Principal Issues: Butterfly transactions of a XXXXXXXXXX corporation owned equally by two brothers.
Position: Favourable rulings provided.
Reasons: Meets the requirements of the law.
XXXXXXXXXX 2021-090431
XXXXXXXXXX 2021
Dear Sir,
Subject: Request for advance income tax rulings - XXXXXXXXXX
This is in response to your letter of XXXXXXXXXX requesting income tax rulings on behalf of XXXXXXXXXX and its shareholders. We have also taken into account additional information submitted in your letters and emails as well as information submitted during our telephone conversations (XXXXXXXXXX).
To the best of your knowledge and that of the parties involved in the proposed transactions, none of the issues raised herein are:
i) dealt with in a previously filed return of one of the Taxpayers or a related person;
ii) being considered by a tax services office or tax centre in connection with a previously filed tax return of one of the Taxpayers or a related person;
iii) under objection by one of the Taxpayers or a related person;
iv) the subject of a current or completed court process involving one of the Taxpayers or a related person; and
v) the subject of a ruling previously considered by the Income Tax Rulings Directorate.
Unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (Canada) (the "Act").
DESIGNATION OF PARTIES
In this letter, unless otherwise indicated, the names and corporate names of the taxpayers are replaced by the following names and corporate names:
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XXXXXXXXXX, brother of B |
A |
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XXXXXXXXXX, brother of A |
B |
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XXXXXXXXXX, adult son of A |
Child 1 |
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XXXXXXXXXX, adult son of B |
Child 2 |
|
XXXXXXXXXX |
Transferor |
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New corporation incorporated in paragraph 8 of this letter |
Newco |
DEFINITIONS
In this letter, unless otherwise specified, the following terms have the following meanings:
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"Adjusted cost base" has the same meaning as in subsection 148(9) |
ACB |
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"Agreed amount " has the same meaning as in subsection 85(1) |
Agreed Amount |
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"Canada Revenue Agency" |
CRA |
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"Canadian-controlled private corporation" as defined in subsection 125(7) |
CCPC |
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"Capital dividend account" as defined in subsection 89(1) |
CDA |
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“Capital property" has the meaning assigned by section 54 |
Capital Property |
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"Cash surrender value" has the same meaning as in subsection 148(9) |
CSV |
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"Depreciable property" as defined in subsection 13(21) |
Depreciable Property |
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"Distribution" as defined in subsection 55(1) |
Distribution |
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"Eligible property" as defined in subsection 85(1.1) |
Eligible Property |
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“Eligible refundable dividend on hand" has the meaning assigned by subsection 129(3) |
ERDTOH |
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"Fair market value" |
FMV |
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"General rate income pool" as defined in subsection 89(1) |
GRIP |
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“Net income stabilization account no. 2” has the meaning assigned by subsection 248(1) |
NISA No. 2 |
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“Non-eligible refundable dividend on hand" has the meaning assigned by subsection 129(3) |
NERDTOH |
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"Paid-up capital" as defined in subsection 89(1) |
PUC |
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"Taxable dividend" has the same meaning as in subsection 89(1) |
Taxable Dividend |
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"XXXXXXXXXX" |
|
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"Taxable Canadian corporation" as defined in subsection 89(1) |
TCC |
FACTS
Facts about the Transferor
1. Transferor was incorporated on XXXXXXXXXX and its fiscal period ends on XXXXXXXXXX of each year. Transferor is and will be, at all relevant times and for all purposes of the Act, a CCPC and a TCC.
2. Transferor carries on a XXXXXXXXXX business at XXXXXXXXXX separate locations.
3. The description of the issued and outstanding shares of the capital stock of Transferor is as follows:
3.1. Class A shares: voting and participating;
3.2. Class D shares: non-voting, non-participating, non-cumulative preferential dividend of XXXXXXXXXX%, redeemable at the paid-up capital amount plus a premium of $XXXXXXXXXX per share.
4. The issued and outstanding shares of the capital stock of Transferor consist of XXXXXXXXXX Class A shares issued in part on XXXXXXXXXX and XXXXXXXXXX with a PUC of $XXXXXXXXXX for all shares. The ACB to A of XXXXXXXXXX Class A shares held by A is $XXXXXXXXXX. The ACB to B of XXXXXXXXXX Class A shares held by B is $XXXXXXXXXX.
