Executive Summary: Key Legal and Evidentiary Issues

• Judicial review concerned the CRA’s partial denial of taxpayer relief under s. 220(3.1) of the Income Tax Act.

• Applicant's donation to a disqualified tax shelter was central to the dispute over reassessed taxes and interest.

• CRA's refusal was based on legislative limits, past taxpayer warnings, and the applicant's financial capacity.

• The court found no extraordinary circumstances or procedural unfairness warranting intervention.

• Alleged CRA delays were deemed reasonable given the scale and complexity of the tax shelter scheme.

• Self-represented applicant’s arguments failed to displace the presumption of reasonableness in the CRA’s decision.

Facts and outcome of the case

The case involved an application for judicial review filed by Laila McMillan, who challenged the Canada Revenue Agency’s (CRA) refusal to fully waive arrears interest on her 2005 income tax reassessment. The origin of the dispute stemmed from McMillan’s claimed charitable donation to the Canadian Humanitarian Trust, a scheme later determined by the courts to be a disqualified donation tax shelter. Although McMillan argued that the donation was arranged by her ex-husband, she had claimed the tax credit on her own return.

Following an initial reassessment in 2008, the CRA denied the full amount of the tax credit. Over time, the CRA allowed a portion corresponding to the actual cash donation but disallowed the larger in-kind amount. This led to additional tax and accumulating interest. McMillan’s objections were held in abeyance pending lead litigation (Morrison and Eisbrenner), which ultimately confirmed the donation shelter was invalid. After the final appellate decisions, the CRA resumed processing objections and issued a confirmation of its reassessment.

McMillan subsequently applied for discretionary relief under section 220(3.1) of the Income Tax Act, citing extraordinary circumstances, CRA error, and financial hardship. The CRA partially granted relief for a limited period (2012–2015) based on financial hardship but denied the remainder, citing statutory time limits, adequate prior warnings, and McMillan’s ability to pay. She sought judicial review of that second-level decision.

The court dismissed her application. It held that the CRA’s decision was reasonable, procedurally fair, and consistent with the governing law and guidelines. The court found no reviewable error in the CRA’s treatment of her circumstances, including the fact that she had multiple opportunities to limit accruing interest, including a 2015 waiver offer which she ignored. The court emphasized that participation in a tax shelter—especially one promising benefits exceeding the cash donation—carries foreseeable risks, and responsibility under tax law rests with the individual taxpayer.

No costs were awarded, as the Attorney General of Canada did not seek them.