consider the allegation of the taxpayer that an amount received by her from her employer was net of employee source deductions, so that she had already paid the tax in question. Such an allegation could be asserted by her in the Federal Court when the Minister attempted to recover the sums he considered to be payable.

Markevich v. Canada, 2001 DTC 5305, 2001 FCA 144

Rothstein J.A. rejected the contention of the Minister that the Act was a complete code which provided for no limitation period in respect of collection procedures. Instead, Parliament's intention was that section 32 of the Crown Liability and Proceedings Act was to apply when Acts of Parliament (such as the Income Tax Act) were silent on the issue of limitations. Accordingly, the Minister was precluded by s. 3(5) of the Limitation Act (B.C.) from instituting collection proceedings against the taxpayer more than six year after the indebtedness of the taxpayer for federal and provincial income tax became collectible (i.e., six years after the expiry of the 90-day period referred to s. 225.1(1)).

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Absurdities 116

Frankel v. The Queen, 84 DTC 6220, [1984] CTC 259 (FCTD)

In a meeting between the individual taxpayer and representatives of the Department, it was tentatively agreed that a global amount of $122,000 owed by the individual and 4 companies which he owned or ran, would be retired by him paying $1,000 per month. It was held that in the circumstances the choice of the Department as to which of the 5 accounts it applied the monthly payments bound the taxpayers.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence 51

DiLorenzo v. The Queen, 82 DTC 6085, [1982] CTC 151 (FCTD)

Where two individuals, who carried on a construction business in partnership with each other as well as through 9 incorporated companies, knew that payments being made by them to the Receiver General respecting arrears of taxes of the partnership and the companies were being credited to the companies' accounts, they were later precluded from arguing that the payments should have been applied by the Department instead to reduce the amount of the debt owing by the partnership to the Receiver General.

Administrative Policy

91 C.R. - Q.63

RCT will not hold collection action in abeyance based upon anticipated non-capital losses to be incurred at some future time.

91 C.R. - Q.62

Discussion of when collection actually will be temporarily delayed in light of the financial situation of the tax debtor.

Subsection 222(1)

Tax debt

Cases

Bechthold Resources Ltd. v. MNR, 86 DTC 6065, [1986] 1 CTC 195 (FCTD)

tax liability arose when designation made and before assessment

The taxpayer made a designation on January 17, 1985 under former s. 194(4) of $30 million in respect of scientific research tax credits, which resulted in a Part VIII tax liability of $15 million, for which the taxpayer was assessed under Part VIII on March 26, 1985. In addressing an argument that the assessment was a nullity so that a requirement to pay issued to the taxpayer also was a nullity, Addy, J. stated (at p. 6069):

Liability to pay tax or to pay any amount on account of tax does not depend on any Notice of Assessment. It has long been firmly established that liability is created by statute and exists regardless of whether there has been an assessment by the Minister. ...

The principle was upheld...in...Lambert...76 DTC 6373 (F.C.A.)... .

The Queen v. Sands Motor Hotel Ltd., 84 DTC 6464, [1984] CTC 612 (Sask QB)

taxpayer insolvent in light of unassessed tax liability

It was held that under the Act, a debt of the taxpayer to the Crown comes into existence the moment that taxable income is earned, notwithstanding that assessment is not made by the Minister until considerably later. The taxpayer corporation accordingly was insolvent for purposes of section 40 of the Business Corporations Act (Saskatchewan) by virtue of paying dividends equal to all its remaining net assets, including proceeds of disposition of land which it had reported as a capital transaction, notwithstanding that the taxpayer was not reassessed on the basis that the disposition had been on capital account until after the payment of the dividends.

The Queen v. Simard-Beaudry, 71 DTC 5511 (FCTD)

liability for tax arose before assessment

The taxpayer agreed in Montreal on December 15, 1964 to acquire assets of another company for consideration which included the assumption of all corporate income taxes which had been incurred prior to January 1, 1965. The Minister subsequently reassessed the vendor for corporate income taxes on August 14, 1969 and then called upon the taxpayer to discharge this debt. In rejecting the taxpayer’s position that it was not liable for such taxes as they had not yet been assessed at the time of its assumption under the purchase agreement , Noël J stated (at p. 5515):

As to his second argument, namely that the debt arising from re-assessment of the taxpayer dates only from the time that the taxpayer is assessed, and that it did not, accordingly, exist at the time the agreement was made, it seems to me that the answer to this is that the general scheme of the Income Tax Act indicates that the taxpayer's debt is created by his taxable income, not by an assessment or re-assessment. In fact, the taxpayer's liability results from the Act and not from the assessment. In principle, the debt comes into existence the moment the income is earned, and even if the assessment is made one or more years after the taxable income is earned, the debt is supposed to originate at that point.

