Good morning, and thank you, Mr. Chairman.
Thank you for inviting me to appear before this committee to provide some insights into one specific aspect of Bill C-48.
I'm a tax partner at Osler, Hoskin & Harcourt LLP, a national Canadian law firm.
My submission today deals with the proposed technical amendment to section 86.1 of the Income Tax Act, which is included in Bill C-48.
First, let me say that we very much support these amendments, and we commend the members of all parties for indicating their support for Bill C-48.
Second, I would echo the comments of the previous witness to encourage all parties to enact this proposed legislation into law at the earliest opportunity.
Over the last 10 years, and actually a little bit longer than that, our firm has represented the interests of over 80 Canadian individuals who have been patiently waiting for the section 86.1 amendment to become law. While the predicament these individuals find themselves in has a lengthy history, in my five minutes I don't have time to address all of that. In simple terms, the issue is about ensuring that share distributions by certain foreign private corporations receive the same tax treatment to a Canadian taxpayer receiving such shares as share distributions by certain foreign publicly traded corporations.
This discrepancy in treatment arose in June 2001 when Parliament enacted section 86.1 of the Income Tax Act. That's the rule that provides tax-deferred rollover treatment for foreign share distributions, but only for foreign publicly listed corporations. In the situation we were concerned with, the transaction spinoff was by a foreign privately held company—it was implemented in 2000—and it involved the 80-odd Canadian shareholders we represent. They met all of the requirements of the rule, except that the shares of the distributing company were not listed on a U.S. stock exchange.
There were discussions with the Department of Finance, and as a result of that it was recommended to the Minister of Finance and a comfort letter was issued to the effect that section 86.1 would be amended to allow Canadian taxpayers receiving share distributions from certain foreign privately held companies registered with the SEC to get the same treatment. In particular, it was agreed that the registration and disclosure requirements for a private company SEC registrant would be basically analogous to those for a U.S. public company.
A commitment was made by the government of the day to amend section 86.1, a comfort letter was issued in 2001, and despite that, the tax status of these shareholders remains unresolved to this day.
There have been various attempts by successive federal governments to put this amendment through, but they've been unsuccessful, not because the provision was not supported—it was—but because of external events such as elections and other parliamentary priorities.
The passage of time has caused, as you might imagine, additional expense, and in some cases anxiety for these shareholders. I would just emphasize that they're individuals. So we're very pleased to have this amendment included in Bill C-48. Again, we're delighted to have it supported by all the parties represented here at committee today.
The main point we want to reiterate is how important it is to have this amendment passed without further delay. It assures fairness and certainty for your constituents; it ensures equal tax treatment in other provinces and territories with the Province of Quebec, which addressed this inequity in its own taxation act several years ago; and it eliminates unnecessary stress for all those Canadian taxpayers who have been waiting patiently for this matter to be resolved.
We do acknowledge the complex and lengthy history of the file, but we're grateful for the fact that the amendment is going forward. We'd be more than happy to respond to any questions.
Thank you.