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Bill C-25

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	Offset of Refund Interest and Arrears Interest
Definitions	161.1 (1) The definitions in this subsection apply in this section.
``accumulated overpayment amount'' « trop-payé accumulé »	``accumulated overpayment amount'', of a corporation for a period, means the overpayment amount of the corporation for the period together with refund interest (including, for greater certainty, compound interest) that accrued with respect to the overpayment amount before the date specified under paragraph (3)(b) by the corporation in its application for the period.
``accumulated underpayment amount'' « moins-payé accumulé »	``accumulated underpayment amount'', of a corporation for a period, means the underpayment amount of the corporation for the period together with arrears interest (including, for greater certainty, compound interest) that accrued with respect to the underpayment amount before the date specified under paragraph (3)(b) by the corporation in its application for the period.
``arrears interest'' « intérêts débiteurs »	``arrears interest'' means interest computed under paragraph (5)(b), 129(2.2)(b), 131(3.2)(b), 132(2.2)(b), 133(7.02)(b) or 160.1(1)(b), subsection 161(1) or (11), paragraph 164(3.1)(b) or (4)(b) or subsection 187(2).
``overpaymen t amount'' « trop-payé »	``overpayment amount'', of a corporation for a period, means the amount referred to in subparagraph (2)(a)(i) that is refunded to the corporation, or the amount referred to in subparagraph (2)(a)(ii) to which the corporation is entitled.
``refund interest'' « intérêts créditeurs »	``refund interest'' means interest computed under subsection 129(2.1), 131(3.1), 132(2.1), 133(7.01) or 164(3) or (3.2).
``underpayme nt amount'' « moins-payé »	``underpayment amount'', of a corporation for a period, means the amount referred to in paragraph (2)(b) payable by the corporation on which arrears interest is computed.
Concurrent refund interest and arrears interest	(2) A corporation may apply in writing to the Minister for the reallocation of an accumulated overpayment amount for a period that begins after 1999 on account of an accumulated underpayment amount for the period if, in respect of tax paid or payable by the corporation under this Part or Part I.3, II, IV, IV.1, VI, VI.1 or XIV,
	(a) refund interest for the period
	(i) is computed on an amount refunded to the corporation, or
	(ii) would be computed on an amount to which the corporation is entitled, if that amount were refunded to the corporation; and
	(b) arrears interest for the period is computed on an amount payable by the corporation.
Contents of application	(3) A corporation's application referred to in subsection (2) for a period is deemed not to have been made unless
	(a) it specifies the amount to be reallocated, which shall not exceed the lesser of the corporation's accumulated overpayment amount for the period and its accumulated underpayment amount for the period;
	(b) it specifies the effective date for the reallocation, which shall not be earlier than the latest of
	(i) the date from which refund interest is computed on the corporation's overpayment amount for the period, or would be so computed if the overpayment amount were refunded to the corporation,
	(ii) the date from which arrears interest is computed on the corporation's underpayment amount for the period, and
	(iii) January 1, 2000; and
	(c) it is made on or before the day that is 90 days after the latest of
	(i) the day of mailing of the first notice of assessment giving rise to any portion of the corporation's overpayment amount to which the application relates,
	(ii) the day of mailing of the first notice of assessment giving rise to any portion of the corporation's underpayment amount to which the application relates,
	(iii) if the corporation has served a notice of objection to an assessment referred to in subparagraph (i) or (ii), the day of mailing of the notification under subsection 165(3) by the Minister in respect of the notice of objection,
	(iv) if the corporation has appealed, or applied for leave to appeal, from an assessment referred to in subparagraph (i) or (ii) to a court of competent jurisdiction, the day on which the court dismisses the application, the application or appeal is discontinued or final judgment is pronounced in the appeal, and
	(v) the day of mailing of the first notice to the corporation indicating that the Minister has determined any portion of the corporation's overpayment amount to which the application relates, if the overpayment amount has not been determined as a result of a notice of assessment mailed before that day.
Reallocation	(4) The amount to be reallocated that is specified under paragraph (3)(a) by a corporation is deemed to have been refunded to the corporation and paid on account of the accumulated underpayment amount on the date specified under paragraph (3)(b) by the corporation.
