This decision could dramatically change a taxpayer’s options where it misses the time limit for filing a notice of objection. The general rule is that where a taxpayer misses the deadline for filing the notice of objection (90 days after assessment) plus the additional one year time limit within which to apply for an extension, the taxpayer has no relief. (See ITA s. 165(1)(b) (90-day limit), 166.1(7)(a) (CRA late extension) and 166.2(5)(a) (TCC extension). See also, ETA s. 301(1.1), 303(7)(a), 304(5)(a).)
The Tax Court and the Federal Court of Appeal have been very strict about these rules, concluding that once the time limits pass, neither CRA nor the Court has any jurisdiction to allow an extension. See e.g., O’Byrne v. Canada, 2015 FCA 239.
ConocoPhillips missed those deadlines. Nonetheless, ConocoPhillips also applied to the CRA for relief, relying on ITA s. 220(2.1) which allows the CRA to waive the requirement for filing any prescribed form. CRA objected that this rule is not intended to override the one year and 90-day time limits for objecting. The Federal Court disagreed, saying that CRA does have that discretion and must consider ConocoPhillips request.
There are many cases one sees in the Tax Court where a taxpayer or GST registrant has missed deadlines for objecting and the Court dismisses the application for want of jurisdiction. Now, this alternative remedy opens up. Where, as here, CRA says that it mailed the assessment but the taxpayer says that it never got the notice and so did not know that it had an assessment to object to, a taxpayer seems to have a basis for saying that it would be unfair to deny it a right to object. It would be up to CRA to assess whether the taxpayer can show that he truly did not get a copy of the assessment through no fault of his own.
Although one can appreciate the unfairness in cases where a taxpayer never got the notice of assessment, it is still hard to see that this interpretation of ministerial discretion can make sense in the context of the Act. ITA s. 165(6) limits CRA discretion to a waiver of the requirement for an objection to be served on the chief of appeals. More to the point, the rules in sections 165(1), 166.1(7)(a) and 166.2(5)(a) are clear about limiting ministerial discretion to extend time. So it does not make great sense of these detailed restrictions to allow the Minister to go around them using s. 220(2.1).
The CRA also argued that the fact that an objection is discretionary on the part of the taxpayer makes it a different process from the one for the kinds of filing requirements for which s. 220(2.1) is designed. (See e.g., para. 48.) Also, said CRA, the objection rules in section 165 require the filing of an objection, so a waiver would be inadequate. To address that, the court said CRA would have to waive the requirement to file an objection and then require an objection. (See paras. 57-60.) The contradiction in that process (or at least the requirement for two exercises of discretion, each with its own right of judicial review) is another reason for questioning the Federal Court’s decision here.
If CRA and taxpayers are to apply this “new” waiver power, they will need a way to decide whether the taxpayer would have filed an objection within the proper time limit if it knew of the reassessment. ConocoPhillips’ facts were as good as one could hope to have for a case like this. It had filed a notice of objection to an earlier, related reassessment. CRA again reassessed that tax year and it was that later reassessment (which invalidated the earlier one to which ConocoPhillips had objected) that gave rise to this case. As ConocoPhillips said, “the Minister has not disputed that the original notice of objection was properly served, such that the Minister was well aware of ConocoPhillips’ intent to object and the grounds upon which it intended to do so.” (Para. 63.)
Unless this decision is overturned on appeal, one can expect to see many more such judicial review applications. For some taxpayers, the first time they learned of a CRA reassessment is a collection letter or garnishment of an account or wages. Although this waiver alternative would not stop collection till waiver was granted, this new process could create a lot of uncertainty for CRA in the collection of tax debts and final resolution of assessments.
(See also the conflicting Prothonotary decision Feng v. Canada (National Revenue), 2016 FC 66 (Lafrenière) concluding that there could be no appeal from a refusal to grant an extension where the registrant did not object to a GST assessment, thinking that her income tax objection and TCC appeal were enough:
([10] In enacting sections 301 to 306, Parliament has provided a complete statutory framework for the exercise by a person of the right to dispute the validity of a tax assessment, all within clear and stringent timeframes. The essential character of the present application for judicial review is a collateral attack of the validity of the Minister’s assessment which is not only time-barred under the ETA, but also barred by section 18.5 of the FCA.
[11] Section 18.5 provides that, to the extent that a matter may be appealed under a statute, judicial review is not available. Pursuant to section 12 of theTax Court of Canada Act, the Tax Court has exclusive original jurisdiction to hear and determines appeals relating to assessments of tax under the ETA, as well as applications for extensions of time under section 304 of the ETA.
[12] The fact that the Tax Court may not be able to grant any relief to the Applicant under subsection 304(1) because the statutorily prescribed time limits for filing a notice of objection or to seek an extension of time have expired does not allow the Applicant to circumvent the comprehensive system of tax assessments and appeals established by the Parliament. It is simply not open to the Applicant to indirectly challenge the Minister’s decision in this Court by mischaracterizing the decision as a denial under subsection 281(1) of the ETA.)
Conocophillips Canada Resources Corp. c. Canada (National Revenue), 2016 FC 98 (Boswell)