Who Can Challenge the CRA? Capacity and Standing in Canadian Tax Disputes

Who can challenge a tax assessment is a question of capacity and standing. When a natural or legal person dies, is dissolved, is amalgamated, or becomes bankrupt, it can be difficult to know who (if anyone) can be assessed tax and who has standing to dispute the assessment. While recent Supreme Court of Canada decisions clarify in which court a tax dispute may be decided, they do not address who can participate in those disputes. The case law on who can appeal an assessment to the Tax Court of Canada has developed unevenly. The leading tax case on dissolved corporations, 145 Ontario, overturned the prior appellate decision, 495187 Ontario, for being manifestly wrong. However, cases addressing the question have rarely analyzed capacity and standing at the Tax Court through the lens of the appeal rights in the tax statutes and have instead relied on private-law concepts as a complete answer. Although private law has an important role in the analysis, the statutory regime for tax disputes must also be considered. The Tax Court of Canada Act grants the Tax Court jurisdiction to hear appeals arising from certain statutes, including the Income Tax Act (ITA). Section 169 of the ITA permits a taxpayer to appeal an assessment to the Tax Court. In some examples, legal fictions in the ITA extend appeal rights to non-entities under private law. Further, the private law itself contains legal fictions that extend rights to non-entities, including dissolved corporations. The time is ripe to revisit the capacity and standing of a "taxpayer" under assessment, objection, and appeal provisions of the tax law. The current landscape allows tax authorities to assess taxpayers in situations where they have no appeal rights, which contravenes a recognized principle of procedural fairness. Taxpayers would benefit from clarity on the rights of an entity to object and appeal after death, amalgamation, dissolution, or bankruptcy and, where those rights exist, the process for giving authority to a person to act on behalf of the entity.