2020-0846711I7 CEWS - Meaning of extraordinary item

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether government funding specifically related to COVID-19 would be considered an extraordinary item for purposes of the term "qualified revenue" in subsection 125.7(1).

Position: Question of fact, but likely yes.

Reasons: COVID-19 funding would not generally be expected to occur frequently over several years, does not result from risks inherent in an entity's normal business operations, and is not driven primarily by decisions of management or owners.

Author: Springate, Sarah

Section: 125.7

XXXXXXXXXX                                                                              2020-084671

May 6, 2020


RE: Extraordinary Items

We are writing in response to XXXXXXXXXX, requesting an opinion on whether provincial support payments to childcare centres to assist them during the COVID-19 crisis would be considered “qualifying revenue” as that term is defined in subsection 125.7(1) of the Income Tax Act (the “Act”).

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

Qualifying revenue of an eligible entity (eligible employer) for purposes of the Canada Emergency Wage Subsidy (CEWS) means the inflow of cash, receivables, or other consideration arising in the course of its ordinary activities in Canada in a particular period. These inflows are generally from the sale of goods, the rendering of services, and the use by others of the eligible employer’s resources. Paragraph (c) of the definition of qualifying revenue states that for greater certainty, qualifying revenue excludes extraordinary items.

Generally, we would expect extraordinary items to meet all three of the following characteristics:

a)    Not be expected to occur regularly or frequently within several years

Grants or other government assistance that an entity is eligible to receive on a regular or reoccurring basis would not meet this criteria.

b)    Not typical of the normal activities or risks inherent in the normal operations of the entity

Consideration should be given to the nature of the services or products offered by an entity and the normal environment in which it operates.

c)    Primarily out of the control of owners or management

Consideration should be given to the extent that inflows are influenced by the decision of owners or management.

The determination of whether an entity has an extraordinary item is a question of fact. However, due to the highly unusual economic impact and response resulting from the COVID-19 crisis, we would generally consider emergency government assistance, including assistance from provinces and municipalities, directly related to COVID-19 to be an extraordinary item. However, we would not consider COVID-19-related government assistance to be an extraordinary item to the extent that it replaces or is meant to replace normal or recurring government assistance.

In order to receive the CEWS, an employer must also meet the eligibility requirements outlined on the Canada.ca webpage Frequently asked questions - Canada Emergency Wage Subsidy (CEWS).

We trust these comments will be of assistance to you.

Yours truly,


Pamela Burnley, CPA, CA
Business Income and Capital Transactions
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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