TEI liaison meeting with Canada Revenue Agency on income tax questions.

• Position: Tax Executives Institute

December 3, 2013

On December 3-4, 2013, representatives from Tax Executives Institute, led by 2013-2014 Vice President for Canadian Affairs Shiraz J. Nazerali, met with officials from Canada Revenue Agency and the Canadian Department of Finance to discuss tax policy and administrative matters. The agendas for the meetings on income tax matters were prepared by the Institute's Canadian Income Tax Committee, whose 2013-2014 chair is Bonnie Dawe of Finning International Inc. Contributing substantially to the development of the agendas were Grant L. Lee of HSBC Bank Canada, Paul T. Magrath of AstraZeneca Canada Inc., Doug Powrie of Teck Resources Ltd., and Anthony Scozzafava of Capital Power L.P. Jeffery P. Rasmussen of the Institute's legal staff coordinated the preparation of the comments. The CRA agenda follows. The responses from CRA will be published on TEI's website (www.tei.org) in early 2014.

Tax Executives Institute welcomes the opportunity to present the following comments and questions on income tax issues, which will be discussed with representatives of the Canada Revenue Agency (hereinafter "CRA" or "the Agency") during the December 3, 2013, liaison meeting. If you have any questions about the agenda in advance of the meeting, please do not hesitate to call Shiraz Nazerali, TEI's Vice President for Canadian Affairs, at 403.213.8125 or, Bonnie Dawe, Chair of the Institute's Canadian Income Tax Committee, at 604.331.4864.

1. Vision 2020

   We invite CRA to provide an update on its Vision 2020 initiative.

2. Risk-Based Audits

   In response to question 12 in the 2012 liaison meeting agenda, CRA advised that it was too early to (1) draw conclusions with respect to the state of tax-risk governance and (2) share its findings and experiences on the risk-assessment process. Many large taxpayers have now completed the risk-assessment process and also experienced a post-risk-assessment audit. Taxpayer's anecdotal descriptions of their experience with both the risk-assessment process and the first post-risk-assessment audit have varied widely. Would CRA provide an update on its observations and summarize trends or conclusions for the initiative? Can CRA provide a summary of feedback from taxpayers and field auditors?

3. Forms, Publications, Electronic Services, e-Filing, & Miscellaneous, including Carryover Items from Prior Years

   1. Form T5018. In response to question 8 in the 2012 liaison meeting agenda, CRA said that it would consider permitting a joint venture to report payments made to contractors for construction services on one Form T5018 (Statement of Contract Payments) slip rather than requiring each coventurer to issue separate T5018s for their proportionate share of payments to the contractors. We invite CRA to advise whether these changes will be implemented and the expected timing for implementation.

   2. Form T5013. In response to question 1(a) in the 2012 liaison meeting agenda, CRA said it is enhancing the electronic return filing system to permit Form T5013 (Statement of Partnership Income) to be filed electronically through the My Business Account (MyBA) portal. The target date for the enhancement to the electronic filing system was January 2014. We invite an update on the expected timing for the added functionality. In addition, please provide an update on the timing for adding the ability to review previously filed Form T5013s online.

      Finally, CRA acknowledged in its response to question 13 in the 2012 liaison meeting agenda that Schedule 50 (Partner's Ownership and Account Activity) of Form T5013 should be modified. Subsequent to the meeting another potential issue about the current format was discovered. Specifically, columns 10 to 13 of Schedule 50 are added to calculate each partner's At-Risk Amount (ARA) at the end of the fiscal period in column 14 [50-440]. Presumably, columns 10 to 12 are equivalent to the additions to ARA adjustments described in paragraphs 96(2.2)(a) to (b.1) of the Income Tax Act (ITA). Column 12 [50-420] is labeled "Partner's share of the fiscal period's resource expenses" and presumably represents the addition to ARA described at paragraph 96(2.2)(b.1), but that paragraph requires the addition of the "amount referred to in subparagraph 53(1)(e)(viii)," which are the proceeds of disposition in respect of resource-related properties rather than a "Partner's share of the fiscal period's resource expenses." Moreover, the "Partner's share of the fiscal period's resource expenses" is already taken into account in the calculation of the adjusted cost base (ACB) (i.e., as a reduction of the ACB of a partnership interest at subparagraph 53(2)(c)(ii)). Accordingly, there would be no need to deduct that amount from ARA a second time. Finally, column 12 on the Form is an addition rather than a subtraction, which is contrary to the ITA. Thus, the description of column 12 [50-420] is misleading or incorrect. Would CRA consider modifying Form T5013 to label Column 12 [50-420] as the "amount referred to in subparagraph 53(1)(e)(viii)" rather than "Partner's share of the fiscal period's resource expenses"? We invite CRA's response.

   3. Electronic Filing of Foreign Reporting Forms. In response to question l(b) in the 2012 liaison meeting agenda, CRA stated that the...