Articles

Colin Campbell, "Liability for the Tax on SIFT Partnerships: A Rejoinder", 2011 Canadian Tax Journal, Vol 59, p. 709:

"Liability" v. "debt" (pp. 716-717)

The distinction so clearly made by Jackett P in Terra Nova Properties [67 DTC 5064] between liability for tax and amounts actually payable (and therefore debts due to the Crown) 26 was unfortunately muddied somewhat in the decision of Noël J in The Queen v. Simard-Beaudry… .

With respect, the references to "debt" in this passage are consistent with the prior jurisprudence only if they are read as references to "liability." Because the agreement in question referred to "liability for income and corporation taxes" and not to "debts" in respect of taxes, Noël J's references to "debt" are in obiter and reflect an unfortunate confusion in terminology.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) 39

Subsection 222(2)

Administrative Policy

Collections, audit, objections and appeals: CRA and COVID-19 28 May 2020 CRA Webpage

Suspension post-COVID-19 of collections actions on new debts

Collections activities on new debts will be suspended until further notice, and flexible payment arrangements will be available. ...

Collections staff will address pre-existing situations on a case-by-case basis to prevent financial hardship.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 165 - Subsection 165(3) 487
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1) suspension duiring COVID-19 of responding to most Objections 193

Articles

Marie-Andrée Beaudry, Dean Kraus, "Selected Income Tax Considerations in the Court-Approved Debt Restructurings and Liquidations", 2015 Annual CTF Conference paper

Stay of assessment in CCAA proceedings (p. 13:38)

In…Girard, the Québec Court of Appeal concluded that a notice of assessment or reassessment constituted a proceeding and was therefore subject to the stay of proceedings under the BIA. The court determined that a notice of assessment or reassessment issued while the stay is in effect will not have the legal effect conferred on it under the ITA unless the tax authorities obtain the leave of the court under section 69.4 of the BIA. [fn 132: …2014 QCCA 1922] …While in Girard the stay of proceedings was issued under section 69.3 of the BIA, the language in that provision is quite similar to the stay provision in section 11.02 of the CCAA. ...

Words and Phrases
proceeding

Subsection 222(3) - No actions after limitation period

Administrative Policy

23 June 2014 Internal T.I. 2013-0501521I7 - Collection Limitation Period

limitation period does not extinguish tax debt

An office which acted as the trustee for various individuals who have not been bankrupt asked whether debts that are "written off" by CRA must still be paid. CRA stated:

There are no provisions…. that permit the Minister to write-off a debt. …Notwithstanding that a debt cannot be written off, section 222… imposes a limitation period after which [subject to extension under s. 222(8)] the CRA may not take collection actions to enforce the debt. … After the end of the limitation period, the CRA may not take collection actions; however, the debt remains payable by the taxpayer and the CRA will accept payments on account of the debt.

Subsection 222(4) - Limitation period

Cases

Collins v. Canada (Customs and Revenue Agency), 2005 FC 1431

The 2004 amendment to s. 222(4)(a)(ii) was effective to overrule Markevich v. The Queen, so that tax debts that became prescribed due to a limitation period prior to the adoption of Bill C30 nonetheless could be enforced by the CCRA under the Act.

Subsection 222(6)

Paragraph 222(6)(b)

Cases

Harrison v. Canada (National Revenue), 2020 FC 772

rejection of CRA position that disputing a tax debt in an objection or appeal constitutes an acknowledgement of the debt

The taxpayer claimed losses and other deductions in her 1988 income tax return respecting two sets of transactions (the “Trinity Denton” and “Sierra Trinity” transactions). The taxpayer’s 1993 objection respecting losses from the Trinity Denton transactions was settled in a 1994 settlement agreement. However, except as described below, CRA did not take any action to collect the taxes acknowledged by that settlement to be owing. On January 4, 2011, the taxpayer filed a Notice of Appeal respecting losses from the Sierra Trinity transactions – but due to an error, also disputed the disallowance of the Trinity Denton losses (because new counsel were unaware of the 1994 settlement). This error was identified in the Minister’s Reply. On December 19, 2014, the Minister reassessed (under the “Third Reassessment”) to essentially allow the Sierra Trinity losses, but applied a portion of the resulting refund as repayment (by way of set off) of the taxes owing by the taxpayer under the 1994 settlement.

