On November 17th, the Department of Finance released a Notice of Ways and Means Motion (“NWMM”) to facilitate the introduction of certain proposals in the November 4th budget.
The 609 page document builds on the draft legislation already included in the tabled Budget from November 4th.
The primary focus appears to be the tightening of previously drafted or enacted legislation to provide clarity. Most new initiatives announced as part of the budget were introduced in the NWMM included with the budget documents.
Private company changes
Trust reporting rules
We continue to see pushes to finalize the legislation for the new trust reporting rules that have lingered in varying degrees of completion for several years. While most of the updates are to refine existing legislation with small technical amendments, some notable updates include:
- Exceptions to the reporting rules will still apply to GRE’s but do not require that the GRE designation be properly made; only that the trust would have qualified as a GRE.
- Qualifying assets under 150(1.2) will include money deposited as a Canadian financial institution.
No update provided at this time regarding whether or not a waiver on filing will be issued for the 2025 year.
164(6) Carry back
In 2024, technical amendments were proposed to allow for the carryback period under 164(6) to be extended from 1 – 3 years. This was an exciting and very hoped for change due to the added flexibility and planning time that would be afforded to graduated rate estates. The released drafts have resurfaced this proposal and seek to implement the extension. An outline of the previous proposals that are now being formalized are here.
International changes
Foreign surplus determinations
Foreign Surplus definitions have several proposed technical amendments, and the drafted legislation also provides for transitional rules regarding Foreign Accrual Business Income by outlining relevant elections are now deemed to have been made for certain time periods.
Other legislative technical updates
A number of previously enacted measures are proposed to have small technical adjustments made in order to tighten application. These include;
- Some further refinements are introduced regarding the cost of clean electricity property and how they are handled for the purposes of different sections such as inducements,
- The intergenerational rules are proposed to see some wording changes that seek to provide clarity to certain already enacted provisions such as determining active involvement and timing of transactions,
- The definition of the capital dividend account as it relates to some amounts received from a foreign entity are proposed to some technical wording changes for clarity. This includes adding that for the purposes of subsection 55(5)(c) that is assumed that no amount deductible under S.113 and included in the corporation’s capital dividend account is not included in the corporation’s income otherwise determined.
Other previously announced measures
Previously announced measures that now have drafted legislation:
- Donation claim period extension for 2024 only,
- Increase of the lifetime capital gains exemption to $1,250,000 as previously announced. The drafts also include transitional rules for transactions occurring after June 25, 2024, as well as the reintroduction of indexation going forward,
- SR&ED Updates as announced in the 2025 Budget (details here),
- Alternative minimum tax as originally proposed however with without updates as originally proposed regarding considerations for flow-through shares.
Next steps
Contact your Baker Tilly advisor to learn more about how we can help you navigate the complexities of the Canadian tax system.
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