Executive Summary: Key Legal and Evidentiary Issues

• Dispute over Bank of America’s eligibility to submit late applications for GST/HST input tax credit allocation under section 141.02 of the Excise Tax Act.

• The Minister of National Revenue declined to exercise discretion to accept the Bank’s late filings due to lack of due diligence.

• Bank of America argued that the Minister initially accepted the filings, which was allegedly unfair upon later reversal.

• The appellate court held the initial acknowledgments were not approvals and had no legal effect.

• Argument that the Minister used the wrong test (from the Federal Courts Act) was rejected; diligence remains the key standard.

• Appeal dismissed with costs, affirming the Federal Court’s finding that the Minister’s decision was reasonable.

Facts and outcome of the case

Bank of America, National Association filed an appeal before the Federal Court of Appeal after the Minister of National Revenue denied its applications to retroactively approve its methodology for claiming input tax credits (ITCs) under section 141.02 of the Excise Tax Act. Under this provision, financial institutions classified as “qualifying institutions” (QIs) must receive ministerial approval before using a specific ITC allocation method, with applications to be submitted at least 180 days before the relevant fiscal year. If this deadline is missed, the Minister has discretion to accept late filings.

In this case, Bank of America submitted its applications late and asked the Minister to exercise discretion under section 141.02(19)(b)(ii) to accept them. The Minister declined, citing the Bank’s lack of due diligence. The Bank challenged this decision in the Federal Court, which ruled in the Minister’s favour in 2023 FC 1496. The Bank then appealed to the Federal Court of Appeal, claiming unfair treatment and that the Minister had applied the incorrect legal standard.

The appellate court held that the initial correspondence from the Minister merely acknowledged receipt of the Bank’s applications and did not amount to acceptance or legal approval. It also determined that the Bank’s procedural fairness argument had not been raised in the lower court and therefore could not be reviewed on appeal. Moreover, the court found no merit to the substantive claim that the Minister applied the wrong test; instead, the court reaffirmed that assessing a taxpayer's diligence is appropriate in such discretionary decisions.

In the final analysis, the Federal Court of Appeal concluded that the Minister acted within her discretion and provided sufficient reasons for denying the late applications. It noted that even under the Bank’s preferred legal framework (the four-part Hennelly test), the Bank failed to provide a reasonable explanation for the delay. As a result, the appeal was dismissed with costs awarded to the Attorney General of Canada. No damages were awarded.