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Tax and Revenue Administration
Alberta Corporate Tax Act
Information Circular CT-6R1


Released: April 1999
Produced by: Alberta Treasury Board and Finance, Tax and Revenue Administration
For more information: tra.revenue@gov.ab.ca

CT-6R1 / April 1999

ALBERTA CORPORATE TAX ACT INFORMATION CIRCULAR:
REASSESSMENTS

NOTE: This information circular is intended to explain legislation and provide specific information. Every effort has been made to ensure the contents are accurate. However, if a discrepancy should occur in interpretation between this Information Circular and governing legislation, the legislation takes precedence.

This Information Circular discusses the provisions of the Alberta Corporate Tax Act (the "Act") and the administrative policies and practices of Alberta Finance, Tax and Revenue Administration ("TRA") relating to the reassessment of amounts due or refundable in a taxation year. The comments in this circular relate only to adjustments to the Alberta Corporate Income Tax Return ("AT1"). The topics discussed include:

 

SOURCES OF REASSESSMENT INFORMATION

  1. The information upon which a reassessment is based may come from a number of sources, either internal or external to TRA. External sources include the taxpayer, the Canada Revenue Agency ("CRA"), the Ontario Ministry of Finance, and the Quebec Ministry of Revenue. Reassessments may also result from TRA internal actions such as an audit, the disposition of an objection or appeal, or a reassessment to another year.

  2. The Alberta income tax system operates on the principle of self-assessment and relies on voluntary taxpayer compliance. Although TRA may obtain information from other sources, the taxpayer is responsible for advising TRA of any adjustments required to the tax payable or refundable tax credits of a taxation year. Providing complete information relating to any adjustments on a timely basis will expedite the processing of any required reassessments.

  3. In the discussion of each of the sources of information, the first part of this circular assumes that the reassessment will be made within the normal reassessment period as described in paragraph 4. The remainder of the circular describes the circumstances under which a reassessment may be made after the normal reassessment period has expired.

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REASSESSMENTS MADE WITHIN THE NORMAL REASSESSMENT PERIOD

Normal Reassessment Period

  1. Except as provided in the Act, a reassessment may not be made beyond the normal reassessment period of the taxation year. The normal reassessment period of a corporation that is a Canadian-controlled private corporation at the end of the year is three years after the date of mailing of a notice of assessment for the year. For all other corporations, the normal reassessment period is four years after the date of mailing of a notice of assessment for the year.

  2. A corporation may be exempt from filing an AT1 for a taxation year ending after June 30, 1994. (See Information Circular CT-2, "Filing Requirements" for details on exemptions from filing.) If a corporation is exempt from filing a tax return and, therefore, does not file a return, a notice of assessment is not issued. For purposes of determining the normal reassessment period where no notice of assessment is issued, a notice of assessment is deemed, for Alberta purposes, to have been mailed to the corporation on the day CRA sends the federal notice of assessment.

    Information Received from the Taxpayer

  3. Within the normal reassessment period, a taxpayer may request an adjustment to an amount assessed for a taxation year. TRA will review the request and will contact the taxpayer for additional information or clarification, if necessary. In certain cases, TRA will confirm with CRA that the adjustment has also been made for federal purposes. In most cases, the request will be processed if it is supportable. However, in some circumstances a reassessment may not be processed. Examples of such circumstances are discussed in paragraphs 7, 26 and 27.

  4. If the taxpayer requests an adjustment solely to discretionary deductions (other than loss carry-backs) in a taxation year, a revision to the amount previously deducted will generally be accepted by TRA under one of the following circumstances.

      a) The time limit for filing a notice of objection for the taxation year (i.e. 90 days after the date of a notice of assessment or reassessment for that taxation year) has not expired.

      b) CRA has accepted and processed the adjustment for federal purposes.

      c) The net affect on Alberta tax payable is nil. This may occur where the change to one discretionary deduction is offset by a change to another discretionary deduction. A notice of reassessment will not be issued in this case.

      (d) The adjustment relates to a computational error or omission in the amount claimed and does not result solely from the taxpayer's attempt to change the amount of the deduction assessed. The following examples illustrate this difference.

      In the first example, assume that in its 1995 taxation year, the corporation purchased an asset for $100,000. In filing its 1995 return, $10,000 was entered as the cost of the asset into the CCA schedule. Providing there are no other adjustments to the cost of the asset, this is a computational error. TRA would process the adjustment to correct the CCA schedule when advised by the taxpayer of the error.

      In the second example, assume that there are no computational errors evident. The corporation's maximum CCA claim for 1995 is $25,000. However, upon filing its return, the corporation decides to claim CCA of only $15,000. After the return is assessed, the corporation decides to maximize its CCA claim. There are no adjustments required to any other amounts. In this case, TRA will not process the corporation's request.

