Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Will proposed amendments to an arrangement adversely affect rulings that were previously obtained with respect to the 6801(d) plan?
Position: No.
Reasons: The proposed amendments do not have any effect on the rulings previously issued because the provisions of 6801(d) remain satisfied.
XXXXXXXXXX XXXXXXXXXX 2000-002572 XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 2000
Dear Sirs:
Re: Advance Income Tax Ruling
XXXXXXXXXX (the "Corporation") XXXXXXXXXX
This is in reply to your letters of XXXXXXXXXX, regarding the rulings provided in our letter of XXXXXXXXXX, 1998 (our file 982889) (the "Letter") and an amendment you wish to make to your deferred share unit plan.
In this letter, the following terms have the meanings specified and are the same as previously specified in our letter of XXXXXXXXXX, 1998:
(a) "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof;
(b) "Board" means the board of directors of the Corporation;
(c) "Deferred Stock Units" means a notional number of Shares maintained in a notional account on behalf of an Employee who participates in the Plan;
(d) "Employee" means an individual who is a senior management officer of the Corporation;
(e) "Fiscal Year" means the Corporation's "fiscal period" as defined under section 249.1 of the Act.
(f) "Incentives" means the annual performance incentive compensation to which members may become entitled in respect of a Fiscal Year.
(g) "Plan" means XXXXXXXXXX Deferred Stock Unit Plan as described in the Letter;
(h) "Regulations" means the Income Tax Regulations; and
(i) "Share" means a common share of the Corporation and such other share substituted therefor as a result of amendments to the articles of the Corporation, reorganization or otherwise.
Facts
1. The Corporation is a public corporation and a taxable Canadian corporation for purposes of the Act and its shares are listed for trading on a public stock exchange. The Corporation deals with the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Tax Centre. Its Business Number is XXXXXXXXXX and its mailing address is XXXXXXXXXX.
2. The Corporation established the Plan as an additional performance incentive for its Employees, under which all or part of the Employee's Incentives may, at the Employee's election, be deferred and allocated as Deferred Stock Units under the Plan rather than taken as a cash payment.
3. The Plan was implemented subsequent to the receipt of the Letter which confirmed that the Plan met the requirements of 6801(d) of the Regulations and was exempted from being considered a "salary deferral arrangement" under paragraph (l) of the definition of "salary deferral arrangement" in subsection 248(1) of the Act. Four rulings were issued regarding the status of the Plan and the tax treatment of the participants under the Plan, subject to the proviso that the Plan is not amended.
4. On XXXXXXXXXX, the Corporation implemented stock ownership guidelines (the "Guidelines") whereby, by a specified date, certain senior officers of the Corporation are to acquire and hold a prescribed minimum number of shares of the Corporation and/or Units under the Plan. In connection with the implementation of the Guidelines, the Corporation wants to allow Employees who are subject to the Guidelines to be able to make further elections with respect to Fiscal Year XXXXXXXXXX in order to help the Employees meet the requirements under the Guidelines. It is anticipated that the additional election period for XXXXXXXXXX would be approximately XXXXXXXXXX weeks.
5. The Employer wishes to make one amendment to the Plan which will not adversely affect the operation of the Plan within the requirements of paragraph 6801(d) of the Regulations.
Proposed Amendment to the Plan
6. It is proposed to amend the provisions of the Plan as described in paragraph XXXXXXXXXX of the Letter to allow an election to participate in the Plan to be made in the first quarter of the Fiscal Year with respect to Incentives to which the Employee may become entitled during the Fiscal Year or within such lesser or greater period of time as may be prescribed or approved from time to time by the Human Resources Committee of the Board of the Corporation. In any event, all elections respecting any Incentive for a Fiscal Year will be made prior to the date of entitlement to receive payment of such Incentive.
Purpose of the Proposed Amendment
7. The proposed amendment to the Plan will be made to help Employees satisfy the Guidelines for the Fiscal Year XXXXXXXXXX and to provide the Corporation with the right to allow later elections where the Corporation considers it necessary under the circumstances.
Additional Information
8. To the best of your knowledge and that of the Corporation, none of the issues related to this request:
(a) have previously been reported in the Corporation's or any related party's prior income tax returns;
(b) are being considered by a tax services office or tax centre in connection with the Corporation's or a related party's prior income tax return;
(c) are under objection by the Corporation or a related person;
(d) are before the courts; and
(e) are, except to the extent noted above, the subject of a ruling previously issued by this directorate to the Corporation.
Ruling
Provided the above statement of facts and the proposed amendment are accurate and constitute a complete disclosure of all relevant facts and provided the amendment is completed as proposed, we rule that the rulings provided in the Letter will continue to be valid and binding upon the Canada Customs and Revenue Agency.
This ruling is given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 dated December 30, 1996 issued by Revenue Canada and are binding provided the proposed amendment is implemented on or before XXXXXXXXXX.
Yours truly,
XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate