Archived - Explanatory Notes to Legislative Proposals to Amend the Income Tax Act Related to Improving the Caseload Management of the Tax Court of Canada

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Partial Disposition of Appeal

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171(2)

Section 171 of the Income Tax Act (Act) relates to the authority of the Tax Court of Canada (the Tax Court) to dispose of appeals made to the Tax Court.

Where an appeal raises a number of issues, new subsection 171(2) of the Act authorizes the Tax Court to hear and dispose of one or more of those issues separately if the parties to the appeal consent, in writing, to the separate hearing and disposition.

New subsection 171(2) applies to issues disposed of by the Tax Court after Royal Assent to the enacting legislation.

Disposal of Remaining Issues

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171(3)

Where the Tax Court has disposed of an issue(s) pursuant to subsection 171(2) of the Act, new subsection 171(3) of the Act allows the appeal procedure at the Tax Court to continue on the remaining issues. Parties to the appeal are not required to recommence procedures, such as by filing of a new notice of objection with the Minister under section 165 of the Act, or a new notice of appeal to the Tax Court, on the remaining issues.

New subsection 171(3) applies to issues disposed of by the Tax Court after Royal Assent to the enacting legislation.

Appeal to Federal Court of Appeal

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171(4)

Where the Tax Court has disposed of an issue(s) pursuant to subsection 171(2) of the Act, new subsection 171(4) of the Act allows the parties to appeal the disposition of the Tax Court to the Federal Court of Appeal, in accordance with the provisions of the Tax Court of Canada Act or the Federal Courts Act, while the remaining issues continue to be dealt with at the Tax Court.

New subsection 171(4) applies to issues disposed of by the Tax Court after Royal Assent to the enacting legislation.

Reference of Common Questions to Tax Court of Canada

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174

Section 174 of the Act provides rules relating to the joining of two or more taxpayers to the determination of a question by the Tax Court. Section 174 is amended to extend the circumstances under which the Minister of National Revenue (the Minister) may apply for such a determination, for applications made to the Tax Court after Royal Assent to the enacting legislation.

Common Questions

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174(1)

Currently, under subsection 174(1) of the Act, the Minister may apply to the Tax Court to determine a question arising out of one and the same transaction or occurrence, or series of transactions or occurrences, if the question is common to assessments or proposed assessments of two or more taxpayers.

Subsection 174(1) is amended to allow the Tax Court, on application by the Minister, to also hear a question arising out of substantially similar transactions or occurrences or series of transactions or occurrences. Under subsection 174(3), as amended, the Tax Court may bind taxpayers named in the application to an appeal of another taxpayer if, for example, their income tax filings raise issues that arise from transactions or occurrences identical or substantially similar to those relevant to the appeal. The questions put before the Tax Court will be restricted to the common issues, allowing other issues, if any, to be dealt with independently.

Applications to Court

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174(2)

Subsection 174(2) of the Act provides that the Minister’s application to the Tax Court for a determination under subsection 174(1) shall set out the question in respect of which the Minister requests a determination, the names of the taxpayers that the Minister seeks to have bound by the determination, and the facts and reasons on which the Minister relies and on which the Minister based or intends to base assessments of tax payable by each of the taxpayers named in the application.

This subsection currently requires that a copy of an application be served by the Minister on each of the taxpayers named in the application, as well as on any other person who, in the opinion of the Tax Court, are likely to be affected by the determination of the question. By virtue of Rule 24 of the Tax Court of Canada Rules (General Procedure), service must be effected personally or by registered mail.

Subsection 174(2) is amended to specify that the Minister can serve notice of the application by way of regular mail or may seek direction from the Tax Court as to alternate means of service.

Determination of Question by the Tax Court

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174(3)

Subsection 174(3) of the Act provides that the Tax Court may proceed to determine a question set out in an application under subsection 174(1) if it is satisfied that

If one or more taxpayers named in the application have appealed the issue to the Tax Court, the Tax Court may make an order joining a party or parties to the appeal and proceed to determine the question.

It is possible that none of the taxpayers named in the application have filed an appeal to the Tax Court. Subsection 174(3) is amended to clarify that an order of the Tax Court naming the taxpayers in respect of whom the question will be determined may be distinct from an order joining a party or parties to an appeal of a taxpayer. The Tax Court may proceed to determine the question in either case.

Determination Final and Conclusive

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174(4)

Subsection 174(4) of the Act provides that, subject to the appeal rights set out in subsection 174(4.1) of the Act, a determination by the Tax Court is final and conclusive for those taxpayers named in an order of the Tax Court under subsection 174(3).

Subsection 174(4) is amended consequential to the amendment of subsection 174(3), to refer to an order under paragraph 174(3)(a).

Appeal

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174(4.1)

Subsection 174(4.1) of the Act allows the Minister, or any taxpayer named in an order of the Tax Court pursuant to subsection 174(3), to appeal a determination of the Tax Court under that subsection to the Federal Court of Appeal, in accordance with the provisions of the Act, the Tax Court of Canada Act or the Federal Courts Act.

Subsection 174(4.1) is amended to provide that a taxpayer named in an order of the Tax Court pursuant to paragraph 174(3)(a) of the Act may appeal the determination if

Binding to Appeal

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174(4.2)

New subsection 174(4.2) of the Act provides that any taxpayer named in an order pursuant to paragraph 174(3)(a) of the Act is bound by the determination of the Tax Court and will also be bound by any subsequent determination of the question by the Federal Court of Appeal or the Supreme Court of Canada.