5. The issued and outstanding shares of the capital stock of Transferor also consist of XXXXXXXXXX Class D shares issued on a section 85 rollover on XXXXXXXXXX. These shares have a PUC of $XXXXXXXXXX for all shares. The ACB to A of XXXXXXXXXX Class D shares held by A is $XXXXXXXXXX. The ACB to B of XXXXXXXXXX Class D shares held by B is $XXXXXXXXXX.
6. The holding of shares of the capital stock of Transferor has remained unchanged since XXXXXXXXXX. All of the issued and outstanding shares of the capital stock of Transferor constitute Capital Property to the holders thereof.
7. As of XXXXXXXXXX, the tax balances of Transferor are as follows: CDA: $XXXXXXXXX, ERDTOH: $XXXXXXXXX, NERDTOH: $XXXXXXXXX, GRIP: $XXXXXXXXX. These balances will be the same or similar just before the commencement of the Proposed Transactions.
PROPOSED TRANSACTIONS
8. Prior to the transfer of part of its assets to Newco as provided for in paragraph 16 below, Transferor will withdraw the amounts in its XXXXXXXXXX accounts.
9. The consideration to be received by Transferor as a result of the receipt of the amounts accumulated in its XXXXXXXXXX accounts will consist solely of cash.
10. The receipt of the amounts accumulated in Transferor's XXXXXXXXXX accounts will result in the payment of an amount from Transferor's NISA No. 2.
11. Newco will be incorporated under the XXXXXXXXXX. Newco will, at all relevant times and for all purposes of the Act, be a CCPC and a TCC. No shares of the capital stock of Newco will be issued on the incorporation of Newco.
12. The authorized share capital of Newco will consist of, inter alia, an unlimited number of shares without par value of the classes "XXXXXXXXXX", "XXXXXXXXXX" and "XXXXXXXXXX":
12.1. The "XXXXXXXXXX" class shares will be voting and participating;
12.2. The "XXXXXXXXXX" class shares will be non-voting, with non-participating, non-cumulative preferential dividends ranging from XXXXXXXXXX% to XXXXXXXXXX% per month, calculated on the redemption value, redeemable at the holder's option at the paid-up capital amount plus a premium. No price adjustment clause will be provided for in the share attributes of the "XXXXXXXXXX" class shares.
12.3. The "XXXXXXXXXX" class shares will be non-voting, with non-participating, non-cumulative preferential dividends ranging from XXXXXXXXXX% to XXXXXXXXXX% per month, calculated on the redemption value, redeemable at the holder's option at the paid-up capital amount plus a premium. No price adjustment clause will be included in the share attributes of the "XXXXXXXXXX" class shares.
13. B will transfer to Newco all the shares he holds of the capital stock of Transferor, namely: XXXXXXXXXX class A shares and XXXXXXXXXX class D shares.
In exchange, B will receive XXXXXXXXXX class "XXXXXXXXXX" shares and XXXXXXXXXX class "XXXXXXXXXX" shares of the capital stock of Newco. The value of the "XXXXXXXXXX" shares issued by Newco will be equal to the FMV of the A and D shares of the capital stock of Transferor transferred by B to Newco, less $XXXXXXXXXX.
B and Newco will make the subsection 85(1) election in prescribed form and within the time period set out in subsection 85(6) in respect of the shares of the capital stock of Transferor that are transferred to Newco. The Agreed Amount for each class of shares will be the lesser of the ACB and FMV of the shares being transferred.
The PUC of the "XXXXXXXXXX" and "XXXXXXXXXX" class shares of the capital stock of Newco will be determined in accordance with the provisions of paragraph 84.1(1)(a).
The terms of the agreement relating to the transfer of the shares of the capital stock of Transferor by B to Newco will not include a price adjustment clause.
After the transfer, Transferor will be a "connected corporation" with Newco pursuant to subsection 186(4).
