Background

• Onex Corporation and its affiliates sought judicial review of two CRA decisions denying them tax relief under subsections 220(2.1) and 220(3) of the Income Tax Act (ITA) related to retroactive application of Bill C-43 amendments to the Foreign Accrual Property Income (FAPI) regime.
• Onex had structured its tax affairs before the 2014 amendments, believing their structure already aligned with the new rules, and did not elect for retroactive application.
• In 2020, the CRA reassessed Onex’s 2012 and 2013 tax returns, adding $102M and $92M to taxable income, respectively.
• Onex requested a waiver of the election requirement (220(2.1) ITA) or an extension to refile with the election (220(3) ITA). The CRA denied both, citing lack of ministerial discretion.

Key Issues & Court Findings

• Minister’s Discretion: The CRA failed to consider a remedial interpretation of ITA section 220, which was enacted as part of a "Fairness Package" to mitigate procedural hardships.
• Standard of Review: The court applied the reasonableness standard, assessing if the CRA’s decision was justified, transparent, and aligned with statutory intent.
• Unreasonable Refusal: The CRA ignored Onex’s compliance history, lack of retroactive tax planning, and significant financial impact.
• Legal Interpretation Error: The court found that subsections 220(2.1) and 220(3) could allow relief, meaning the Minister did have discretion but failed to apply it properly.

Outcome

• Judicial review granted; CRA’s decisions set aside.
• Case remitted for reconsideration.
• $8,330 in costs awarded to Onex.