The federal government has just published legislative proposals that would relax one of the conditions for tax-exempt pension fund investment corporation status under the Income Tax Act. That is, under the proposals, there would no longer be a prohibition against such a corporation issuing "debt obligations" and the prohibition would be narrowed to cover issuing "bonds, notes, debentures or similar obligations". The change would be retroactive to 1994.

We believe that these amendments, if adopted, should eliminate concerns that, for example, the assignment to a third party of a right to receive an investor's capital contribution to a limited partnership would be treated as an impermissible debt obligation, where that investor was a pension fund investment corporation.

Interested parties are invited by the Department of Finance to provide comments on the proposals by December 5.