14. The proposed distribution of the property of Transferor to Newco will be made on the basis of the consolidated net asset value method accepted by the CRA. Immediately prior to the distribution described in paragraph 16 below, the property of Transferor will be classified into the following three types of property for purposes of the definition of "distribution" in subsection 55(1):
14.1. “Cash and near cash property" ("cash") will be one type of property. Cash of Transferor will consist of cash on hand, accounts receivable, income taxes receivable, XXXXXXXXXX, cash surrender values of life insurance and prepaid expenses. For greater certainty, funds received by Transferor from the receipt from its XXXXXXXXXX accounts will be included in cash.
14.2. “Investment property" will be a second type of property. Investments will include all property of Transferor, other than cash, the income from which constitutes income from property or from a "specified investment business" as defined in subsection 125(7). For greater certainty, investments will include, inter alia, the excess of the FMV of the life insurance policy over the cash surrender value.
14.3. The final type of property will be "business property". Business property will include all property of Transferor, other than cash and investments, the income from which constitutes income from a business, other than a "specified investment business" as defined in subsection 125(7).
For greater certainty, the various tax accounts of Transferor, including, but not limited to, the CDA, GRIP, ERDTOH and NERTOH, will not be considered to be property for the purposes hereof.
15. For the purposes of calculating the net FMV of each type of property of Transferor, immediately prior to the transfer of property referred to in paragraph 16 below, the FMV of the debts of Transferor will be allocated to and deducted from the FMV of each type of property in accordance with the following steps:
15.1. Current liabilities will be allocated to each cash property in the proportion that the FMV of each such property is of the FMV of all cash property. Current liabilities will consist of bank overdrafts, bank loans, accounts payable, accrued expenses, taxes payable and due on acquisition of property, plant and equipment if applicable.
15.2. Debts, other than current liabilities, that pertain to a particular property will then be allocated to the particular property to the extent of its FMV and any liability that pertains to a type of property, but not to a particular property, will then be allocated to that type of property. Indebtedness that forms part of Transferor's long-term debt (including the portion payable in the short term) will be indebtedness to which this paragraph or the next paragraph applies.
15.3. Debts, other than current liabilities, that do not pertain to a particular property but that pertain to a type of property will be allocated to the type of property to which it pertains, to the extent of the FMV of that type of property.
15.4. If applicable, any liabilities remaining after the allocations referred to in paragraphs 15.1 to 15.3 above will then be allocated to the FMV of each type of property in proportion to the FMV of each type of property, such fair market values being determined after the allocations referred to in paragraphs 15.1 to 15.3 above and up to the FMV of that type of property determined after the allocations referred to in paragraphs 15.1 to 15.3 above.
16. Transferor will transfer to Newco a portion of its property and Newco will assume a portion of Transferor's liabilities, such that Newco will receive its pro rata share of the net FMV of the "cash", "investment property" and "business property" held by Transferor immediately prior to the transfer. This pro rata share of the net FMV of the property so distributed to Newco will be based on the FMV of the shares of Transferor held by Newco immediately before the distribution being the FMV of all the issued and outstanding shares of the capital stock of Transferor immediately before the transfer. Such transfer will constitute a distribution.
There will be no property transferred by Transferor to Newco with a FMV less than the cost amount of the property to Transferor.
Transferor will transfer to Newco, inter alia, the following property: certain current property, XXXXXXXXXX, land, buildings, machinery, rolling stock, XXXXXXXXXX.
Transferor and Newco will make the election provided for in subsection 85(1) in the prescribed form and within the prescribed time set out in subsection 85(6) in respect of each property transferred to Newco that will constitute Eligible Property.
The Agreed Amount for Transferor and Newco for each transferred property that will be Capital Property other than Depreciable Property will be equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii). However, paragraph 85(1)(b) may apply to certain property.
The Agreed Amount agreed to by Transferor and Newco for each transferred property that is Depreciable Property will be the least of the amounts described in subparagraphs 85(1)(e)(i), (ii) and (iii).
