The proposed legislation will suspend time limits established under an Act of Parliament relating to the commencement of legal proceedings. Additionally, the Time Limits Act will authorize the minister responsible for an Act or Parliament to suspend or extend time limits under an Act of Parliament or regulation in order to prevent any exceptional circumstances brought about by COVID-19 which made it difficult or impossible to meet those time limits. Bill C-17, An Act respecting additional COVID-19 measures, which includes the Time Limits Act, received first reading on June 10, 2020. The proposed legislation would extend the timeline for filing income tax and GST appeals to the Tax Court of Canada and would allow the retroactive extension of limitation periods related to income tax and GST reassessments.
Under section 7 of the proposed legislation, the Minister of National Revenue has the power to make an order to suspend or extend time limits established under the Income Tax Act and the Excise Tax Act. The time limit may be suspended or extended for a total maximum duration of six months, provided that extension or suspension ends prior to December 31, 2020. The order made may have retroactive effect to March 13, 2020. It is expected that the Minister of National Revenue will make an order relating to the limitation periods to reassess income tax and GST once the legislation has passed.
Normally, the Canada Revenue Agency (the "CRA") can reassess a taxpayer anytime within three years (or in some cases four or six years) of sending a notice of an original assessment for income tax or four years after the date on which a GST/HST return was filed. After this time, the "limitation period" is over (sometimes referred to as a tax year being "statute-barred") and the CRA cannot reassess unless they can prove that the taxpayer was negligent or fraudulent in preparing their return, or if the taxpayer has signed a waiver or failed to file a return.
Once an order is made by the Minister, these limitation periods may be extended for a six-month period, with effect potentially beginning retroactively on March 13, 2020 and ending September 13, 2020. Limitation periods that would have normally expired between these dates will not become statute-barred until after September 13, 2020.
While these potential changes will benefit the CRA, taxpayers would benefit from section 6 of the proposed legislation which provided that time limits for commencing proceedings before a court are suspended between March 13, 2020 and September 13, 2020. Accordingly, this will affect the deadlines to file notices of appeal or other originating motions to various courts, including the Tax Court of Canada, the Federal Court of Canada, the Federal Court of Appeal, and the Supreme Court of Canada. This would grant taxpayers more time to appeal from certain types of decisions made by CRA.
While the time limit for taxpayers to file notices of objection from assessments or reassessments is not affected by the Time Limits Act, the CRA extended the time limit for notices of objection, so any objections that were due between March 18, 2020 and June 30, 2020 already had their deadline extended to June 30, 2020.
There has been some concern that the Time Limits Act provides for longer-than-necessary extensions to the government, given the resumption of the CRA's audit activity, while not granting similar extensions to taxpayers. Some of these concerns were addressed in a submission to the Department of Finance Canada by the Joint Committee on Taxation of the Canadian Bar Association and Chartered Professional Accountants of Canada. The full submission is available here.
More information on the proposed legislation can be found here.
This post was prepared with the assistance of MLT Aikins LLP summer student, Danielle Hopkins.
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