Rules of Reassessment: First Order Issued Under the Time Limits and Other Periods Act (COVID-19)

September 28, 2020

Written By Marc Pelletier and Sophie Virji

The Minister of National Revenue issued an order on August 31, 2020. This is the first order issued under the Time Limits and Other Periods Act (COVID-19) (TLOPA). The August 31 Order extends the time limit to reassess taxpayers and certain filing deadlines under the Income Tax Act (Canada) (ITA) and under the Excise Tax Act (ETA).¹

The August 31 Order affects the tax risk exposure and filing obligations of some taxpayers. The manner in which taxpayers are affected may be complex. The most significant impact for many taxpayers will be the extension of the normal reassessment period (subsection 152(3.1) of the ITA). In an interesting twist, taxation years that became statute-barred between March 13, 2020, and May 19, 2020, remain statute-barred; however, years that otherwise would have become statute-barred between May 20, 2020, and December 30, 2020, will now only become statute-barred six months later or on December 31, 2020, whichever date is earlier.

Brief Overview of TLOPA

TLOPA came into force on July 27, 2020, to address the many Canadians, businesses and other organizations, including the Canada Revenue Agency (CRA), which may have been unable to meet time limits set out in federal legislation due to the COVID-19 pandemic.² TLOPA allows federal ministers to make temporary orders to extend or suspend time limits in specific federal legislation for which they are responsible.

Specifically, TLOPA allows the Minister to issue administrative orders extending certain time limits under the ITA for up to six months wherein extensions or suspensions may have retroactive effect back to March 13, 2020, and cannot continue after December 31, 2020. The August 31 Order was made pursuant to this power. TLOPA includes a sunset clause such that a minister cannot exercise these powers after September 30, 2020.

Extended Reassessment Periods Under the August 31 Order

Where the time limit would expire during the period beginning on May 20, 2020, and ending on December 30, 2020, the August 31 Order extends the following time limits or periods by six months or until December 31, 2020, if that day is before the end of those six months:

• The normal reassessment period in subsection 152(3.1) of the ITA. Unless an exception applies³, the normal reassessment period for a mutual fund trust or a corporation other than a Canadian-controlled private corporation is four years from the day the CRA sends the original notice of assessment. In any other case, the normal reassessment period is three years from the day the CRA sends the original notice of assessment.
• The deadline to reassess a taxpayer for taking specific actions as outlined in paragraph 152(4)(b) of the ITA.⁴  This provision extends the deadline to reassess a taxpayer by three years after the expiry of the normal reassessment period.
• The deadline to reassess a taxpayer who has not filed an information return as and when required in relation to a tax shelter or benefit in paragraph 152(4)(b.1) of the ITA. This provision extends the deadline to reassess a taxpayer to three years after the day on which the information return is filed.⁵
• The deadline to reassess a taxpayer who has failed to file a prescribed form or to report on the prescribed form the information required in respect of "specified foreign property" and failed to report income from a "specified foreign property" pursuant to paragraph 152(4)(b.2) of the ITA. This provision extends the deadline to reassess a taxpayer to three years after the end of the normal reassessment period.
• The deadline to reassess a taxpayer who fails to report a disposition of real property pursuant to subparagraph 152(4)(b.3) of the ITA. This provision extends the deadline to reassess a taxpayer to three years after the day the taxpayer files the prescribed form amending the return.
• The deadline to reassess a taxpayer in relation to the adjustment of a loss carryover pursuant to paragraph 152(4)(b.4) of the ITA. This provision extends the deadline to reassess a taxpayer to six years after the end of the normal reassessment period.
• The deadline to reassess a taxpayer as a consequence of a change in the allocation of the taxpayer’s taxable income earned in a province pursuant to paragraph 152(4)(d) of the ITA. This provision extends the deadline to reassess a taxpayer to one year after the later of the day on which the Minister is advised of the provincial reassessment and the day that is 90 days after the day of sending of a notice of the provincial reassessment.

Extended Filing Periods Under the August 31 Order

Where the time limit would expire during the period beginning on March 13, 2020, and ending on December 30, 2020, the August 31 Order extends the following time limits or periods by six months or until December 31, 2020, if that day is before the end of those six months:

• The deadline to file Form T661 with respect to scientific research and experimental development claim pursuant to subsection 37(11) and paragraph (m) of the definition "investment tax credit" in subsection 127(9) of the ITA. The deadline for both filings is on or before the day that is one year after the taxpayer’s filing-due date for the particular taxation year.
• The deadline by which the Minister can grant an application to extend time for filing a notice of objection pursuant to paragraph 166.1(7)(a) or making a request under subsection 245(6) of the ITA. The Minister can grant an application to extend the deadline within one year of the expiration of the time for filing a notice of objection or request.
• The deadline by which a taxpayer may apply to the Tax Court of Canada for an extension of time to file a notice of objection pursuant to paragraph 166.1(7)(a) or making a request under subsection 245(6) of the ITA, as outlined in paragraph 166.2(5)(a) of the ITA. A taxpayer may apply to the Tax Court of Canada after the Minister has refused the application or if 90 days have elapsed after service of the application, but no later than 90 days after the day on which notification of the decision was mailed to the taxpayer.

The Bennett Jones Tax group will continue to monitor developments in this area, and would be pleased to assist you as you look to identify and implement strategies in connection with mitigating tax risk exposure and navigating new filing obligations. In addition, please visit our COVID-19 Resource Centre for other COVID-19-related materials.

¹For the time limit and other period extensions ordered under the ETA, visit the Government of Canada website.
²For more information on TLOPA see our blog from August 2020, Limitation Periods for Tax Disputes Might Now Be Extended.
³See for example the exceptions in subsection 152(4) of the ITA.
⁴For example, a transaction with non-arm's length non-residents (subparagraph 152(4)(b)(iii) of the ITA).
⁵A reassessment of a liability for a taxation year authorized to be made by paragraph 152(4)(b.1) of the ITA is limited by subparagraph 152(4.01)(b)(vii) of the ITA to the deduction or claim in respect of the tax shelter or the tax benefit in respect of the reportable transaction.

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