2020-0850981E5 CECRA – Pension plan eligibility

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: 1. Is participation in the CECRA by a pension real estate corporation a borrowing permitted by clause 149(1)(o.2)(ii)(C)? 2. Can registered pension plans that own real estate directly participate in the CECRA?

Position: 1. Yes. 2. Yes.

Reasons: 1. The forgivable loan would be money borrowed for the purpose of earning income from real property. 2. Although the forgivable loan would contravene the narrower borrowing restriction in paragraph 8502(i), the CRA will exercise its discretion to not revoke the registration of an RPP for failure to comply with this condition.

Author: Ferrigan, Helen

Section: 149(1)(o), 149(1)(o.1), 149(1)(o.2), ITR 8502(i)

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                                                                                                        H. Ferrigan
June 15, 2020


Re:  Canada Emergency Commercial Rent Assistance Program (the “CECRA”)

We are writing in response to your email of May 28, 2020 regarding the CECRA program administered by the Canada Mortgage and Housing Corporation (the “CMHC”).

Our understanding is that the CECRA provides relief for small businesses experiencing financial hardship due to COVID-19 by offering unsecured, forgivable loans to eligible commercial property owners (each an “Owner”). To participate, an Owner must offer qualifying small business tenants a rent reduction of at least 75% for rent otherwise due in respect of April, May and June 2020. CECRA loan funds cover 50% of the rent and the Owner agrees to forgo receipt of the other 25%. Loans will be forgiven on December 31, 2020 unless the Owner fails to comply with the program terms, commits fraud or misconduct, or becomes insolvent.

You have asked us if registered pension plans (“RPPs”) and tax-exempt pension real estate corporations can participate in the CECRA without adverse tax consequences.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) and the Income Tax Regulations (the “ITR”). 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.

RPPs can hold commercial real property directly or indirectly through pension real estate corporations. These entities are exempt from Part I tax under paragraph 149(1)(o), (o.1) or (o.2) of the Act, as applicable, provided they comply with a number of conditions, including rules limiting their ability to borrow money. In particular, RPPs are prohibited from borrowing money under paragraph 8502(i) of the ITR subject to two very narrow exceptions and an RPP that fails to comply with these rules becomes a revocable plan. The borrowing restriction applicable to pension real estate corporations in clause 149(1)(o.2)(ii)(C) is less restrictive.

Because the CECRA provides funding in the form of a forgivable loan, there is concern that participating in the program will breach these borrowing restrictions, jeopardizing the tax-exemption or the registration status of the participant.

The CECRA is administered by the CMHC pursuant to Order in Council 2020-0310. Based on our review of the Act, the ITR and the program documentation, our views are as follows:

*    Participating in the CECRA with respect to commercial property held by a pension real estate corporation will not contravene the borrowing restriction in clause 149(1)(o.2)(ii)(C).

*    Although participating in the CECRA by an RPP will contravene the narrower borrowing restriction in paragraph 8502(i), the CRA will exercise its discretion to not revoke the registration of an RPP for failure to comply with this condition.

We trust that these comments will be of assistance to you.

Yours truly,


Mary Pat Baldwin, CPA, CA
Section Manager
For Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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