Repayment of refund	(5) If an application in respect of a period is made under subsection (2) by a corporation and a portion of the amount to be reallocated has been refunded to the corporation, the following rules apply:
	(a) a particular amount equal to the total of
	(i) the portion of the amount to be reallocated that was refunded to the corporation, and
	(ii) refund interest paid or credited to the corporation in respect of that portion
	is deemed to have become payable by the corporation on the day on which the portion was refunded; and
	(b) the corporation shall pay to the Receiver General interest at the prescribed rate on the particular amount from the day referred to in paragraph (a) to the date of payment.
Consequential reallocations	(6) If a particular reallocation of an accumulated overpayment amount under subsection (4) results in a new accumulated overpayment amount of the corporation for a period, the new accumulated overpayment amount shall not be reallocated under this section unless the corporation so applies in its application for the particular reallocation.
Assessments	(7) Notwithstanding subsections 152(4), (4.01) and (5), the Minister shall assess or reassess interest and penalties payable by a corporation in respect of any taxation year as necessary in order to take into account a reallocation of amounts under this section.
	(2) Subsection (1) applies after 1999.
	49. (1) Clause 163(2)(a)(i)(B) of the Act is replaced by the following:
	(B) the amounts that would be deemed by subsections 120(2) and (2.2) to have been paid on account of the person's tax for the year
	(2) Clause 163(2)(a)(ii)(B) of the Act is replaced by the following:
	(B) the amounts that would be deemed by subsections 120(2) and (2.2) to have been paid on account of the person's tax for the year
	(3) Subsection 163(2.9) of the Act is replaced by the following:
Where partnership liable to penalty	(2.9) Where a partnership is liable to a penalty under subsection (2.4) or section 163.2 or 237.1, sections 152, 158 to 160.1, 161 and 164 to 167 and Division J apply, with any changes that the circumstances require, in respect of the penalty as if the partnership were a corporation.
	(4) Subsection 163(3) of the Act is replaced by the following:
Burden of proof in respect of penalties	(3) Where, in an appeal under this Act, a penalty assessed by the Minister under this section or section 163.2 is in issue, the burden of establishing the facts justifying the assessment of the penalty is on the Minister.
	(5) Subsections (1) and (2) apply to the 1999 and subsequent taxation years.
	50. (1) The Act is amended by adding the following after section 163.1:
	Misrepresentation of a Tax Matter by a Third Party
Definitions	163.2 (1) The definitions in this subsection apply in this section.
``culpable conduct'' « conduite coupable »	``culpable conduct'' means conduct, whether an act or a failure to act, that
	(a) is tantamount to intentional conduct;
	(b) shows an indifference as to whether this Act is complied with; or
	(c) shows a wilful, reckless or wanton disregard of the law.
``entity'' « entité »	``entity'' includes an association, a corporation, a fund, a joint venture, an organization, a partnership, a syndicate and a trust.
``excluded activity'' « activité exclue »	``excluded activity'', in respect of a false statement, means the activity of
	(a) promoting or selling (whether as principal or agent or directly or indirectly) an arrangement, an entity, a plan, a property or a scheme (in this definition referred to as the ``arrangement'') where it can reasonably be considered that
	(i) subsection 66(12.68) applies to the arrangement,
	(ii) the definition ``tax shelter'' in subsection 237.1(1) applies to a person's interest in the arrangement, or
	(iii) one of the main purposes for a person's participation in the arrangement is to obtain a tax benefit; or
	(b) accepting (whether as principal or agent or directly or indirectly) consideration in respect of the promotion or sale of an arrangement.
``false statement'' « faux énoncé »	``false statement'' includes a statement that is misleading because of an omission from the statement.
``gross compensation '' « rétribution brute »	``gross compensation'' of a particular person at any time, in respect of a false statement that could be used by or on behalf of another person, means all amounts to which the particular person, or any person not dealing at arm's length with the particular person, is entitled, either before or after that time and either absolutely or contingently, to receive or obtain in respect of the statement.
``gross entitlements'' « droits à paiement »	``gross entitlements'' of a person at any time, in respect of a planning activity or a valuation activity of the person, means all amounts to which the person, or another person not dealing at arm's length with the person, is entitled, either before or after that time and either absolutely or contingently, to receive or obtain in respect of the activity.
