Principal Issues: Will an overall limit of XXXXXXXXXX on the number of DSUs that the Plan may issue cause the Plan to cease compliance with paragraph 6801(d) of the Regulations?
Position: No
Reasons: A limit on the number of DSUs that may be issued under the Plan does not violate any of the requirements of paragraph 6801(d) such that the Plan would cease to be a prescribed plan or arrangement within paragraph (l) of the definition of salary deferral arrangement in subsection 248(1) of the Act.
XXXXXXXXXX 2005-011826
XXXXXXXXXX, 2005
Dear XXXXXXXXXX:
Re: Supplemental Advance Income Tax Ruling - XXXXXXXXXX (the Corporation)
This is in reply to your letters of XXXXXXXXXX and is supplemental to our advance income tax ruling number 2003-003405 dated XXXXXXXXXX, 2003 (the "Ruling").
We understand that, to the best of your knowledge and that of the Corporation, none of the issues involved in the ruling request is:
(i) in an earlier return of the Corporation or a related person,
(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the Corporation or a related person,
(iii) under objection by the Corporation or a related person,
(iv) before the courts, or
(v) the subject of a ruling previously issued by the Directorate to the Corporation or a related person except as described herein with respect to the Ruling.
Facts
1. The Corporation was incorporated on XXXXXXXXXX under the laws of XXXXXXXXXX under the name "XXXXXXXXXX". On XXXXXXXXXX, the Corporation changed its name to "XXXXXXXXXX". On XXXXXXXXXX, the Corporation was continued under the laws of the XXXXXXXXXX and changed its name to "XXXXXXXXXX". The Corporation, together with its subsidiaries, is engaged in the XXXXXXXXXX.
2. The Corporation's registered office is located at XXXXXXXXXX. The executive office and mailing address of the Corporation is XXXXXXXXXX. The Corporation files its T2 tax returns with the XXXXXXXXXX Tax Centre and is located within the area served by the XXXXXXXXXX Tax Services Office.
3. The Corporation's business number is XXXXXXXXXX.
4. Effective XXXXXXXXXX, the Corporation established a deferred share unit (DSU) plan (the "Plan") for certain resident and non-resident directors and senior officers in accordance with the Ruling.
Proposed Amendments
It is proposed to amend the Plan as follows:
5. The following is added at the end of paragraph 8 of the Ruling:
Notwithstanding the foregoing right to make an election, the maximum number of DSUs that may be awarded under the Plan shall be XXXXXXXXXX or such greater number as may be approved from time to time by an ordinary resolution of the shareholders of the Corporation.
6. The following is added at the end of paragraph 9 of the Ruling:
Notwithstanding the foregoing right to make an election, the maximum number of DSUs that may be awarded under the Plan shall be XXXXXXXXXX or such greater number as may be approved from time to time by an ordinary resolution of the shareholders of the Corporation.
7. The following is added at the end of paragraph 10 of the Ruling:
The number of DSUs that a Participant director is entitled to receive is also subject to the Plan's overall DSU limit described in 8 above.
8. The following is added at the end of paragraph 11 of the Ruling:
The number of DSUs that a Participant senior officer is entitled to receive is also subject to the Plan's overall DSU limit described in 9 above.
9. The following is added to the beginning of the first sentence of paragraph 17 of the Ruling:
Subject to the Plan's overall DSU limit described in 8 and 9 above,
10. The following is added to the beginning of the first sentence of paragraph 18 of the Ruling:
Subject to the Plan's overall DSU limit described in 8 and 9 above,
Purpose of the Proposed Amendments
11. The purpose of the proposed amendments is to implement a maximum amount of DSUs that may be issued by the Corporation pursuant to the Plan.
Rulings Given
Provided the preceding statements constitute a complete disclosure of all the relevant facts, the proposed amendments to the Plan and the purpose of the proposed amendments to the Plan, and provided the Plan is amended as described above, we rule as follows:
A. The amendments to the Plan as described in 5 to 10 above, will not disqualify the Plan from being a prescribed plan or arrangement as described in paragraph 6801(d) of the Income Tax Regulations.
B. Provided the Plan was implemented in accordance with the terms contained in the Ruling and prior to the deadline imposed therein, we confirm that the Ruling will continue to be binding on the Canada Revenue Agency.
The above advance income tax rulings, which are based on the Act and Regulations in their present form and does not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R5 Advance Income Tax Rulings, dated May 17, 2002, and are binding on the Canada Revenue Agency provided that the proposed amendments to the Plan are implemented by XXXXXXXXXX.
Yours truly,
XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch