Tax Dispute Resolution: Monthly Review Vol. 1, No. 2
If a taxpayer is issued a reassessment of tax that is incorrect, recourse may be available if a Notice of Objection to the reassessment is filed. The relatively recent decision in Minister of National Revenue v. ConocoPhillips Canada Resource Corp. serves as a reminder that tax dispute procedures are often stacked against taxpayers.
Strict Timelines to Object and Appeal
Taxpayers generally have only 90 days to make an objection, in writing. Furthermore, that 90 day period runs from the date that the Notice of Reassessment is sent to them by Canada Revenue Agency (“CRA”), not the day that the Reassessment is received by the taxpayer. Ordinarily if taxpayers want to dispute a monetary claim brought against them by most other parties, limitations laws would allow a significantly longer period of time to contest the claim.
If an Objection is not filed within the 90 day period, there is an opportunity to apply to extend the time to file the Objection, so long as this application is filed within one year after the 90 day period for Objecting has expired. Outside of this one year and 90 day period, CRA is generally without jurisdiction to consider an Objection.
On occasion we will be contacted by clients who did not realize that they had even been issued a reassessment of tax, until they receive a call from the CRA Collections Division after the period to apply to extend the time to file an Objection has expired.
The ConocoPhillips Decision
Sometimes, taxpayers’ advisors will look for arguments as to why the strict timelines to Object should not apply in the facts of a particular case. From time to time, Courts will render decisions setting out favourable interpretations of the provisions in the Act that impose the strict timelines.
For example, some Tax Court decisions have held that the one year period in which a taxpayer is able to apply to extend the time to Object does not include periods of time where they reasonably believed that a reassessment had not been issued. These decisions were challenged and have not been followed as precedent by other Judges of the Court.
The ConocoPhillips case is another example. The Federal Court held that CRA had narrowly interpreted a fairness provision of the Income Tax Act (the “Act”) that ConocoPhillips had argued could allow CRA to waive the normal timeline for objecting to a particular assessment. However, the Federal Court of Appeal disagreed.
The argument in the case was that subsection 220(2.1) of the Act provided discretion for CRA to waive the requirement in subsection 165(1) to file an Objection within 90 days of the date on which the reassessment was sent to ConocoPhillips, because the reassessment was not received until it was too late to apply to extend the time to Object. The evidence was that the original reassessment had not been initially received and ConocoPhillips only received a copy of it after they were told that a reassessment had been issued and they asked for a copy.
However, the Federal Court of Appeal held that owing to principles of statutory interpretation, the general provision in subsection 220(2.1) of the Act could not override the specific provision in subsection 166.1 of the Act. Section 166.1 sets out the one-year timeline within which taxpayers must file an application to extend time to Object.
Why Is This Case Important
As noted, this case serves as a reminder that the rules and procedures governing tax disputes can often apply unfairly to taxpayers. It also serves as a more specific reminder of the short timelines in which to contest tax reassessments.
In some cases, where taxpayers can prove that they did not receive a reassessment Courts will rule that the reassessment was not sent to them on the date indicated on the Notice of Reassessment document. Our office has had some success in advancing such arguments in particular circumstances.
However, even in trying to prove that the reassessment was not sent there are rules of evidence set out in the Act that favour CRA. For example, if CRA can prove that the reassessment was sent by first class mail or its equivalent, than it is deemed to have been received by the person to whom it was sent.
It’s always best that taxpayers not have to try and argue a way around the rules, where possible. The best course of action is to be aware of the short timelines in which to file a Notice of Objection and always to act quickly as possible to ensure that it is acted upon as soon as possible. Furthermore, particular content requirements apply for large corporation filing Objections. Failure to meet these requirements can limit the issues that such corporations would be allowed to raise on any subsequent appeal.
All of this suggests a need to ensure that Objections are responded to quickly and where necessary legal counsel are consulted to ensure that all filing requirements are met.
Invitation for Discussion:
If you would like to discuss this article in greater detail, or any other business law matter, please do not hesitate to contact one of the lawyers in the Tax Dispute Resolution group at Shea Nerland LLP.
Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.
 2017 FCA 243