On Thursday, January 11, 2024, I attended the Tax Court of Canada (TCC) as an observer for an appeal on the denial of a New Housing Rebate (NHR). What you may or may not know is that I was a GST/HST Rulings officer at the Canada Revenue Agency (CRA) for 5 years, and am intimately aware of the CRA’s position on the legislative requirements for eligibility on the NHR and the numerous court cases on the matter. However, seeing the process in person was something entirely different. First, this case was done under the Informal Procedure and the rules of evidence and argumentation are relaxed for the purposes of leveling the playing field a little for the taxpayer. Justice Graham did an amazing job explaining to the unrepresented taxpayer the statutory requirements of the proceedings and how the onus was on the taxpayer to “demolish” the assumptions the CRA based their denial of the rebate on. The taxpayer was then invited onto the stand to explain to the court his version of the facts in respect of his eligibility for the rebate. He explained that in 2013 he and his common law wife, at the time, had entered into a purchase and sale agreement (APS) with a builder for a new residential complex (House) approximately an hour from their present residence. The project was delayed by some time and they were only able to close with the builder in late August 2016. Some evidence was produced by the taxpayer, including an invoice from a moving company, that they had moved their family and a minimum of their possessions into the House as early as was practicable, September 3, 2016. The taxpayer also explained that soon after moving into the House they encountered some practical issues with residing there, including a conflict with their immediate neighbour, and a long commute each day to deliver and pickup his wife and family from their respective workplaces and schools, often resulting in long days driving back and forth from the House. The taxpayer concluded that they had entered into the APS to make the House their primary place of residence but that various frustrations including conflict with the neighbour and a long and unsafe commute made that intention untenable so they entered into another APS with a different builder for a new residential complex closer to their family duties and responsibilities. The taxpayer then concluded their testimony.
It’s at this point that it’s probably good to give some background to the statute that governs eligibility for this rebate. The Excise Tax Act legislation, in part, is as follows:
254(2) Where
…
(b) at the time the particular individual becomes liable … under an agreement of purchase and sale of the … unit … the particular individual is acquiring the complex or unit for use “as the primary place of residence of the particular individual or a relation of the particular individual”,
…
and
…
(g) either
(i) the first individual to occupy the … unit as a place of residence at any time after substantial completion … is
(A) … the particular individual or a relation of the particular individual,
…
or
(ii) the particular individual makes an exempt supply by way of sale of the … unit and ownership … is transferred to the recipient of the supply before the complex or unit is occupied by any individual as a place of residence or lodging, or exempt supply before occupancy
So, while there are several more conditions that must be met, the main points of contention in this case were paragraphs (b) and (g). Paragraph (b) requires that the individual enter into the APS with the “intention” of occupying the residential complex as a primary place of residence. Paragraph (g) requires that the individual actually occupies the residential complex as a place of residence or makes an exempt sale of the residential complex before it has been occupied as a place of residence or lodging by anyone.
With the legislative explanation out of the way….
The lawyer from the Department of Justice (Respondent) then cross examined the taxpayer regarding the timeline of events that led to the occupation of the House and then subsequent move to the new build approximately 4-6 weeks after moving to the House. This is where the wheels started falling off the case for the taxpayer. They had previously stated that they moved to the new build because their intention to occupy the House was frustrated by unexpected neighbour relations and logistical difficulties. However, the Respondent produced evidence that the taxpayer’s wife entered into another APS years before for the residential complex the family eventually did move into on a permanent and primary basis. The taxpayer themselves was added to the APS for that new residential complex on September 28, 2016, approximately 25 days after moving into the House. The Respondent then followed up with some additional questions for the taxpayer regarding ties to the House, such as proximity to work, school, family, etc., with effectively no indicators of permanency that you would normally see for moving to a new primary place of residence. The Respondent concluded his case.
At this point the taxpayer was given the opportunity to present closing arguments in support of their case but it was clear that the preponderance of the evidence supported the assumptions made by the CRA that the taxpayer and his wife were not eligible for the NHR on the House, and that is how Justice Graham eventually ruled.
An interesting twist came at the end of the trial after the case had been decided. By the time of the trial the taxpayer and their wife had separated and appeared estranged. The Taxpayer asked that their former wife be held responsible for half the amount owing (approximately $12k). Justice Graham did resume the court to look at the statutes to determine if the Excise Tax Act commented on joint and several liability in respect of the NHR and co-applicants. He found no statute to decide this matter and was prevented by legislative authority to address it in a judgement. My conclusion is that there likely is a court that could address this matter but it must be a court of inherent jurisdiction and not a statutory court.
Anyway, as a former GST/HST Rulings officer for the CRA, I learned more in 3 hours of observing the court in action than I did reading TCC decisions over the previous five years.