Draft s.129(1.3) (contained in January 29, 2026 draft legislation) proposes that, subject to the exclusions in ss. 129(1.31) and (1.32), where a taxable dividend is paid by a corporation (the “payer”) to an affiliated private or subject corporation (the “payee”) that has a balance-due day after that of the payer, the dividend is deemed not to be a taxable dividend for the purposes of s. 129(1) (no dividend refund). Comments of the Joint Committee on these rules include:

• The requirement in s. 129(1.32) that the payee corporation (and grandparent corporations, if applicable) pay one or more taxable dividends of the same character as the suspended dividend, in an aggregate amount at least equal to the amount of the suspended dividend, means that RDTOH balances of the payer can become effectively trapped where the payer lacks sufficient assets to pay the required dividends to unsuspend the dividend.
• As s. 129(1.3) suspends an entire dividend of the payer, even where only a portion of that dividend gives rise to a dividend refund, the requirement that a dividend of the payee corporation exceed the amount of the suspended dividend, rather than only the portion necessary for the refund, increases the risk that dividend refunds may effectively be lost.
• Regarding the requirement (for unsuspending the payer’s dividend) that the dividend paid by the payee corporation (or grandparent corporations, if applicable) must be of the same character, this may not be feasible.
• In particular, it is not always possible for the payee to pay an eligible dividend even where it has received an eligible dividend from the payer, for example, because of a negative GRIP balance.
• Alternatively, if it is not a CCPC, it may have a low LRIP balance that must be fully depleted before it can designate any dividend as an eligible dividend.
• S. 129(1.32) does not unsuspend a dividend where the payor corporation is subject to a loss restriction event (LRE) between the time of the suspended dividend payment and the end of the particular taxation year for which the rule is being applied.
• The exception to the above LRE rule in s. 129(1.31)(b) applies where an LRE occurs within 30 days after the payment of the dividend.
• In some circumstances, a 30-day window may be insufficient - for example, where the corporation being sold is owned by a trust, s. 104(19) deems the trust’s corporate beneficiaries to receive a dividend only at the trust’s taxation year-end, so that a pre-closing purification dividend may need to be paid in the taxation year preceding the sale in order to ensure that the relevant connected status requirements are satisfied.
• Note that s. 256(9) may result in the acquisition of control occurring at the end of the day before the closing date, so that the LRE is deemed to occur before the payment of the dividends to the vendors on the closing date.
• The s. 129(1.32)(b) rule, which is understood to be intended to prevent the same taxable dividends from being used to recover RDTOH in more than one instance, would appropriately be avoided in some situations if the dividend payor could choose to not to recover its own RDTOH in order to avoid tainting the release of a suspended dividend under s. 129(1.32), until it can pay a dividend in excess of the suspended dividend amount.
• However, 2016-0649841E5 indicates that CRA automatically issues a dividend refund where sufficient taxable dividends are paid, even where the dividend payor does not expressly request the refund.

Neal Armstrong. Summary of Joint Committee, “Submission on Tax Deferral Through Tiered Corporate Structures (Part IV refund suspension),” 27 February 2026 Joint Committee submission under s. 129(3.2).

The taxpayer engaged in an upgrading of a Supervisory Control and Data Acquisition (SCADA) system for the remote control of pipeline systems. In finding that the work did not qualify as SR&ED on the basis of not satisfying the test of there being sufficient technological risk or uncertainty, Wong J. stated:

The appellant’s efforts to develop a browser‑based system and move away from using a proprietary brand of hardware was more in the nature of catching up with a browser‑based external world and bringing an outdated system into the 21st century, i.e. product research and development. …

[T]here is no evidence that the appellant used more than routine engineering or standard procedures.

The taxpayer also worked on building a system for driverless trains that would run through a central box system, which the client wanted to operate at a Safety Integrity Level (SIL) of 4. In finding that this qualified as SR&ED, Wong J. stated:

Here, the cumulative uncertainties in creating a central train control box capable of operating at the SIL 4 level combined to form a system uncertainty … . The appellant had no guidance for building a control box capable of detecting zero speed and managing train‑line functions while also operating at the highest safety level.

In applying the proxy method under s. 37(8)(a)(ii)(B) in respect of the qualifying project, which references the payroll of employees engaged “directly” in SR&ED, the taxpayer included 100% of an employee’s remuneration where the employee's work contributed directly to SR&ED; whereas, if the employee's work was considered to be supporting in nature—for example, during a weekly project manager's meeting in which the project would be discussed along with other unrelated projects—the taxpayer applied a 60% factor to the remuneration.

Wong J. found that she could not agree with the Crown's contention that applying a mathematical factor of 0.6 was unreasonable in the circumstances.

Neal Armstrong. Summaries of Willowglen Systems Inc. v. The King, 2026 TCC 7 under s. 248(1) – SR&ED and s. 37(8)(a)(ii)(B).

We have translated a further 5 CRA interpretations released in September of 1999. Their descriptors and links appear below.

These are additions to our set of 3,496 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 26 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5^th of each month).

CRA has published a revised version of its Circular on the third-party penalties imposed under s. 163.2, which represents a substantial rewriting of the previous version.

Points made include:

• Indicating the basic distinction between the penalty imposed under s. 163.2(2) and that under s. 163.2(4):

The planner penalty is directed primarily at any person who generally prepares, participates in preparing, selling, or promoting, either directly or in-directly, a planning activity or valuation activity.

…. The preparer penalty is generally directed at any person providing tax-related services to a taxpayer.

• Providing examples of misrepresentations in tax planning arrangements, including “a lawyer giving a favourable legal opinion about an abusive tax scheme knowing that it contains false statements” and “an accountant creating offshore structures to obtain a tax benefit relying on false statements”.
• However, stating that “CRA does not require more of reputable practitioners than compliance with the professional standards of their governing bodies.”
• Stating factors that may be relevant to determining whether penalties will be assessed:

• whether the position taken is obviously wrong, unreasonable, and/or contrary to well-established case law
• the person’s experience with the relevant subject matter and knowledge of the other person’s specific circumstances, or lack thereof
• the extent of knowing or deliberate participation in false statements
• the degree to which the culpable conduct represents the most aggressive and blatantly abusive behaviour
• the extent to which there is a pattern of repeated abuse
• the significance of the tax benefit

• Indicating that if “a practitioner discovers that another person made a false statement for tax purposes, the CRA expects practitioners to take the necessary steps to rectify the situation.”
• However, when the Circular then provides the example of a practitioner who discovers that the previous accountant of a new client had made a false statement by not reporting income of the client from the underground economy, CRA indicates that the practitioner should advise the client to make a voluntary disclosure (and, of course, that the practitioner not make the same omission in fresh returns) but does not suggest any further action including where a voluntary disclosure is declined.

Neal Armstrong. Summaries under IC 01-1R2 Third-Party Penalties 17 February 2026 under s. 163.2(1) – culpable conduct, excluded activity, subordinate, s. 163.2(2), s. 163.2(4), s. 163.2(5), s. 163.2(8), and s. 163.2(12).