On September 16, 2015, the Honorable Mr. Justice Martineau rendered summary judgment in the matter of Hillis and Deegan v. The Attorney General of Canada, docket T-1736-13 (2015 FC 1082).
As a matter of background (and as discussed in a previous post), on August 11, 2014, the plaintiffs, Hillis and Deegan, had filed a statement of claim in Federal Court seeking a declaration that the Canada-United States Enhanced Tax Information Exchange Agreement Implementation Act (the IGA) as well as Sections 263 to 269 of the Income Tax Act (Canada) (the Act) unjustifiably infringed the Canadian Charter of Rights and Freedoms and are therefore unconstitutional (the “constitutional issues”). Thereafter, on October 9, 2014, the plaintiffs filed an amended statement of claim adding non-constitutional arguments, questioning the legality of the disclosure of personal information of US persons residing in Canada and collected in respect of the 2014 calendar year by Canadian financial institutions for the Canada Revenue Agency, which information is scheduled to be disclosed on or about September 30, 2015 by the Minister of National Revenue (the Minister) to the US tax authorities (the non-constitutional issues). Specifically, the plaintiff sought a general declaration and a permanent prohibitive injunction preventing the collection and disclosure of taxpayer information to the US tax authorities by the Minister on the basis that its disclosure is inconsistent with the Canada –United States Income Tax Treaty and in violation of section 241 of the Act which places limits on the ability of the Minster to disclosure confidential information.
It was these non-constitutional issues that was the object of Justice Martineau’s decision and not the constitutional issues.
In his findings, Justice Martineau concluded that the collection and automatic disclosure of account holder information about US reportable accounts has been legally authorized in Canada by the provisions of the IGA and that the collection and automatic disclosure of such information is not inconsistent with the provisions of the Canada –United States Income Tax Treaty, nor does it violate section 241 of the Act.
He did hold however, that while “the declaratory and injunctive relief requested by the plaintiffs in their motion for summary judgment shall be denied by the Court, [it shall be] without prejudice to the plaintiffs’ right to pursue their claim that the impugned provisions are ultra vires or inoperative because they are unconstitutional or otherwise unjustifiably infringe Charter rights.”
On to round two.
Postscript : IRS Notice 2015-66
The IRS has since issued a notice confirming that the FATCA implementation date can be extended to September 30, 2016.
Specifically, Notice 2015-66 provides that a foreign (non-U.S.) financial instruction (FFI) in a Model 1A treaty country (this would include Canada) will be treated as FATCA compliant, and not subject to withholding, so long as the partner jurisdiction notifies the U.S. before September 30 that it requires more time, and “provides assurance that the jurisdiction is making good faith efforts to exchange the information as soon as possible.” Notice 2015-66 does not, however, change the deadline for FFIs to report information to their local tax authority, which remains governed by law of that country.”
We await Canada’s Minister of National Revenue’s reaction to this development.