Executive Summary: Key Legal and Evidentiary Issues

• Judicial review was sought after the CRA refused to extend IMAX Corporation’s deadlines for filing Canada Emergency Wage Subsidy (CEWS) claims.

• The dispute centered on the interpretation and application of subsection 125.7(16) of the Income Tax Act regarding CRA’s discretion to grant extensions.

• IMAX cited exceptional pandemic-related staffing shortages and operational pressures as reasons for missing the deadlines.

• The CRA determined that IMAX’s circumstances did not meet the threshold for exceptional circumstances beyond its control.

• The court applied the standard of reasonableness to assess the CRA’s decision and found it justified, intelligible, and transparent.

• IMAX’s applications for judicial review were dismissed, with no costs awarded.

Facts and outcome of the case

Background and parties

IMAX Corporation, a Canadian company that designs, manufactures, and sells theatre projection systems and engages in film development, digital remastering, and post-production, applied for judicial review against the Attorney General of Canada. The case arose from the Canada Revenue Agency’s refusal to extend the deadlines for IMAX to file claims under the Canada Emergency Wage Subsidy (CEWS) program. The CEWS program was enacted during the COVID-19 pandemic to provide a wage subsidy to help employers retain workers through payroll challenges posed by the pandemic.

Circumstances leading to the dispute

IMAX missed the deadlines for CEWS claims for Period 11 and Period 12, relating to two payroll accounts: 10245 7215RP0002 and 10245 7215RP0001. IMAX attributed the missed deadlines to exceptional circumstances, including significant turnover and staff shortages in its Finance and Tax Departments, with three out of five tax team members being new hires in 2021 and the team working 80-90 hours a week. The company stated that between January 2020 and June 2021, 29 individuals left the Finance Department and 16 others were on leaves of absence. IMAX submitted that these circumstances, combined with operational issues from movie theatre closures and low attendance, led to the missed deadlines.

CRA decisions and IMAX’s response

The CRA initially denied IMAX’s request for relief, stating that IMAX had “ample time” to file the claims before the expiry of the claims periods and did not meet the requirements for late filing per section 26-02 of its “Frequently Asked Questions - CEWS” publication. IMAX then sought a second-level review, referencing subsection 125.7(16) of the Income Tax Act, which grants the CRA the power to grant an extension of time in exceptional circumstances. IMAX provided further details of its staffing and operational challenges and argued that it had not been negligent and had intended to file the claims.

Court’s analysis

The court examined whether the CRA’s decision was reasonable, focusing on the interpretation of subsection 125.7(16) and the application of the General Fairness Provisions. The court found that the CRA’s interpretation aligned with the explanatory notes accompanying the enactment of subsection 125.7(16), which state that the CRA may accept late-filed subsidy applications on a case-by-case basis in exceptional circumstances, consistent with general fairness rules. The court noted that IMAX’s circumstances, while challenging, did not amount to exceptional circumstances beyond its control, as IMAX had received the necessary calculations in May 2021 and was able to meet other deadlines during the same period. The court also found that the officer’s reasoning was justified and that any minor missteps did not justify intervention.

Outcome

The court dismissed IMAX Corporation’s applications for judicial review in files T-2200-24 and T-2201-24. No costs were awarded to either party, and there was no cost award.