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Published: July 10, 2024

Last Updated: July 10, 2024


On June 28, 2024, the Supreme Court released its decisions in Dow Chemical Canada ULC v. The King, 2024 SCC 23 (Dow Chemical) and its companion appeal, Iris Technologies Inc v. A.G. of Canada, 2024 SCC 24 (Iris Technologies). In both cases, the Supreme Court clarified the jurisdictional boundaries between the Tax Court and the Federal Court.

Both cases confirmed the Federal Court’s jurisdiction over challenges to discretionary decisions by the CRA. This article will further elaborate on the holding of these two cases and potential impact on taxpayers in dispute with the CRA.

Background Information

As a general matter, both the Tax Court and the Federal Court have authority over general tax matters. However, their scope of power differs upon a closer examination.

The Tax Court is a statutory court and empowered to review various tax matters, including, most notably, matters under the Income Tax Act (ITA), the Excise Tax Act (ETA) dealing with goods and services tax (GST/HST). It has no inherent jurisdiction and can only review appeals from CRA assessments made under these Acts.

On the other hand, the Federal Court is established to review decisions on diverse federal matters made by federal boards and tribunals. Tax law is a federal matter, as classified under s. 91 of the Constitution Act 1867, and the CRA is a federal administrative agency specializing in tax affairs. The Federal Court has the authority to review discretionary decisions made by the Minister of National Revenue, but not appeals regarding tax assessments.

In addition to the difference in the matters that can be heard at the two courts, their scope of authority also differs by remedial power. The Federal Court has broad remedies when reviewing a CRA discretionary decision since it is empowered to compel the Minister to take, or refrain from taking, certain actions. However, compared to the Federal Court, the Tax Court can only “remit a decision back to the Minister to reconsider.”

Tax Assessment vs Discretionary Decision

As a general matter, all tax decisions can be roughly divided into two categories, tax assessment decisions and discretionary decisions.

Tax assessment decisions are decisions concluding the amount of tax owed or refunds entitled to by a taxpayer. Tax assessments are highly objective and based on investigation and calculation that allow minimal discretion for individual CRA officials in the decision-making process. For example, assessing the amount of total income earned is a tax assessment decision.

A discretionary decision is when the CRA is allowed, by law, to have some leeway in deciding how to apply tax laws to specific cases. In these matters, the CRA is entitled to consider a wide variety of relevant factors, depending on the particular circumstances of each individual case. For example, the eligibility under the Voluntary Disclosure Program determination is a discretionary decision. As discussed above, discretionary decisions fall within the scope of authority of the Federal Court, where the Federal Court will assess whether the discretionary decision is “reasonable.

Dow Chemical and Iris Technologies

In Dow Chemical, the appellant taxpayer challenged a CRA decision of denying a downward transfer pricing adjustment under subsection 247(10). The Supreme Court clarified that the Federal Court has exclusive jurisdiction over discretionary decisions of the Minister under subsection 247(10), regardless of whether such a decision results in tax assessment. The Supreme Court rejected the argument that such a challenge can be pursued at the Tax Court for two reasons: (1) the Tax Court has jurisdiction only over outcomes, not the conduct of the Minister, and (2) the Tax Court is not equipped with proper statutory authority to grant the proper remedies.

In Iris Technologies, the appellant taxpayer challenged CRA’s audit of its GST/HST returns on procedural fairness grounds. The Supreme Court held that the “essential nature or true character” of the taxpayer’s complaint is on the correctness of the CRA decision, instead of the exercise of the discretion, as alleged by the taxpayer. The main implication of Iris Technologies is that, when determining whether to allow an application to proceed, courts ought to focus only on the true nature of the taxpayer’s allegation rather than the language the taxpayer used to phrase it.

Conclusion: Powers of Each Court

To summarize, Dow Chemical and Iris Technologies confirmed the following. The Tax Court has the authority to review various tax matters, including assessments made under the Income Tax Act and the Excise Tax Act. The Federal Court can review discretionary decisions made by the Minister of National Revenue but not tax assessments themselves. In addition, the Federal Court has broader remedies when reviewing a CRA discretionary decision, while the Tax Court is more limited in the remedies it can provide.

Canadian Tax Lawyer Assistance

If you are in a dispute with the CRA, get in touch with our experienced tax law firm in Toronto. Effective planning and strategy are necessary at all stages of the tax litigation process. Understanding the unique rules of the Tax Court and the various powers of the Federal Courts is critical to launching an appeal in the proper court and for your success. Our Canadian tax law firm can give you the counsel and representation that you need to be successful in your dispute with the CRA in the Tax Court of Canada as well as in the Federal Court.

Pro Tax Tips: Jurisdiction of Each Court

If you are in dispute with the CRA and wish to appeal a tax decision, here is what you should keep in mind regarding the jurisdictional boundaries between the Tax Court and the Federal Court:

  • Identify the type of decision: Before appealing, determine if you’re challenging a tax assessment or a discretionary decision by the CRA.
    • Tax Assessment: This refers to the amount of tax owed or refund issued by the CRA based on your tax return.
    • Discretionary Decision: This involves the CRA exercising flexibility in applying tax laws, such as waiving a penalty.
  • Choose the right court:
    • Tax Assessment Appeals: Go to the Tax Court of Canada. They specialize in reviewing assessments based on the correct application of tax law.
    • Discretionary Decision Appeals: File an appeal with the Federal Court. They assess whether the CRA acted reasonably in using their discretion.
  • Seek professional advice: Tax law can be complex. Consider consulting a top Canadian tax litigation lawyer or advisor to ensure you’re following the proper appeals process for your situation.


How do I know if my tax matter is a discretionary or assessment decision?

A: Essentially, this question can be answered by examining whether the CRA used their judgment to apply the tax law in your specific situation. You could also look for keywords: discretionary decisions often involve terms like “waiver,” “penalty,” “interest,” or “payment plan.” Assessment issues usually focus on specific numbers like income, deductions, or tax owed. If you’re unsure, it’s always best to consult a tax professional. They can help you analyze your situation and determine the appropriate course of action.

What happens if I appeal to the wrong court?

While the courts may try to transfer your case to the appropriate court, it can cause delays and made cause you to lose your appeal rights because you have missed the appeal deadline in the proper court. Consulting a top Canadian litigation tax lawyer can help ensure you file your appeal in the right place from the outset.

Disclaimer: This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.

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