The taxpayer sought recovery of this collection by way of set-off on the basis that it was contrary to the 10-year collection limitation period (“CLP”) in s. 222(4), and brought this application for judicial review when the Minister’s representative rejected this position, consistent with the CRA published position that the filing of a notice of objection or an appeal to the Tax Court is an acknowledgment of the related tax debt.

In finding that the taxpayer’s appeal to the Tax Court did not constitute an “acknowledgement” of her 1988 tax liability so as to restart the running of the CLP under ss. 222(5) and (6)(b), Strickland J stated (at paras. 66-67, 76):

It would … be absurd if the limitation period could be both restarted by the filing of an appeal to the Tax Court pursuant to s 222(5)(a) and (6)(b) and, at the same time, also be extended pursuant to s 222(8). This could have the result of two different limitation periods running with respect to the same matter. …

[T]he Minister’s general conclusionary statement that filing an appeal with the Tax Court is an acknowledgement of debt, thereby restarting the limitation period, is not justified, intelligible or transparent and is unreasonable … .

… [T]he plain meaning of “acknowledgment” requires an admission or confirmation by the person making the acknowledgment of the thing alleged, be it an admission of liability for damages, blame, responsibility or liability for a tax debt.

In any event , the Appeal did not admit or confirm that the 1988 debt was validly owed and instead “dispute[d] the validity of the amounts assessed” (para. 96).

The application for judicial review was allowed and the matter remitted back to the Minister for redetermination taking into account the above reasons.

Words and Phrases
acknowledgement
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 222 - Subsection 222(8) - Paragraph 222(8)(a) appeal did not restart the 10-year debt collection period 413

Subsection 222(8)

Paragraph 222(8)(a)

Cases

Harrison v. Canada (National Revenue), 2020 FC 772

appeal did not restart the 10-year debt collection period

The taxpayer claimed losses and other deductions in her 1988 income tax return respecting two sets of transactions (the “Trinity Denton” and “Sierra Trinity” transactions). The taxpayer’s 1993 objection respecting losses from the Trinity Denton transactions was settled in a 1994 settlement agreement. However, except as described below, CRA did not take any action to collect the taxes acknowledged by that settlement to be owing. On January 4, 2011, the taxpayer filed a Notice of Appeal respecting losses from the Sierra Trinity transactions – but due to an error, also disputed the disallowance of the Trinity Denton losses (because new counsel were unaware of the 1994 settlement). This error was identified in the Minister’s Reply. On December 19, 2014, the Minister reassessed (under the “Third Reassessment”) to essentially allow the Sierra Trinity losses, but applied a portion of the resulting refund as repayment (by way of set off) of the taxes owing by the taxpayer under the 1994 settlement.

The taxpayer sought recovery of this collection by way of set-off on the basis that it was contrary to the 10-year collection limitation period (“CLP”) in s. 222(4), and brought this application for judicial review when the Minister’s representative rejected this position, consistent with the CRA published position that the filing of a notice of objection or an appeal to the Tax Court is an acknowledgment of the related tax debt.

After finding that the taxpayer’s appeal to the Tax Court did not constitute an “acknowledgement” of her 1988 tax liability so as to restart the running of the CLP under ss. 222(5) and (6)(b), Strickland J went on to reject the Minister’s position that the CLP was restarted and simultaneously extended pursuant to ss. 222(8) and 225.1(2) when the Appeal was filed. Stickland J stated (at para. 108) that in the Appeal, the Trinity Denton losses:

were not properly raised and therefore were not in controversy when the Appeal was filed. They were improperly included in the Appeal as recognized by the Minister at that time. In the Reply, the Minister correctly took the position that the Trinity Denton matters were not validly subject to appeal pursuant to the terms of the Settlement Agreement.

Finally, Strickland J noted (at para 119):

… [T]he Third Reassessment, undertaken on December 19, 2014, fell outside the March 4, 2014 limitation period expiry and could not extend, restart or revive the exhausted limitation period. Accordingly, the Decision unreasonably found that the Third Reassessment restarted the limitation period.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 222 - Subsection 222(6) - Paragraph 222(6)(b) rejection of CRA position that disputing a tax debt in an objection or appeal constitutes an acknowledgement of the debt 456