Specifically, Transferor will also transfer an undivided XXXXXXXXXX% interest in the life insurance policy to Newco. The provisions of subsection 148(7) will apply such that Transferor will be deemed to acquire the right to receive proceeds of disposition equal to XXXXXXXXXX% of the greater of (i) the CSV of the life insurance policy at the time of disposition, (ii) the FMV, calculated at that time, of any consideration given for the interest, and (iii) the policyholder's adjusted cost basis of the interest immediately before that time. Newco will be deemed to acquire that interest in the life insurance policy at a cost equal to that same amount. In addition, paragraph 56(1)(j) and the provisions of subsection 148(1) will apply to require Transferor to include in computing its income for a taxation year, in respect of the disposition of its interest in the life insurance policy, the amount, if any, by which the proceeds of disposition of its interest in the life insurance policy exceeded the adjusted cost basis to Transferor of that interest immediately before the disposition. The income inclusion to Transferor resulting from this transfer is estimated to be $XXXXXXXXXX.
Transferor and Newco will not make an election under subsection 85(1) in respect of the transfer of the interest in the life insurance policy.
The terms of the agreement relating to the transfer of the Transferor Property by Transferor to Newco will not include a price adjustment clause.
17. Transferor will receive as consideration for the property transferred to Newco:
17.1. The assumption by Newco of the liabilities of Transferor that have been allocated (for the purposes of determining the net FMV of each type of property) to the property to be transferred to Newco by Transferor;
17.2. XXXXXXXXXX class "XXXXXXXXXX" shares of the capital stock of Newco. The redemption value of the XXXXXXXXXX Class "XXXXXXXXXX" shares will be equal to the excess of the total FMV of the property transferred by Transferor to Newco over the total principal amount of the liabilities assumed by Newco. The total amount of the FMV of the consideration represented by the liabilities to be assumed by Newco and allocated as consideration for each property that will be an Eligible Property will not exceed the Agreed Amount (as determined in accordance with the rules described in paragraph 16 above) in respect of the property.
The total amount of the FMV of the consideration represented by the liabilities to be assumed by Newco and allocated as consideration for each property that will not be an Eligible Property will not exceed the FMV in respect of the property.
The PUC of the XXXXXXXXXX Class "XXXXXXXXXX" shares of the capital stock of Newco will be determined in accordance with the provisions of subsection 85(2.1). After the transfer of property, Newco will be "connected" with Transferor pursuant to subsection 186(4).
Immediately after the issuance of the "XXXXXXXXXX" Class Shares by Newco to Transferor as consideration for the property transferred to Newco and before the redemption of those shares described below in paragraph 18, an agreement in respect of those "XXXXXXXXXX" Class Shares will be entered into specifying an amount in respect of each such share for which the share is to be redeemed, acquired or cancelled for the purposes of subsection 191(4). The amount so specified in respect of each such "XXXXXXXXXX" Class Share will be an amount expressed as a dollar amount, will not be determined by formula or subject to subsequent modification and will not exceed the FMV immediately before the entering into of the agreement, of each of the "XXXXXXXXXX" Class Shares in the capital stock of Newco so issued.
18. Before the end of Newco's taxation year, Newco will purchase for cancellation the XXXXXXXXXX Class "XXXXXXXXXX" shares of its capital stock owned by Transferor. In return, Newco will issue to Transferor a non-interest bearing note payable on demand ("Transferor Note"), the principal amount of which will be equal to the redemption value of the XXXXXXXXXX Class "XXXXXXXXXX" Shares. Transferor will accept the note payable by Newco as full and absolute payment for the purchase for cancellation of the XXXXXXXXXX Class "XXXXXXXXXX" shares.
Upon such purchase of shares, Newco will be deemed to have paid and Transferor will be deemed to have received a dividend pursuant to subsection 84(3) in respect of the purchase for cancellation of the XXXXXXXXXX Class "XXXXXXXXXX" Shares in an amount equal to the amount by which the repurchase amount for the XXXXXXXXXX Class "XXXXXXXXXX" Shares exceeds their PUC. This dividend will be a Taxable Dividend as defined in subsection 89(1).
19. Newco will complete its first fiscal period.
20. After the end of Newco's first fiscal period, Transferor will purchase for cancellation the XXXXXXXXXX Class A shares and the XXXXXXXXXX Class D shares of its capital stock held by Newco. The total purchase price will be the FMV of the shares purchased. In consideration, Transferor will issue to Newco a non-interest bearing demand note ("Newco Note") with a principal amount equal to the purchase price of the Purchased Shares. Newco will accept the note payable by Transferor as full and absolute payment for the purchase of such shares.
