Canada: s. 220(2.1) & Notice Of Objection - ConocoPhillips Canada Resources Corp v MNR Case Comment

Last Updated: March 16 2016
Article by David Rotfleisch

ConocoPhillips Canada Resources Corp v MNR – s. 220(2.1) & Notice of Objection – Toronto Tax Lawyer Case Comment

Summary - ConocoPhillips Canada Resources Corp v MNR

In Conocophillips Canada Resources Corp. v MNR 2016 FC 98 the Federal Court of Canada found that the CRA does have the jurisdiction to waive the service requirements for a notice of objection under subsection 220(2.1) of the Canadian Income Tax Act ("Tax Act"). However, whether the waiver should be granted is to be determined by the CRA. If the CRA unreasonably refuses to exercise their discretion, a taxpayer can challenge the refusal in the Federal Court. For more information on the exercising of discretion by the CRA, please visit

We have not yet heard the last word on this case since the CRA filed a notice of appeal to the Federal Court of Appeal against this decision on February 26, 2016.

Timely Notice of Objection and Extension of Time for Service of Notice of Objection

Under subsection 165(1) of the Tax Act, a taxpayer who objects to a CRA Income Tax Assessment may serve a notice of objection on the CRA. Paragraph 165(1)(a) states that the objection must be served within 90 days after the notice of assessment is sent to the Canadian taxpayer. If an objection is not sent during this 90 day period, subsection 166.1(1) of the Tax Act allows the taxpayer to apply to the CRA to extend the time to serve the notice of objection. However, the application will not be granted if the taxpayer does not comply with subsection 166.1(7) of the Tax Act. Subsection 166.1(7) states that an application for an extension of time must be made within one year after the expiration of the 90 day objection period. If the taxpayer attempts to serve the notice of objection outside of this time period it will not be accepted by the CRA. In other words, there is normally a 15 month window for a Toronto tax attorney to object to a CRA tax assessment.

Section 220 of the Tax Act

The "Administration and Enforcement" part of the Tax Act begins in section 220. Under the heading "Minister's Duty" is subsection 220(2.1) which covers "waiver of filing of documents." In this subsection, if there is a requirement under the Tax Act to file a prescribed form, document, receipt, or prescribed information, the CRA has the power to waive the requirement. However, even if a waiver of a requirement is granted, the CRA can still request the documents or information at a later date.

Facts ConocoPhillips Canada Resources Corp v The Minister of National Revenue

ConocoPhillips was part of a collective group of litigants that challenged the correctness of the Syncrude Remission Order for the 2000 tax year. All members had participated in the Syncrude Oil Sands project. The CRA requested that ConocoPhillips provide a waiver for adjustments that would occur if the litigation was decided in favour of the collective litigants. ConocoPhillips refused to provide this document. As a result, the CRA reassessed ConocoPhillips' taxable income for the 2000 year to include potential, additional remission amounts. ConocoPhillips served a timely notice of objection to this initial reassessment in 2006.

A second (unrelated) reassessment was issued on November 7, 2008. However, ConocoPhillips was not aware that this notice had been issued until April 14, 2010, which was after the period to object and apply for an extension had expired. ConocoPhillips did not receive a copy of this reassessment until May 2010. ConocoPhillips attempted to serve a second notice of objection. The objection was rejected by the CRA on the grounds that it had not been served in a timely manner and that the period to request an extension to serve a notice of objection had expired. ConocoPhillips alleged that it did not file a timely notice of objection because it received a copy of the reassessment after the time limit and extension periods for a notice of objection had passed.

ConocoPhillips relied on subsection 220(2.1) of the Tax Act to request that the CRA waive the obligation to serve a notice of objection. The CRA decided that the scope of authority under subsection 220(2.1) did not extend to objections to assessments and denied the request. ConocoPhillips made a successful application to the Federal Court to review the CRA's refusal to waive the obligation to serve a notice of objection.

Toronto Tax Lawyer Legal Analysis ConocoPhillips Canada Resources Corp v The Minister of National Revenue

Our experienced Toronto tax litigation attorneys have analyzed this case. At issue in this case is whether the CRA erred in determining that it did not have the authority under subsection 220(2.1) of the Tax Act to waive the obligation to serve a notice of objection. However, before the court could decide on the issue, the court had to determine if it had the ability, or jurisdiction, to make a decision on the issue.

There are different types of courts in the Canadian legal system including courts of inherent jurisdiction and statutory courts. Statutory courts have their decision making powers granted to them by way of a statute. Courts of inherent jurisdiction can hear any matter unless a statue or rule grants jurisdiction to another court. If the matter is outside of a court's jurisdiction, it cannot make a legally binding decision on the matter.

In this case the court decided that the matter was properly pursued in the Federal Court for the following reasons. First, the issue was not under the jurisdiction of the Tax Court of Canada ("Tax Court"). The Tax Court of Canada Act sets out the areas of law that only the Tax Court can decide on. Therefore, the issue raised did not need to be heard in the Tax Court. Second, the ability to try the issue was granted to the Federal Court through statute. Judicial review of the matter was available under sections 18 and 18.1 of the Federal Courts Act. Lastly, the ground of review, substantive unacceptability, is known or could be recognized in administrative law. To conclude, the Federal Court said that it had the jurisdiction to decide on this case.

At issue is the CRA's interpretation of a provision within a statute that grants it the authority to apply and administer the Tax Act. The Federal Court held that this is akin to a tribunal interpreting its home statute. Therefore, the precedent in the Supreme Court case of ATA v Alberta 2011 SCC 61 was followed and a deferential reasonableness standard of review was adopted. Based on this standard of review, the CRA's interpretation of the provision would only be accepted if the court found that the interpretation was "reasonable."

The CRA advanced an unsuccessful argument that subsection 220(2.1) would only apply when a provision or regulation of the Income Tax Act "requires a person to file a prescribed form, receipt, or other document." The terms "require" and "file" in subsection 220(2.1) were not consistent with the terms "may" and "serve" used in subsection 165(1). Due to the inconsistencies in language, the CRA argued that the scope of subsection 220(2.1) did not extend to notices of objection under subsection 165(1).

In rejecting the CRA's position , the Federal Court relied on the Tax Court cases of Petratos 2013 TCC 240 and Melanson 2011 TCC 569 to demonstrate that subsection 220(2.1) does apply to notices of objection despite differences in wording between the two provisions. In addition, the Tax Court case of Poulin 2013 TCC 104 held that the CRA's authority under subsection 220(2.1) was a broader, discretionary power which enabled the CRA, in effect, to waive statutory requirements.

The Federal Court held that the CRA's interpretation of subsection 220(2.1) was not reasonable. The provision should not be interpreted strictly. Therefore, the CRA's discretionary power under this subsection extends to objections to assessments. In other words, taxpayers may be able to object to matters beyond the typical 15 month objection window if the CRA chooses to use their power under subsection 220(2.1) to waive the obligation to serve a notice of objection.

Toronto Tax Lawyer Help for Missed Notice of Objection Time Period

Here are two potential scenarios where this waiving of the Objection requirement may occur. First, the Tax Act states that CRA must reassess a taxpayer once served with a notice of objection. However, the CRA possesses the power to reassess a taxpayer even if not served with a notice of objection. Therefore a tax reassessment could still occur even if a notice of objection is not received by the CRA at all. Alternatively the CRA could waive the obligation to serve the notice of objection and then later request the document. Upon receiving the notice of objection, the CRA must then reassess the taxpayer in accordance with the normal Objection rules. If you have missed the 15 month time period to file a Notice of Objection contact one of our top Toronto tax attorneys for tax help.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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