25 January 2011 Internal T.I. 2011-0392901I7 - Reassessments - discretionary adjustments

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.

Principal Issues: Can subsection 80(11) of the Ontario Corporations Tax Act ("CTA") be used to process a taxpayer request for reassessment?

Position: Depends

Reasons: The Ontario Minister is not required to reassess a taxation year under subsection 80(11). Based on the Ministry of Revenue's long standing practice as noted in Ontario Interpretation Bulletin 3009, the Minister will not process any taxpayer requested adjustments when a year is statute-barred. For years that are not statute-barred, the Minister will only process an adjustment to a discretionary deduction if there is no change to income tax payable for the year and no increase to capital tax payable. The Minister is not required to reassess a taxation year if another Canadian taxing authority has done so.

January 25, 2011

Toronto East Tax Services Office			HEADQUARTERS
Andre Langlois						P. Waugh
Technical Advisor, CTAO Desk Audit			905-721-5221

      							2011-039290

Discretionary deductions and reassessments

I am writing in response your email dated January 14, 2011 concerning reassessments under the Corporations Tax Act ("CTA") and statute-barred periods. You have described a situation where a taxpayer is requesting the Ontario Minister of Revenue (the "Minister") make adjustments to capital cost allowance ("CCA") for particular taxation years, some of which are statute-barred. CRA may be reassessing some of the years that the Minister would not reassess.

OUR COMMENTS

The Minister has the discretion whether to issue a reassessment under subsection 80(11) of the CTA. Interpretation Bulletin 3009 sets out the Ontario Ministry of Revenue's (the "Ministry") policy on amending discretionary deductions such as CCA under the CTA.

It has been a long-standing policy of the Ministry not to permit changes to discretionary deductions in taxation years that are statute-barred because any consequential capital tax increases cannot be reassessed. As noted in paragraph 30 of Bulletin 3009, the Ministry will allow revisions to a discretionary deduction for a particular year if the time period for filing a notice of objection (i.e. within 180 days after the mailing of a notice of assessment) has not expired. If the notice of objection period has expired and the year is not statute-barred, the Minister will only process an adjustment for a particular year to a discretionary deduction if there is no change to income tax payable for the year and no increase to capital tax payable.

Subsection 80(25) of the CTA provides that the Minister may reassess a corporation beyond the normal reassessment period in respect of any item that can be reasonably regarded as relating to an assessment action carried out by another taxing authority. The Minister has the latitude to use discretion in determining whether a reassessment under subsection 80(25) of the CTA is appropriate. The Minister is not required to reassess a taxation year under subsection 80(25) every time another Canadian taxing authority has done so, as long as the Minister has not acted arbitrarily or capriciously in refusing to reassess. Therefore, even if CRA amends any of the years for a change in CCA, the Ministry is not required to make a corresponding change. Subsection 80(25) is not intended to be used by taxpayers to force the Minister to do what he would otherwise not do under subsection 80(11).

We trust these comments are helpful.

Guy Goulet CA, M.Fisc.
A/Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch