How to lose your appeal rights: a cautionary tale for “large corporations” objecting to reassessments

The Income Tax Act (Canada) (the “ITA”)) contains strict requirements for notices of objection filed by a “large corporation”. A recent Tax Court of Canada (“TCC”) decision – 641624 Alberta Ltd v R, 2026 TCC 67 – illustrates that failing to comply with those requirements can result in a swift and total loss of appeal rights. The case serves as a stark reminder that careful adherence to the ITA’s provisions is vital.

Notice of objection requirements for large corporations

A taxpayer that is not a “large corporation” (as defined in subsection 225.8(1) of the ITA) can generally file a simple notice of objection to dispute any assessment or reassessment with which they do not agree. Those taxpayers may also subsequently appeal to the TCC in respect of any issue and seek any relief, even if not initially raised in their notice of objection.

Large corporations, however, must include detailed information in their notices of objection. Pursuant to subsection 165(1.11) of the ITA, those details are:

a. a reasonable description of each issue;

b. in respect of each issue, the relief sought, expressed as a change in balance (as defined in subsection 152(4.4)) or a balance of undeducted outlays, expenses or other amounts; and

c. the facts and reasons relied upon in respect of each issue.

Subsection 169(2.1) of the ITA limits large corporations’ rights of appeal to the TCC to only those issues in respect of which the taxpayer complied with subsection 165(1.11). Large corporations are also limited to claiming only the relief specified in their notice of objection, if any, in respect of those issues. Per the Federal Court of Appeal, the purpose of those rules is to encourage large corporations to identify disputed issues early and prevent them from reconstructing their tax returns after the objection or appeal process has started, based either on developing interpretations or court decisions (Potash Corp of Saskatchewan v R, 2003 FCA 471 at para 4).

Large corporations have a limited opportunity to remedy a defective Notice of Objection pursuant to subsection 165(1.12) of the ITA: if the Minister of National Revenue (the “Minister”) (usually a Canada Revenue (“CRA”) appeals officer on the Minister’s behalf) requests in writing, the corporation may within 60 days supplement the facts or reasons relied upon and relief sought. Corporations may not, however, unilaterally use this provision to add issues that were not initially raised in the Objection.

Background to 641624 Alberta and TCC Decision

In 641624 Alberta, the Minister reassessed the Appellant in respect of tax years during which it was a “large corporation”. In response, the Appellant filed simple Notices of Objection (the “Objections”) which only contained the following:

The taxpayer objects to the Minister’s reassessment. The Minister’s reassessment errs in fact and law. The taxpayer’s return was correct as filed.

The Appellant subsequently appealed directly to the TCC pursuant to paragraph 169(1)(b) of the ITA. The Respondent then brought a motion to quash the appeal on the basis that the Objections did not comply with the large corporation rules in subsection 165(1.11) of the ITA and, therefore, the Appellant had no right of appeal under subsection 169(2.1) of the ITA.

TCC decision

The Appellant argued that the TCC should consider the entire context of the Objections, including the reassessments themselves and the CRA’s audit letters, to determine whether they complied with subsection 165(1.11) of the ITA. The Appellant also argued it had not offended the spirit of the large corporation rules because it had not attempted to reconstruct its return or raise issues in response to emerging interpretations.

The TCC agreed that it could look at context beyond the Objections. However, the Court also concluded that the Objections did not contain sufficient content beyond which to look; they did not describe any issues that could be the subject of a robust, purposive analysis to determine whether subsection 165(1.11) of that Act was complied with.

The Appellant also argued that its Notice of Appeal to the TCC cured non-compliance with subsection 165(1.11) of the ITA. In fact, it appears doing so may have had the opposite effect in that it solidified such non-compliance.

The CRA appeals officer assigned to review the Objections requested the taxpayer provide information to supplement the Objections. The Appellant ignored that request. Instead, the Appellant sent the Appeals Officer a filed copy of its TCC Notice of Appeal, which contained a description of the issues, facts and reasons, and relief sought. The Appellant argued that sending its Notice of Appeal to the Appeals Officer “perfected” its Objections because it had effectively followed the process contemplated by subsection 165(1.12) of the ITA.

The TCC rejected that argument, describing it as circular. Instead, the TCC concluded that a Notice of Appeal subsequently filed with the TCC could not be used to argue compliance with subsection 165(1.11), noting that the taxpayer had ignored the Appeals Officer’s request for further information.

Even if the Appellant had responded to the Appeals Officer, it could only have provided facts and reasons and the relief sought; it could not have utilized subsection 165(1.12) of the ITA to overcome the TCC’s conclusion that the Objections did not describe any issues.

Ultimately, the TCC concluded that since the Objections did not describe any issues in dispute, subsection 169(2.1) of the ITA prevented the Appellant from seeking any relief. The TCC therefore granted the Respondent’s motion, quashed the appeals, and awarded costs to the Respondent.

Takeaways

This case illustrates the importance of complying with the “large corporation” rules when filing notices of objection. To preserve its ability to object and appeal to the TCC, a large corporation and its advisors must properly identify all issues, provide facts and reasons relied upon, and clearly set out the precise relief sought. If a large corporation discovers its Objections are deficient, it may be best served by first attempting to cure those deficiencies under subsection 165(1.12) by engaging with the Minister, as such deficiencies cannot be cured at the TCC stage.

Although this case considers the large corporation rules in the ITA, the Excise Tax Act (the “ETA”) contains similar restrictions in subsections 301(1.2), 301(1.3) and 306.1(1) for “specified persons”, as defined in subsection 301(1). The reasoning and conclusions in this case would thus likely also apply to specified persons objecting and appealing under the ETA.