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CRA Clarifies When it Will Accept Late or Amended Elections - by Guy Lancaster 

Canadian Tax Adviser

 

May 15, 2012

 

Guy Lancaster
Toronto, Canadian Corporate Tax

 

In a recent internal technical interpretation, the CRA affirmed that an Ontario-Federal corporate tax harmonization election that is filed with a late tax return will be considered valid, but it would not accept a late or amended election. This TI is interesting because, even though it deals with a very specific Ontario election, the CRA provides general guidance on when an election can be filed late or amended.

Legislative background
The Ontario-Federal Corporate Tax Harmonization regime applies to tax years ending after 2008. Under these rules, a corporation can reduce or eliminate a transitional tax debit related to its federal scientific research and experimental development (SR&ED) pool balance if, among other things, it makes an election to do so, under Ontario's Taxation Act, 2007 (OTA).

 

Amended or late-filed elections
The TI notes that a taxpayer may ask the CRA to accept an amended or late-filed election where:

 

  • The federal SR&ED pool balance changes as a result of an audit, causing a 2009 tax return originally filed with a transitional credit to instead have a transitional tax debit. The taxpayer would not have known they had a debit balance until after the audit.
  • Taxpayers who have incomplete information when they filed their 2009 corporate income tax return and Schedule 506, "Ontario Transitional Tax Debits and Credits", and thus do not file their SR&ED claim until one year after the corporate income tax return has been filed.
  • Taxpayers who were not aware of the election when they filed their 2009 corporate income tax return.

 

Late election now allowed
The CRA notes that Ontario does not allow a corporation to amend or file the election late since the election under subsection 48(4) of the OTA is specific to the OTA only. It is not a federal Income Tax Act election.

 

The CRA notes that, in the absence of an express provision to the contrary, the courts have found that a taxpayer is not entitled to make a late election. Further, the CRA notes that the courts have made a distinction between a designation and an election.

 

The CRA's administrative guidelines for accepting late, amended or revoked elections are available in Information Circular IC 07-01, "Taxpayer Relief Provisions". IC 07-01 states that the elections that a taxpayer can make a request to file late or amended under the Taxpayer Relief Provisions are found in Regulation 600 of the Income Tax Act. The CRA notes that it is not required to extend the taxpayer relief provisions to elections other than those listed in Regulation 600.

 

Election valid if filed with late-file tax return
Notwithstanding the above, the CRA notes that the courts have found that where an election does not specify a due date (only that the election be filed with the corporation's tax return), the election is still valid where the late election is filed with the late tax return.

 

For more information, contact your KPMG adviser.

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