CRA scrambled to announce 11th-hour 'bare trust' reporting pause, internal emails suggest

A last-minute decision to pause "bare trust" reporting requirements left officials at Canada's tax agency scrambling to inform the public about the changes, internal emails suggest.

The Canada Revenue Agency (CRA) announced in March — with just days to go before the filing deadline —  that Canadians with bare trusts would not be required to file a T3 tax return form under new reporting rules for trusts that took effect this past tax season.

A bare trust relationship is one where a person, known as a trustee, has legal ownership of a property or asset but doesn't hold beneficial ownership. In such a relationship, a "trustee can take no action without instructions from that beneficiary and the trustee's only function is to hold legal title to the property," according to the government's definition.

While some bare trust relationships can be complex, others can be rather simple — such as a shared bank account or a parent being named on the title of a child's house in order to help them qualify for a mortgage.

Internal emails, obtained through an access to information request, show a flurry of back-and-forth discussions among CRA officials in the days leading up to the announcement. Much of the discussion was centred on the wording of the announcement itself.

The announcement was posted on the CRA's website the afternoon of March 28. But the documents attached in the emails suggest public servants began working on the wording of the announcement on March 25, just over a week before the filing deadline.

CBC News asked the CRA when the decision to pause the filing requirements was made internally. The agency didn't pinpoint when that decision was made.

Documents suggest the government still planned to go through with the filing requirement only a few weeks before the pause was announced. An email dated March 12 shows the agency was seeking approval from the minister's office for an information package that would be sent to MPs and stakeholders laying out the filing requirements.

A number of the emails were marked "urgent" or "high importance" as the filing deadline approached.

"[The minister's office] would like to have this tax tip published tomorrow, as long as the required documents from CRA and Finance [department] are in order," an email dated March 26 says. That deadline was ultimately missed.

One email shows the tax agency was waiting for approval from the Privy Council Office on the day the announcement was made.

The need to present 'clearer narrative'

The CRA also appears to have rejigged its communications strategy in the wake of the announcement and the subsequent media attention.

"There has been criticism in the media and from stakeholders regarding the impact of the decision to exempt bare trusts from the new reporting requirements," says an email sent almost three weeks after the announcement was made.

A subsequent email indicates that the CRA began working on a new question-and-answer document to provide guidance for the media relations team. The new media lines were created "with the intention of providing a clearer narrative regarding the agency's decision to waive the filing requirement," one email reads.

The "clearer narrative" doesn't appear to have been approved until early May, more than a month after the pause was announced.

No possibility of reimbursement

The new question-and-answer document also suggests that the government wasn't initially anticipating complaints from Canadians who had paid hundreds of dollars in tax preparation fees for paperwork they ultimately weren't required to file.

More than 44,000 Canadians filed T3 forms for their bare trusts, Revenue Minister Marie-Claude Bibeau told the House of Commons in June. Some of those taxpayers asked whether the government would be reimbursing them for the costs associated with filing before the pause was announced.

CBC News asked the CRA in early April about Canadians who had paid tax preparation fees. The agency didn't provide a definitive answer on whether reimbursement was a possibility at the time.

The internal emails show the CRA didn't have a solid answer until the new media lines were approved in early May.

"There is no provision of the Income Tax Act that would apply to permit the CRA to reimburse taxpayers for legal and accounting fees incurred in preparing their tax returns," one of the draft answers reads.

There were several emails regarding the reimbursement question and response. Much of the discussion over the precise wording has been redacted from them.

Canada's taxpayer ombudsperson announced in July that he's looking into whether the rollout of a new bare trust reporting requirement respected taxpayers' rights.

The CRA says the Department of Finance has proposed amendments to the bare trust reporting requirements which are still being finalized.

"On August 12, 2024, the Department of Finance announced proposed amendments to the trust reporting rules and invited Canadians to share their feedback by September 11, 2024. The CRA will provide updated information as it becomes available," the agency told CBC in an email on Thursday.