Thank you, Mr. Chair, members of the committee.
I'm here today with Sandra Phillips, the associate assistant deputy attorney general of the tax law services of the Department of Justice; Sean Keenan, director of the personal income tax division of the Department of Finance; and Geoff Trueman, who is director of the business income tax division of the Department of Finance.
To give you a brief overview, I'll go through the measures as set out in the summary, and then we can turn to the committee's specific questions.
Part 1 contains a number of measures that were announced in budget 2013. The first relates to the adoption expense tax credit. Specifically, certain expenses are eligible for the adoption expense tax credit if they are incurred during what's known as the adoption period. What this measure does is to extend the adoption period by allowing it to start at the earlier of the time that an application to register with a provincial ministry responsible for adoption is made, or with an adoption agency licensed by a provincial government, and the time at which an application for adoption is made to a Canadian court.
The second measure relates to the first-time donor super credit. This measure provides for an additional 25% tax credit for a first-time donor on monetary gifts of up to $1,000 in donations. A first-time donor is defined in the legislation as a person who has not made a donation since 2007, and this credit is available on a one-time basis for taxation years 2013 to 2017. The credit can be split between an individual and a spouse.
The next measure relates to the deductibility of expenses for safety deposit boxes. This measure provides that expenses for the use of a safety deposit box of a financial institution will no longer be deductible. This applies to taxation years that begin after March 20, 2013.
The next measure relates to the dividend tax credit. In order to ensure better integration of dividends other than eligible dividends received by an individual, this measure adjusts the gross-up factor and dividend tax credit associated with dividends.
The next measure relates to taxes in dispute and charitable donation tax shelters. This measure allows the Canada Revenue Agency to take collection action on up to 50% of the taxes, interest, and penalties in dispute in respect of a tax shelter that involves a charitable donation. That's in respect of the donor and the donation tax shelter.
The next measure relates to the mineral exploration tax credit for flow-through share investors. This measure extends that credit for one additional year, and it's applicable to flow-through share agreements entered into before April 2014.
The next measure relates to manufacturing and processing machinery and equipment. It provides that the 50% straight-line capital cost allowance rate currently available to machinery and equipment on a temporary basis be extended for an additional two years. It will apply in respect of equipment and machinery acquired in 2014 and 2015.
The next measure relates to reserves for future services and provides that the reserve currently available under paragraph 20(1)(m) of the Income Tax Act in respect of future services and goods to be provided is not available in the context of reclamation obligations.
The next measure relates to credit unions and would provide a phase-out of the additional deduction, allowing credit unions to access the small business tax rate on amounts that would not be eligible for the small business rate. This measure will be phased out over the current year to 2016.
The next measure relates to information requirements regarding unnamed persons. Currently, in order to obtain a judicial authorization to require a third party to provide information in respect of an unnamed person, the CRA must apply to a court for judicial authorization using an ex parte application. That is an application without notice to the third party. What this measure would do is actually streamline the measure by requiring the CRA to provide notice to the third party. This would allow the third party to participate in the actual judicial application and obviate the need for potential judicial review after the application has been heard.
The next measure relates to international banking centres. In recognition of the fact that the international banking centre rules haven't been used by any financial institution since 2007, what this measure would do is repeal the international banking centre rules in section 33.1 of the Income Tax Act.
There are additional measures contained in part 1. The first relates to caseload management for the Tax Court of Canada. This measure would do three things. It would update the monetary limits for access to informal appeals. In the case of income tax appeals, it would change the informal appeal limit from amounts of tax of $12,000 to $25,000. In respect of losses of a taxpayer, it would change the informal appeal threshold from $24,000 to $50,000. It would introduce an informal procedure appeal limit in respect of GST/HST appeals of $50,000.
As well, it would allow the Tax Court to separate issues. Currently, the Tax Court must deal with all issues at once relating to a particular taxation year of a taxpayer. What this measure would do is allow taxpayers and CRA to agree to deal with some issues separately. Perhaps if there's a question of law that could advance more quickly, that could be dealt with in one decision, and then the questions of fact could take their normal course without holding up the question of law issue. As well, on application, it would allow the Tax Court to hear appeals affecting groups of two or more taxpayers that arise out of substantially similar transactions and provide that the results of any applicable decision would be binding on all the taxpayers involved.
The bill also provides a measure to streamline the provision of relief for Canadian Forces members and police officers deployed on international operational missions. Currently, for missions that are assessed at risk level 2, in order to receive the tax relief available under the Income Tax Act, the mission must be prescribed by regulation. What the new measure would do is allow the Minister of Finance, on recommendation of the Minister of National Defence or the Minister of Public Safety, to designate the mission, and that designation would implement the tax relief for the members involved.
Part 1 also contains a technical amendment with respect to registered disability savings plans. In order to clarify the application of a measure that was introduced in budget 2012, allowing qualifying family members to open an RDSP for a beneficiary whose contractual competence is in question, this measure would simply ensure it is clear that the qualifying family member who opens the RDSP can continue to hold that RDSP on behalf of the beneficiary.
The final measure contained in part 1 of the bill relates to Canadian-source income for non-resident pilots. In a recent Tax Court of Canada case, Price v. The Queen, the Tax Court indicated how complex it was to determine the Canadian-source income of non-resident pilots. In order to deal with this issue, we have introduced a simplified determination of income for non-resident pilots. If a flight takes off and lands in Canada, the income associated with that flight will be Canadian-source income. If the flight takes off or lands in Canada and the other end of the flight is outside Canada, it will be 50% Canadian income. If a flight takes off outside Canada and lands outside Canada, there will be no Canadian-source income.
Those are the measures that are contained in part 1.