21. Upon the purchases of such shares of the capital stock of Transferor, Transferor will be deemed to have paid and Newco will be deemed to have received a dividend pursuant to subsection 84(3) in respect of the purchase in an amount equal to the amount by which the purchase price of the shares exceeds their PUC. The dividend resulting from the purchase will be a Taxable Dividend within the meaning of the definition in section 89(1).
22. Shortly thereafter, the Transferor Note and the Newco Note will be extinguished by set-off pursuant to XXXXXXXXXX.
23. Newco and Transferor will operate independently and separately.
24. A and Child 1 will take an active and continuous part in the operation of Transferor.
25. B and Child 2 will take an active and continuous part in the operation of Newco.
26. Approximately one week after the Proposed Transactions are completed, B will give XXXXXXXXXX "XXXXXXXXXX" shares of the capital stock of Newco to Child 2.
27. No later than XXXXXXXXXX months after the Proposed Transactions are completed, A will exchange XXXXXXXXXX Class A shares of the capital stock of Transferor for Class B shares of the capital stock of Transferor. Section 51 will apply to this exchange. The Class B shares issued will be non-voting, non-participating, with a non-cumulative preferential dividend of XXXXXXXXXX% per month, redeemable at the option of the holder at the paid-up capital amount plus a premium.
28. Thereafter, A will give XXXXXXXXXX Class A shares of the capital stock of Transferor to Child 1.
29. Transferor and Newco will make a demand pursuant to XXXXXXXXXX.
30. Upon completion of the Proposed Transactions described in paragraphs 8 to 22, Newco will either purchase XXXXXXXXXX property with a value of $XXXXXXXXXX or purchase shares of the capital stock of a corporation holding XXXXXXXXXX property with a value of $XXXXXXXXXX. In the latter case, the acquired corporation will be merged into Newco or wound up into Newco under subsection 88(1).
PURPOSE OF PROPOSED TRANSACTIONS
31. A and B have been operating their business within Transferor for several years. A and B have agreed to divide the property used in the business of Transferor in a butterfly reorganization to enable them to continue to operate the business independently, through separate corporations, with their respective families. In addition, the integration of the children of each into Newco and Transferor provides them with significant operational benefits (XXXXXXXXXX, etc.).
ADDITIONAL INFORMATION
32. The contact details of the taxpayers concerned by the advance rulings are:
XXXXXXXXXX
33. All material transactions that have been undertaken prior to the submission of the request for advance rulings or that may be undertaken after the conclusion of the Proposed Transactions are described herein.
34. Other than the Proposed Transactions described herein, Transferor has not acquired and will not acquire any property, and has not incurred and will not incur any liabilities, in contemplation of and prior to the distribution made in the butterfly reorganization that is the subject of the Proposed Transactions.
35. Except as described herein, Transferor and Newco will not dispose of any property to any person unrelated to the vendor or any partnership in connection with the butterfly reorganization that is the subject of the Proposed Transactions.
36. Other than the Proposed Transactions described herein, there will be no acquisition of control of Transferor and Newco in the course of the series of transactions or events comprising the Proposed Transactions described herein.
37. Transferor and Newco are not, and neither of them will be at the time of the Proposed Transactions, a "specified financial institution" within the meaning of subsection 248(1).
38. None of the shares of Transferor and Newco have been or will be at any time during the term of the series of Proposed Transactions:
- subject to a guarantee agreement as referred to in section 112(2.2);
- subject to a "dividend rental arrangement" as defined in subsection 248(1), as referred to in subsection 112(2.3);
- issued or acquired in connection with a transaction, event or series of transactions or events of the type referred to in subsection 112(2.5).
39. As a result of the proposed transactions, Transferor will continue to operate the retained portion of the business. Similarly, Newco will continue to operate the portion of the business acquired from Transferor.
ADVANCE RULINGS GIVEN
Provided that the statement of facts, the Proposed Transactions, the Additional Information and the Purposes of Proposed Transactions constitute full disclosure of all relevant facts and of all the proposed transactions, and provided that the transactions are carried out as described above, our decisions are as follows:
A. Provided that there is no transaction, other than a Proposed Transaction described herein, that is part of a series of transactions or events (within the meaning of section 248(10)) that includes the Proposed Transactions, and that is:
(a) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);
(b) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);
(c) an acquisition of shares in the circumstances described in subparagraph 55(3.1)(b)(iii);
(d) an acquisition of property in the circumstances described in paragraphs 55(3.1)(c) and 55(3.1)(d);
Taxable Dividends resulting from the transactions described in paragraphs 18 and 20 above will not give rise to the application of subsection 55(2), by virtue of paragraph 55(3)(b).
