Liberal tax promise tracker: Bill C-15 edition

Among the backlog of tax measures in the bill, a “big” one, said Hemal Balsara, head of tax, retirement and estate planning, individual insurance, with Manulife Financial Corp. in Toronto, is the loss carryback extension for graduated rate estates (GREs). The measure was in draft legislation when Parliament was prorogued last year, introducing some uncertainty about the rule change passing into law, Balsara said. “The good news is it was included as … part of Bill C-15.”

Extended period for loss carryback strategy. Given technical amendments in the bill that are retroactive to Aug. 12, 2024, a GRE can carry back a capital loss realized within its first three years — instead of its first year — to offset capital gains in a deceased taxpayer’s terminal return. (A GRE benefits from the same graduated tax rates available to an individual taxpayer, and an estate can be a GRE for up to 36 months following a taxpayer’s death.)

When a business owner dies giving rise to a deemed disposition of their private corporation shares, the loss carryback strategy helps protect the estate from punitive double taxation as the business is wound up, particularly when retained earnings are trapped inside the corporation. (A blog post by Miller Thomson LLP provides an overview of the situation and strategy.) Triple taxation could even occur if the corporation has taxable assets, which it would need to sell on windup.

For private corporation owners, the extension to three tax years from one is “a game changer in the estate planning field,” Balsara said. Previously, executors had to complete transactions under a tight deadline (or use another strategy). “Having this additional time is going to be very positive and impactful.”

Bare trust reporting for 2026 tax year. Bill C-15 includes amendments to trust reporting exemptions. As announced in Budget 2025, reporting by bare trusts was deferred to tax years ending on or after Dec. 31, 2026.

For bare trusts that don’t qualify for an exemption, that means “it’s March of 2027 when you have to do the reporting,” Balsara said.

Listed trusts continue to be exempt from the annual trust filing requirement and include trusts in existence for less than three months and trusts holding assets with a fair market value (FMV) of $50,000 or less throughout the year.

As this publication previously reported, with the legislation, trusts — including bare trusts — are exempt from the annual filing requirement given the following conditions: the trustees and beneficiaries are related to each other, the FMV of the property doesn’t exceed $250,000 throughout the year, and the trust’s assets consist of qualifying assets such as cash, GICs, mutual funds, segregated funds, personal-use property, securities traded on a designated exchange and exempt life insurance policies issued by Canadian insurers.

For the exempt policies, FMV is determined by cash surrender values, but the legislation has no valuation rule for life insurance policies when it comes to the $50,000 blanket exemption.

“The way it’s drafted, [the legislation] has created a bit of a mismatch,” Balsara said. The fix could come via an amendment or a CRA interpretation, he suggested. Otherwise, the measure “would introduce a lot of administrative burden [to determine FMV] on what would be a small bare trust.”

Repeal of underused housing tax. Bill C-15 includes Budget 2025’s measure to repeal the underused housing tax. In a LinkedIn post on Monday, Ryan Minor, tax director with CPA Canada in Sudbury, Ont., confirmed that, based on the legislation, the CRA doesn’t expect affected owners to file a UHT return or to pay the tax for 2025 and subsequent years. UHT filing and tax still applies for the 2022, 2023 and 2024 calendar years.

Bill C-15 also implements the following tax proposals from Budget 2025 and earlier:

Personal income tax measures

• An expense claimed under the medical expense tax credit can’t also be claimed under the home accessibility tax credit (2026 and subsequent tax years).
• Temporary non-refundable top-up tax credit, applicable for the 2025–2030 tax years, maintains the 15% rate for nonrefundable tax credits claimed on amounts above the first income tax bracket threshold ($57,375 in 2025).
• Temporary refundable personal support workers tax credit, available in certain provinces for the 2026–2030 tax years, equals 5% of eligible earnings, up to a maximum of $1,100 per year. Based on the legislation, employers must provide a certification of yearly eligible remuneration.
• Increase in the lifetime capital gains exemption limit to $1.25 million on the sale of small business corporation shares and farming and fishing property on or after June 25, 2024; indexation to resume in 2026.
• Exemption of the Canada Disability Benefit from income.
• Extension of the 2024 charitable donations deadline to Feb. 28, 2025 (arising from the Canada Post strike; comes into force on royal assent of bill). 
• Extended mineral exploration tax credit (for individual investors who invest in eligible flow-through shares), to March 31, 2027, at the current rate of 15%.
• Addition of 13 critical minerals (including phosphate) eligible under the critical mineral exploration tax credit (for individual investors).

Business income tax measures

• Reinstatement of the existing accelerated investment incentive and immediate expensing for most capital properties.
• Increased annual expenditure limit of $6 million for scientific research and experimental development tax incentive program, along with additional changes to the program.
• Clean electricity investment tax credit and enhancements to existing clean economy tax credits.
• Elimination of tax deferral for investment income earned by substantive Canadian-controlled private corporations using foreign-resident corporations (from Budget 2022).
• Expansion of capital gains rollovers for qualifying dispositions of eligible small business corporation shares.
• Technical changes to the existing capital gains exemption for business sales to employee ownership trusts.

Proposals passed into law and moving forward

Bill C-4 received royal assent on March 12:

• One-percentage-point tax cut to first federal tax bracket.
• GST rebate for first-time homebuyers, which covers 100% of the GST on new home sales of up to $1 million, with GST relief phased out as the price approaches $1.5 million. CRA is now accepting applications for the rebate.

Bill C-19 received royal assent on Feb. 12:

• A 25% hike to the GST credit for five years beginning in July 2026, along with a one-time payment worth 50% of the credit — as early as possible this spring, Finance says — for lower-income taxpayers.

Proposals in draft legislation

Draft legislation published on Jan. 29 includes a proposal with some problematic language, related to indirect trust property transfers and the 21-year rule for the deemed disposition of trust assets.

Generally, trusts are deemed to have disposed of their property at FMV every 21 years. Budget 2025 proposed to broaden the anti-avoidance rule that prevents trusts from deferring the 21-year rule when trust property is directly transferred to another trust on a tax-deferred basis. Specifically, the rule is being expanded to include indirect trust-to-trust transfers.

With the measure, Finance is targeting the potential deferral of the deemed disposition through tax-deferred distributions by a personal trust to a corporation that’s owned by another personal trust.

But the proposed amendments “are too broad and risk capturing a wide range of ordinary trust-and-estate planning transactions that are not motivated by an intention to defer a deemed disposition,” STEP Canada said in a submission to Finance last month.

For example, a life interest trust is normally subject to a deemed disposition only on the death of the last beneficiary. But the proposal could capture scenarios in which a non–life interest trust is considered to have made an indirect transfer to a life interest trust.

“[W]e are not aware of transactions involving indirect transfers to life interest trusts that give rise to the type of deferral concern the amendment is intended to address,” STEP Canada says in its submission.

“The reality is, many clients consider [life interest trusts],” such as alter ego or spousal trusts, Balsara said, so the legislation as drafted “can create some issues.”

The consultation on the draft legislation, which included several other proposals, such as proposed dividend suspension rules targeted at tiered corporate structures, ended Feb. 27, with updated legislation yet to come.

Finally, draft legislation published in August 2025 includes a proposal with no update, but it’s one to watch: Proposed new audit powers for the CRA related to non-compliance with information requests.