Door closes on out-of-time objections under subsection 220(2.1)

The Federal Court of Appeal recently released its decision in Canada (National Revenue) v. ConocoPhillips Canada Resources Corp., 2017 FCA 243. The background for the case is as follows: ConocoPhillips had been issued a reassessment of its 2000 taxation year and found itself out of time to object. Not only that, it was out of time to apply for an extension of time to object under section 166.1 of the Income Tax Act (Canada) (the “Act”). In an attempt to engage the objection process despite this reality, ConocoPhillips applied to the Minister for a waiver of the requirement that it file a notice of objection in order for the Minister to reconsider the reassessment under subsection 165(3). It relied upon subsection 220(2.1) of the Act.

The Minister denied the application on the basis that subsection 220(2.1) did not apply to notices of objection. So ConocoPhillips sought judicial review of that decision at the Federal Court: 2016 FC 98. The Federal Court allowed the application for judicial review, stating that the Minister’s interpretation was unreasonably narrow. That decision was appealed by the Minister to the Federal Court of Appeal. The appeal was allowed.

Subsection 220(2.1) of the Act reads as follows:

220(2.1)  Where any provision of this Act or a regulation requires a person to file a prescribed form, receipt or other document, or to provide prescribed information, the Minister may waive the requirement, but the person shall provide the document or information at the Minister’s request.

The court determined that the outcome of the case fundamentally depended on the statutory interpretation of subsection 220(2.1) of the Act. And, while the Federal Court had identified the correct test, the Federal Court of Appeal held that it had erred in failing to properly consider the scheme of the Act. In particular, subsection 220(2.1) had to be considered against the purpose of subsection 166.1(7) of the Act and the objections regime.

In analyzing the objections regime, the court identified that there were clear, specific, strict time limits intended by Parliament. The court provided, at para. 46, that “The clear statutory intent of the scheme is to provide conditions on the ability of taxpayers to invoke the objection process, including strict time limits for serving objections and seeking extensions of time.” With this in mind, the court applied the “implied exception” rule of statutory interpretation. In short, the court chose an interpretation that gave effect to more specific provisions (the objections regime) rather than a general provision (subsection 220(2.1)). The decision is summed up well at para. 52:

[52]      With respect, this argument must be rejected. Parliament did not intend that subsection 220(2.1) act as a safety valve for objections. A taxpayer is intended to be either in or out of the objections regime. ConocoPhillips suggests that it is outside the scope of objections and appeals. However, it does not want to be outside the regime—it seeks to be in it. The specific limitation periods provided for in the objections regime must be applied in this case.

Thus, the Minister does not have discretion to admit a taxpayer into the objections regime under subsection 220(2.1) of the Act. Taxpayers absolutely must comply with the strict time limits set out in the Act. There is no safety valve here.