    The term "discretionary deductions" is used to describe the type of deductions available where the taxpayer has the discretion to claim any amount up to the maximum allowable. One example is capital cost allowance.

    Information Received from CRA

  5. Under an agreement between TRA and CRA, TRA receives information relating to assessments and reassessments made by CRA. CRA's data is compared to TRA's records and discrepancies are investigated by TRA. Based on its review, TRA will determine what action, if any, is required. In some cases, the corporation will be contacted to provide further information or clarification. Where possible, TRA will process a reassessment to agree with CRA's data. This process is intended to provide a verification check for TRA's purposes. The onus remains on the corporation to make TRA aware of any adjustments made by CRA which affect the Alberta return.

    Please refer to Information Circular CT-2, "Filing Requirements" for a discussion of the time limits for providing this information. As well, TRA may reassess a corporation prior to that corporation providing the additional information.

  6. TRA will not automatically reassess to agree to CRA's data where the discrepancy relates to a loss carried back for federal purposes. The taxpayer must advise TRA that the loss is to be applied for Alberta purposes. See Information Circular CT-7, "Calculation and Deduction of Losses" for details.

  7. The corporation may have claimed different discretionary deductions for federal purposes than for Alberta purposes. If, as a result of CRA's reassessment, the maximum allowable claim for Alberta purposes is reduced below the amount previously deducted for Alberta purposes, TRA will adjust the deduction to reflect the correct maximum claim. Where the maximum allowable claim has not been exceeded, TRA will not reassess the amount claimed for Alberta purposes to agree with the federal amount unless advised to do so by the taxpayer. The taxpayer must provide TRA with details of both the federal and Alberta revisions.

    Information Received from Ontario or Quebec

  8. Alberta and the provinces of Ontario and Quebec exchange two types of information: information relating to proposed reassessments based on the allocation of income among provinces and information relating to reassessments made to taxable income which affect the tax payable to the other provinces. These three provinces administer their own provincial corporate taxes. Through this exchange of information, TRA is able to determine if Alberta tax payable is affected by reassessments made by Ontario or Quebec. In addition, through this exchange the provinces attempt to ensure that the corporation's income is correctly allocated among the jurisdictions in which the corporation has permanent establishments. TRA will follow procedures similar to those described in paragraph 8. Although this exchange of information is made, the onus remains on the corporation to advise TRA of any adjustments made by Ontario or Quebec which affect the Alberta return.

    Please refer to Information Circular CT-2, "Filing Requirements" for a discussion of the time limits for providing this information. As well, TRA may reassess a corporation prior to that corporation providing the additional information.

    Reassessments as a Result of TRA Audit Action

  9. As a result of an audit, TRA may propose that a reassessment be made to correct errors or omissions in the taxpayer's return. See Information Circular CT-10, "Tax Audit" for a discussion on TRA's audit policies and practices.

  10. Reassessments initiated by TRA audit may only be processed within the normal reassessment period unless one of the circumstances described in the following paragraphs exists.

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REASSESSMENTS MADE AFTER THE NORMAL REASSESSMENT PERIOD

Waiver and Revocation of Waiver

  1. If the normal reassessment period is about to expire and an issue relating to a proposed reassessment has not been resolved between the taxpayer and TRA, the taxpayer may wish to waive the limitation of the normal reassessment period. If a valid waiver has not been filed, it may be necessary for TRA to issue a reassessment before the normal reassessment period expires even if the issue has not been fully resolved. A waiver ensures that the taxpayer does not lose the right to have an adjustment made even if the normal reassessment period expires.

  2. In order to make a waiver valid, the taxpayer must submit to TRA a prescribed form ("Waiver in Respect of Time Limit for Assessment, Reassessment or Determination"), signed by an authorized signing officer and specifying the conditions under which the normal reassessment period has been waived. The waiver must be received by TRA before the normal reassessment period expires.

  3. Once a valid waiver is received by TRA for a taxation year, that year is held open for reassessment indefinitely in relation to the matters specified in the waiver. The taxpayer may, however, submit to TRA a "Notice of Revocation of Waiver" in prescribed form. The revocation prohibits a reassessment for that year from being processed as a result of a waiver beyond six months from the date on which the notice of revocation is received by TRA.

  4. While a waiver is in effect, TRA may process an additional adjustment requested by the taxpayer provided TRA considers it to be supportable. However, if TRA initiates a proposal, the reassessment may not include in income for that year any amount that:

      a) was not included in income in an assessment before the normal reassessment period expired; and

      b) the taxpayer establishes does not relate to the matter specified in the waiver.

