Canadian taxation: corporate partner income inclusions.

September 16, 2011

On September 16, 2011, Tax Executives Institute submitted the following recommendations to the Canadian Department of Finance for revision of proposed legislation accelerating corporate partner income inclusions. TEI's comments, which took the form of a letter from TEI President David M. Penney to Brian Ernewein, General Director and Senior Assistant Deputy Minister in the Canadian Department of Finance's Tax Policy Branch, were prepared under the aegis of the Institute's Canadian Income Tax Committee, whose chair is Carmine A. Arcari of Royal Bank of Canada. Contributing substantially to the development of TEI's comments were Lynn Moen of Walton International Group Inc. and Marvin E. Lamb of Imperial Oil Limited. Jeffery P. Rasmussen, TEI Senior Tax Counsel, is staff liaison to the Canadian Income Tax Committee and coordinated the preparation of the comments.

On June 6, 2011, the government released a Budget message with legislative proposals to amend various provisions of the Income Tax Act, Canada (the Act) to accelerate income inclusions by corporate partners. Tax Executives Institute submitted comments on the proposals on June 21, a copy of which is attached to this letter. The Department of Finance released draft legislation to implement the proposals on August 16, 2011, commenced a consultation period, and issued Explanatory Notes on September I to clarify and explain the legislation. On behalf of Tax Executives Institute, I am writing to reiterate the Institute's concerns about some aspects of the proposals, and to make recommendations to clarify the August 16 draft legislation.

Background on Tax Executives Institute

Tax Executives Institute is the preeminent international association of business tax executives. The Institute's 7,000 professionals manage the tax affairs of 3,000 of the leading companies in North America, Europe, and Asia. Canadians constitute 10 percent of TEI's membership, with our Canadian members belonging to chapters in Calgary, Montreal, Toronto, and Vancouver, which together make up one of our nine geographic regions, and must contend daily with the planning and compliance aspects of Canada's business tax laws. Many of our non-Canadian members (including those in Europe and Asia) work for companies with substantial activities in Canada. The comments set forth in this letter reflect the views of the Institute as a whole, but more particularly those of our Canadian constituency.

TEI concerns itself with important issues of tax policy and administration and is dedicated to working with government agencies to reduce the costs and burdens of tax compliance and administration to our common benefit. In furtherance of this goal, TEI supports efforts to improve the tax laws and their administration at all levels of government. We believe that the diversity and professional training of our members enable us to bring a balanced and practical perspective to the issues raised by the August 16, 2011, draft legislation affecting corporate partner income inclusions.

Summary of June 21 Institute Recommendations

The following comments and recommendations from the Institute's letter of June 21 in respect of the budget proposals remain apropos to the August 16 draft legislation and we urge their consideration during this consultation. [Editor's Note: TEI's earlier comments appear in the...