Month: April 2021

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Release of the 2021 Canadian Budget

On April 19, 2021, Canada’s Deputy Prime Minister and Minister of Finance, Chrystia Freeland, released the first official budget in the past two years, titled, Federal Budget 2021: A Recovery Plan for Jobs, Growth, and Resilience (the “Budget”).  The Budget proposed over $100 billion in spending, and, among the more significant measures, the Budget proposes to extend the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Rent Subsidy (CERS), and Lockdown Support through September, 2021.  The Budget also introduces a new Canada Recovery Hiring Program.

In summary, the Budget:

  • Puts limitations on interest deductibility by corporations, trusts, and partnerships to a percentage of tax-basis EBITDA;
  • Enhances Canada’s mandatory reportable transaction disclosure rules (subject to a public consultation) and introduces a new “notifiable transaction” regime;
  • Proposes to consult on the transfer pricing rules;
  • Imposes new rules to target hybrid mismatch arrangements;
  • Reduces corporate tax rates on eligible zero-emission technology manufacturing and processing income;
  • Amends the capital cost allowance system by providing for temporary immediate expensing of up to $1.5 million per taxation year of capital property acquisitions to Canadian-controlled private corporations (CCPCs);
  • Provides further details of a proposed digital services tax, to be effective January, 2022;
  • Proposes amendments to the measures announced in the Fall 2020 Economic Statement regarding the new GST/HST rules targeting e-commerce coming into effect July 1, 2021;
  • Proposes a new tax on luxury items (namely, automobiles, planes, and boats) over a certain price threshold; and
  • Proposes a new tax on the unproductive use of Canadian housing owned by foreigners.

If you have any questions regarding the above, please contact Jennifer Leve in our Toronto office at 416-777-4043.

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Taxation

ABOUT THE AUTHOR

Jennifer Leve (Partner, Toronto) is a member of Dickinson Wright’s Tax practice group, focusing her practice primarily on personal and corporate tax planning, corporate reorganizations, wealth management, and trust and estate planning matters. She can be reached at 416-777-4043 or jleve@dickinsonwright.com.

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Tax Treatment of Unemployment Benefits

The federal American Rescue Plan Act signed by President Biden in March 2021 provides that up to $10,200 of state unemployment benefits received by individuals during 2020 are excluded from gross income. Taxpayers are eligible for the exclusion only if federal adjusted gross income is less than $150,000.

The mid-March legislation created some initial confusion regarding filing 2020 individual tax returns, particularly for those individuals that had previously filed their returns. The IRS ultimately advised taxpayers that had previously filed a return that an amended return was not required, rather, the IRS will process previously filed returns and issue tax refunds resulting from the exclusion from gross income.

Those individuals who still need to file their 2020 tax returns by the extended May 17, 2021 due date should report their unemployment benefits on Schedule 1, line 7 of Form 1040, and claim the excludable benefits, up to $10,200, as a subtraction on Schedule 1, line 8.

The Michigan Department of Treasury recently issued guidance for individuals filing Michigan tax returns, essentially following federal tax law. The Department has not yet issued guidance for individuals that already filed before the new law. Michigan is coordinating with the IRS to determine whether a Michigan return can be processed and a refund issued without the need for an amended Michigan return.

The laws of other states may vary on the treatment of these issues.

For more information, please contact Tom Hammerschmidt in the Firm’s Ann Arbor office at (734) 623-1602 or any of the Firm’s tax specialists located in our Dickinson Wright U.S. offices.

Related Services

Taxation

ABOUT THE AUTHOR

Tom Hammerschmidt (Member, Ann Arbor) is a certified public accountant and member in the firm’s Taxation practice group. You can access his biography here, and contact him via phone or email at thammerschmidt@dickinsonwright.com.