    Loss Carry-backs

  5. A reassessment may be processed within three years after the normal reassessment period has expired if the corporation is claiming a loss carried back from a subsequent year. (See Information Circular CT-7, "Calculation and Deduction of Losses" for details relating to deducting losses from a subsequent year.) The reassessment may only include the amount that relates to the loss carry-back.

    Reassessments Made in Other Jurisdictions

  6. Even though the normal reassessment period has expired, a reassessment to a taxation year (the "reassessed year") may be made within 12 months after an assessment or reassessment by CRA, the Ontario Ministry of Finance, or the Quebec Ministry of Revenue for that year. The other jurisdiction's action may have included a revision to a loss calculated for the reassessed year. If the loss had been deducted in another year for which the normal reassessment period has expired, that year may also be reassessed, within the same 12-month period of the reassessed year, to reflect the revised loss. The reassessment may only include amounts that reasonably relate to the adjustment made by the other jurisdiction and the affect of those adjustments on the calculation of Alberta tax and credits.

    Failure to Refile Information

  7. If a corporation has been assessed by another jurisdiction, discovers an error on a previously filed return (within the normal reassessment period), or believes that it was exempt from filing a return and subsequently determines that it was not exempt, the corporation must advise TRA of the other jurisdiction's assessment or file an amended return or a return, as the case may be.

    In such cases, the normal reassessment period may be extended indefinitely until the corporation provides the required information to TRA. Once the information is provided to TRA, the normal 12 month reassessment period applies for TRA.

    Misrepresentation or Fraud

  8. A reassessment may be made at any time if the taxpayer has made a misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in the filing of a return or in supplying information. Where a year is being reassessed due to misrepresentation or fraud, TRA may not include in income for that year, any amount that was not included in income in an assessment before the normal reassessment period expired and that the taxpayer establishes does not relate to the misrepresentation or fraud. However, the reassessment may include an adjustment requested by the taxpayer provided TRA agrees that it is valid.

    Alberta Energy Adjustment

  9. After November 15, 1993, a reassessment may be made after the normal reassessment period of a taxation year (the "affected year") if the corporation's Alberta crown royalty amount changes due to an adjustment made by Alberta Energy. The affected year must be reassessed within the normal reassessment period of the year in which the corporation is notified by Alberta Energy of the adjustment. The reassessment may only include an amount that reasonably relates to Alberta Energy's adjustment.

    Resulting from a Reassessment to Another Taxation Year

  10. In assessing or reassessing a taxation year (the "initial year"), the balance of an account may change for that year. An amount from this account may have been carried over to another year (the "other year") or had a direct effect on the calculation of tax in the other year. At the taxpayer's written request or, upon TRA's initiative, the other year will be reassessed even though the normal reassessment period for that year has expired. The following conditions apply:

      a) the reassessment to the initial year must have been made after December 20, 1991;

      b) the reassessment to the other year must be made after June 10, 1993 but within one year after the day on which all rights of objection or appeal expire for the initial year; and

      c) the reassessment for the other year may only include any amount that reasonably relates to the change in the balance of the account.

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REASSESSMENTS AS A RESULT OF AN OBJECTION OR APPEAL

  1. A reassessment may be made at any time when it results from the resolution of an objection or appeal.

  2. As part of the resolution of the objection or appeal, the taxpayer may request an adjustment be made to an amount that was not under objection or appeal. Provided TRA considers the adjustment to be supportable, the taxpayer's request will be processed if the reassessment to which the taxpayer has objected was made under one of the following situations:

      a) within the normal reassessment period;

      b) under waiver; or

      c) as a result of misrepresentation or fraud.

  3. Where the taxpayer objects to a reassessment that was issued after the normal reassessment period under one of the provisions described below, the taxpayer may only object to an issue that gave rise to that reassessment. Upon resolution of the objection or appeal, any reassessment made may only include an amount that reasonably relates to the issue under objection. This applies to reassessments made:

      a) within three years of the normal reassessment period, as a result of a loss carried back from a subsequent year;

      b) within 12 months of a reassessment made by CRA, the Ontario Ministry of Finance or the Quebec Ministry of Revenue;

      c) as a result of adjustments made by Alberta Energy to the corporation's Alberta crown royalty;

      d) as a result of a reassessment to another taxation year as described in paragraph 22;

      e) as a result of the resolution of an objection or appeal; or

      f) as a result of an order of a court.

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TOLERANCES

  1. When information related to a corporation is received from one of the sources discussed in this circular, TRA updates its records accordingly. A notice of reassessment may not be issued to reflect these actions if the net effect to Alberta tax, interest, and penalties is minimal.

  2. If, as the result of a reassessment, a taxpayer's account has a balance of less than $20.00, TRA will not charge nor refund the balance unless specifically requested to do so.

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