The Regulations Amending the Income Tax Regulations (Technical Amendments), SOR/2024-231 aim to address several identified issues in the Income Tax Regulations by making 46 technical tax amendments. These amendments respond to feedback from the Canada Revenue Agency (CRA), provincial governments, and pension plan consultants and focus on improving the interpretation and administration of tax rules for registered pension plans, pooled registered pension plans, qualified investments, employee stock options, and mark-to-market rules. The primary objective is to improve clarity and flexibility and to ensure that tax rules align with their intended policy objectives.

One category of amendments is aimed at addressing situations where current laws do not align well with their intended policy, offering relief and better outcomes. This includes updates that align federal tax rules with provincial pension standards to reduce inefficiencies for pension administrators while preserving policy intent. For example, changes were made to ensure tax rules accommodate the new “year’s additional maximum pensionable earnings” (YAMPE) introduced in the Canada Pension Plan (CPP) in 2024. The amendments also reflect enhancements to Old Age Security (OAS) to exclude increased OAS payments for individuals over age 75 from pension adjustment calculations, preserving RRSP contribution room. Further, registered pension plans now include more equitable treatment for employees during periods of reduced pay; the minimum service requirement for crediting pensionable service was lowered from 36 to 3 months. This change ensures newer employees are not disadvantaged compared to long-serving employees during reduced pay periods.

Further amendments aim to support regional economic growth by recognizing shares from provincial economic development corporations as qualified investments for registered savings plans. Alberta’s Investing in a Diversified Alberta Economy Act, Nova Scotia’s Equity Tax Credit Act, and Prince Edward Island’s Equity Tax Credit Act are now included in the list of eligible investment vehicles. These changes encourage investment in local initiatives, benefiting regional economies. The regulations were also updated to include venture capital corporations (VCCs) from Alberta and Prince Edward Island to reflect similar tax credits offered by existing prescribed VCCs.

Changes were also made to employee stock option rules. To ensure employees retain stock option deductions after corporate reorganizations, the rules now allow prescribed shares to be exchanged for other prescribed shares without losing deduction eligibility. This amendment safeguards tax benefits for employees during mergers or acquisitions involving share exchanges.

Additionally, the mark-to-market rules were adjusted to prevent tax consequences for investments made by Farm Credit Canada, a tax-exempt Crown corporation, while ensuring the intent behind mark-to-market taxation remains effective. Interac Corp. shares were added as “excluded property” to avoid being caught under these rules, protecting them from mark-to-market taxation.

Canada (SOR/2024-231) December 4, 2024