``participate'' « participer »	``participate'' includes
	(a) to cause a subordinate to act or to omit information; and
	(b) to know of, and to not make a reasonable attempt to prevent, the participation by a subordinate in an act or an omission of information.
``person'' « personne »	``person'' includes a partnership.
``planning activity'' « activité de planification »	``planning activity'' includes
	(a) organizing or creating, or assisting in the organization or creation of, an arrangement, an entity, a plan or a scheme; and
	(b) participating, directly or indirectly, in the selling of an interest in, or the promotion of, an arrangement, an entity, a plan, a property or a scheme.
``subordinate' ' « subalterne »	``subordinate'', in respect of a particular person, includes any other person over whose activities the particular person has direction, supervision or control whether or not the other person is an employee of the particular person or of another person, except that, if the particular person is a member of a partnership, the other person is not a subordinate of the particular person solely because the particular person is a member of the partnership.
``tax benefit'' « avantage fiscal »	``tax benefit'' means a reduction, avoidance or deferral of tax or other amount payable under this Act or an increase in a refund of tax or other amount under this Act.
``valuation activity'' « activité d'évaluation »	``valuation activity'' of a person means anything done by the person in determining the value of a property or a service.
Penalty for misrepresentat ions in tax planning arrangements	(2) Every person who makes or furnishes, participates in the making of or causes another person to make or furnish a statement that the person knows, or would reasonably be expected to know but for circumstances amounting to culpable conduct, is a false statement that could be used by another person (in subsection (6) and (15) referred to as the ``other person'') for a purpose of this Act is liable to a penalty in respect of the false statement.
Amount of penalty	(3) The penalty to which a person is liable under subsection (2) in respect of a false statement is
	(a) where the statement is made in the course of a planning activity or a valuation activity, the greater of $1,000 and the total of the person's gross entitlements, at the time at which the notice of assessment of the penalty is sent to the person, in respect of the planning activity and the valuation activity; and
	(b) in any other case, $1,000.
Penalty for participating in a misrepresentat ion	(4) Every person who makes, or participates in, assents to or acquiesces in the making of, a statement to, or by or on behalf of, another person (in this subsection, subsections (5) and (6), paragraph (12)(c) and subsection (15) referred to as the ``other person'') that the person knows, or would reasonably be expected to know but for circumstances amounting to culpable conduct, is a false statement that could be used by or on behalf of the other person for a purpose of this Act is liable to a penalty in respect of the false statement.
Amount of penalty	(5) The penalty to which a person is liable under subsection (4) in respect of a false statement is the greater of
	(a) $1,000, and
	(b) the lesser of
	(i) the penalty to which the other person would be liable under subsection 163(2) if the other person made the statement in a return filed for the purposes of this Act and knew that the statement was false, and
	(ii) the total of $100,000 and the person's gross compensation, at the time at which the notice of assessment of the penalty is sent to the person, in respect of the false statement that could be used by or on behalf of the other person.
Reliance in good faith	(6) For the purposes of subsections (2) and (4), a person (in this subsection and in subsection (7) referred to as the ``advisor'') who acts on behalf of the other person is not considered to have acted in circumstances amounting to culpable conduct in respect of the false statement referred to in subsection (2) or (4) solely because the advisor relied, in good faith, on information provided to the advisor by or on behalf of the other person or, because of such reliance, failed to verify, investigate or correct the information.
Non-applicati on of subsection (6)	(7) Subsection (6) does not apply in respect of a statement that an advisor makes (or participates in, assents to or acquiesces in the making of) in the course of an excluded activity.
False statements in respect of a particular arrangement	(8) For the purpose of applying this section (other than subsections (4) and (5)),
	(a) where a person makes or furnishes, participates in the making of or causes another person to make or furnish two or more false statements, the false statements are deemed to be one false statement if the statements are made or furnished in the course of
	(i) one or more planning activities that are in respect of a particular arrangement, entity, plan, property or scheme, or

Bill C-25

Offset of Refund Interest and Arrears Interest

Misrepresentation of a Tax Matter by a Third Party