Principal Issues: [TaxInterpretations translation] Would a management corporation that only manages leases and handles accounting be accepted as a funding medium for pension plan registration?
Position: No
Reasons: The corporation does not hold property as required by paragraph 8502(g) of the Regulations.
XXXXXXXXXX 2008-027428 Catherine Ayotte, Notary, M.Fisc. October 28, 2008
Dear Madam,
Subject: Interpretation of paragraph 149(1)(o.1)
This is further to your letter of May 1, 2008 to the Registered Plans Directorate which was forwarded to us on June 4, 2008 in response to your letter. In that letter, you indicated that you would like more information regarding a pension corporation described in paragraph 149(1)(o.1).
Please note that unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act"); and all references to the "Regulations" are to the Income Tax Regulations.
It appears to us that the situation described in your letter could constitute an actual situation involving taxpayers. As explained in Information Circular 70-6R5, it is not the Directorate’s practice to comment on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involves a specific taxpayer and a completed transaction, you should provide all relevant facts and documents to the appropriate Tax Services Office for its views. We are, however, prepared to provide the following general comments that may be of assistance to you.
Clause 149(1)(o.1)(i)(A) applies to a corporation that is incorporated and operated, throughout the particular period, solely for the administration of a registered pension plan. This is a two-pronged test that must be analyzed in two stages. First, it must be shown that the corporation was incorporated solely to administer a registered pension plan. Second, it must be determined whether the corporation was operated solely for the purpose of administering such a pension plan. This last condition is a question of fact that must be analyzed for each period that the corporation wishes to be a corporation exempted under paragraph 149(1)(o.1).
Subparagraph 149(1)(o.1)(ii) requires that the corporation be accepted by the Minister as a funding medium for the purpose of the registration of the pension plan. The Minister referred to in this subsection is the Minister of National Revenue and in this context, there has been a delegation of the Minister’s powers to the Director General of the Registered Plans Directorate. The rules for the registration of a pension plan are set out in section 8501 et seq. of the Regulations. Paragraph 8502(g) of the Regulations clarifies that a funding arrangement is an arrangement under which property is held in connection with the plan that is acceptable to the Minister. In this context, a management corporation that provides only accounting and lease management services would not be accepted by the Minister as a funding medium for the purposes of registering a pension plan since the corporation does not hold property.
A pension corporation that was not accepted as a funding medium of funding a pension plan, either when the plan was originally registered or when the plan was amended, will not come within paragraph 149(1)(o.1).
We hope that our comments are of assistance.
Best regards,
Ghislain Martineau
Manager
Financial Sector and Exempt Entities Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.
c.c. Simone St-Amant
Registered Plans Directorate
Canada Revenue Agency