B. The Taxable Dividends resulting from the transactions described in paragraphs 18 and 20 above and deemed to be received by Transferor and Newco
(i) will be included in computing the income of Transferor and Newco, as the case may be, pursuant to paragraphs 12(1)(j) and 82(1)(a);
(ii) will not be included in the proceeds of disposition of the shares pursuant to paragraph (j) of the definition "proceeds of disposition" in section 54;
(iii) will be deductible in computing the taxable income of Transferor and Newco, as the case may be, pursuant to subsection 112(1);
(iv) in addition, any loss on the disposition of those shares will be reduced by the amount of those dividends pursuant to subsection 112(3).
C. For the purposes of determining the Agreed Amount in respect of the Depreciable Property of Transferor that will be transferred by Transferor to Newco, as described in paragraph 16 above, the reference in subparagraph 85(1)(e)(i) to "... the undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition …" will be interpreted to mean "that proportion of the taxpayer's undepreciated capital cost of all property of that class immediately before the disposition that the taxpayer's FMV of the transferred property of that class is of the taxpayer's FMV of all property of that class immediately before the disposition.
D. The settlement of the Newco Note and the Transferor Note as described in paragraph 22 will not result in a "forgiven amount" as defined in subsection 80(1).
E. Provided that Newco is not entitled to a DR in its taxation year in which it is deemed to have paid the dividend, as described in paragraph 18 of the Proposed Transactions, Transferor will not be subject to Part IV tax in respect of the dividend deemed to be received pursuant to paragraph 186(1)(b).
F. As Transferor will be entitled to a DR pursuant to subsection 129(1) in its taxation year in which it is deemed to have paid the dividend, as described in paragraphs 20 and 21 of the Proposed Transactions, Newco will be subject to Part IV tax in respect of the deemed dividend received to the extent provided for in paragraph 186(1)(b).
G. The Taxable Dividends resulting from the transactions described in paragraphs 18 and 20 above and deemed to have been received by Transferor and Newco, as the case may be, will be deemed to be "excluded dividends" within the meaning of section 187.1 and subsection 191(1) and will not be subject to Part IV.1 and Part VI.1 tax.
H. Subsections 73(4) and (4.1) will apply to the contributions described in paragraphs 26 and 28 of the Proposed Transactions such that the proceeds of disposition for A and B, as the case may be, will be equal to the ACB of the contributed shares if, immediately before the transfers of the contributed shares, those shares qualify as shares of the capital stock of a XXXXXXXXXX corporation within the meaning of paragraph XXXXXXXXXX.
I. Subsections 15(1), 56(2), and 246(1) will not apply as a result of and because of the Proposed Transactions.
J. The provisions of subsection 245(2) will not apply as a result of and because of the Proposed Transactions described above to redetermine the tax consequences confirmed in the rulings above.
These rulings are subject to the limitations and general conditions set out in Information Circular 70-6R11 dated April 1, 2021, issued by the CRA and are binding on the CRA, provided that the Proposed Transactions described in paragraphs 8 to 22 are completed prior to the six-month period ending after the date hereof and the Proposed Transactions described in paragraphs 26 to 30 are completed as contemplated in this letter. These decisions are based on the current Act and do not take into account the proposed amendments to it.
OTHER COMMENTS
The decisions rendered should not be construed as an acquiescence by the CRA that:
(a) we have considered the other tax consequences that may result from the Proposed Transactions set out herein;
(b) the amount allocated to a property in the Statement of Facts and Proposed Transactions truly represents the FMV or ACB of a property, or the PUC amount of a share; and
(c) the amount attributed to a corporation's CDA, GRIP or ERDTOH/NERDTOH truly represents the CDA, GRIP or ERDTOH/NERDTOH such corporation.
The statement of our fees for the time spent on your file will be sent to you under separate cover.
Best regards,
XXXXXXXXXX
for the Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch