Federal Court Rejects Taxpayer's Attempt to Restrict Collection

Date: 20260603 Docket: T-3454-25 Citation: 2026 FC 721 Toronto, Ontario, June 3, 2026 PRESENT: Madam Justice Whyte Nowak BETWEEN: [NAME] Applicant and ATTORNEY GENERAL OF CANADA Respondent

REASONS AND

JUDGMENT I. Overview [ 1 ] The Applicant, [NAME] [Applicant], seeks judicial review of a decision of a collections officer [Collections Officer] of the Canada Revenue Agency [[NAME]] to issue a requirement to pay notice [Requirement to Pay] to the Applicant’s professional corporation on August 12, 2025. The Applicant seeks to set aside the Requirement to Pay on the basis that the Minister of [NAME] [Minister] was prohibited from taking steps to collect his disputed tax debt [Debt], in light of the collection restrictions found in paragraph 225.1(1)(c) and subsection 225.1(2) of the Income Tax Act , RSC 1985, c 1 (5th Supp), as amended [ ITA ]. The Applicant also submits that it was unreasonable for the Collections Officer to issue the Requirement to Pay having previously shown a willingness to hold off on collection while there was an ongoing dispute over the correctness of the underlying [NAME] of the Applicant’s income tax. [ 2 ] For the more detailed reasons that follow, this application is dismissed. The Applicant has not met his burden of showing that the Minister was restricted from taking steps to collect the Applicant’s Debt or that it was unreasonable for the Collections Officer to have issued the Requirement to Pay. In doing so, the Collections Officer acted in furtherance of the [NAME]’s duty to collect taxes and reasonably exercised the discretion that accompanies that duty as to how and when to do so.

II. Facts A. The notices of reassessment [ 3 ] On January 9, 2025, the Applicant received Notices of Reassessment for the tax years 2010 to 2014 and 2016 [collectively, the [NAME]]. The [NAME] state in part: After reviewing your request and our records, we cancelled the arrears interest and late-filing penalty. We did this based on the taxpayer relief provisions of the Income Tax Act. As a result, you cannot file an objection about this change. B. The Applicant’s objections [ 4 ] The Applicant filed an online notice of objection on April 9, 2025 [First Objection], disputing the assessments of income tax in respect of his 2010, 2011, 2012, 2013, 2014 and 2016 taxation years. The Applicant’s First Objection states in part: Generally, while the [NAME] decreased penalties and arrears interest previously assessed, the assessments do not effect [ sic ] the Minister's determination on the propriety of the penalty and interest and did not apply the taxpayer’s non-capital losses as reported and claimed in respect of these years. [ 5 ] By letter dated June 11, 2025, the [NAME]’s Appeals Division issued a letter to the Applicant declining the First Objection on the basis that the assessment of the 2010, 2011, 2012, 2013, 2014 and 2016 tax years, on April 9, 2025, was made under the taxpayer relief provisions and therefore no objection could be filed (citing subsections 165(1.2) and 169(2.2) of the ITA ). [ 6 ] On June 25, 2025, the [NAME] confirmed the Applicant’s ability to pay his outstanding Debt and issued a warning to the Applicant stating that the [NAME] may take legal action without further notice if the Applicant did not pay the outstanding Debt within 14 days. [ 7 ] The Applicant filed a second objection to the [NAME] in respect of his 2014, 2015, and 2016 taxation years on July 11, 2025 [Second Objection], arguing that his First Objection did not pertain to any decision made pursuant to subsection 220(3.1) of the ITA but related instead to the correctness of the assessment of tax. The Applicant stated, “[t]he objections were validly filed and not prohibited by section 165.” C. The issuance of the Requirement to Pay and judicial review [ 8 ] The [NAME] issued the Requirement to Pay on August 12, 2025, demanding that the Applicant pay the sum of $350,081.99, pursuant to subsections 224(1), (1.1) and/or (3) of the ITA . No taxation years were referenced; however, according to the Applicant’s counsel, the “lion’s share” of the amount sought relates to the taxation years in dispute. [ 9 ] According to the affidavit of the Collections Officer, the [NAME] was unaware of the Second Objection in respect of the Applicant’s 2014, 2015 and 2016 taxation years at the time that the Requirement to Pay was issued. It is the belief of the Collections Officer, that the Applicant was subsequently advised by letter dated October 22, 2025, that the Second Objection was invalid with respect to the 2014 and 2016 taxation years on the same basis that the First Objection was found to be invalid. [ 10 ] The Applicant has sought judicial review of the decision to pursue collections and the issuance of the Requirement to Pay pending a determination of the correctness of the assessments of his Debt.

III. Issues and Standard of Review [ 11 ] The only issue for determination is whether the Requirement to Pay should be set aside. The Applicant submits that there are two bases for doing so: It was unreasonable for the Minister to have issued it considering subsections 225.1(1) and (2) of the ITA ; and It was unreasonable for the Collections Officer to have taken steps to collect the Debt while the underlying tax assessment was under dispute. [ 12 ] The applicable standard of review on the merits of the decision to issue the Request to Pay is reasonableness ( Canada (Minister of Citizenship and Immigration) v [NAME] , 2019 SCC 65 at paras 16-17 [ [NAME] ]). A court must ensure that the decision-making process and the decision itself, show a rational justification and are transparent and intelligible. Where the decision falls “within a range of possible, acceptable outcomes which are defensible in respect of the facts and law,” this Court must defer to a specialized tribunal ( [NAME] at para 93, [NAME] v [NAME] , 2008 SCC 9 at paras 47-49).

IV. Analysis A. Was the issuance of the Requirement to Pay prohibited? [ 13 ] The Applicant submits that upon service of the First Objection, the Minister was prohibited from taking steps to collect the Debt, in light of the restrictions found in paragraph 225.1(1)(c) and subsection 225.1(2) of the ITA , which provide as follows: Collection restrictions Restrictions au recouvrement 225.1 (1) If a taxpayer is liable for the payment of an amount assessed under this Act, other than an amount assessed under subsection 152(4.2), 169(3) or 220(3.1), the Minister shall not, until after the collection-commencement day in respect of the amount, do any of the following for the purpose of collecting the amount: 225.1 (1) Si un contribuable est redevable du montant d’une cotisation établie en vertu des dispositions de la présente loi, exception faite des paragraphes 152(4.2), 169(3) et 220(3.1), le ministre, pour recouvrer le montant impayé, ne peut, avant le lendemain du jour du début du recouvrement du montant, prendre les mesures suivantes : … … (c) require a person to make a payment under subsection 224(1), c) obliger une personne à faire un paiement, conformément au paragraphe 224(1); … … No action by Minister Restriction (2) If a taxpayer has served a notice of objection under this Act to an assessment of an amount payable under this Act, the Minister shall not, for the purpose of collecting the amount in controversy, take any of the actions described in paragraphs (1)(a) to (g) until after the day that is 90 days after the day on which notice is sent to the taxpayer that the Minister has confirmed or varied the assessment. (2) Dans le cas où un contribuable signifie en vertu de la présente loi un avis d’opposition à une cotisation pour un montant payable en vertu de cette loi, le ministre, pour recouvrer la somme en litige, ne peut prendre aucune des mesures visées aux alinéas (1)a) à g) avant le quatre-vingt-onzième jour suivant la date d’envoi d’un avis au contribuable où il confirme ou modifie la cotisation. [ 14 ] The Applicant submits that upon service of the First Notice of Objection, the Minister was barred from taking any action to collect the Debt until ninety days after the Minister mails a notice of confirmation or variation of the [NAME] to the Applicant. [ 15 ] The Respondent submits that the [NAME] were made under one of the excepted provisions referred to in subsection 225.1(1) namely, subsection 220(3.1) of the ITA , which is one of the taxpayer relief provisions of the ITA . While the Applicant acknowledges that the cancellation of the arrears interest and late-filing penalties were made under the taxpayer relief provisions, he did not object to this relief. Rather, his objection was to the [NAME]’s assessment of taxes and in particular, a failure to apply a non-capital loss as reported and claimed in respect of certain years. While the Applicant’s written submissions do not identify under what provision he considers the [NAME] to have been made, at the hearing the Applicant’s counsel suggested they were made pursuant to the general power to make assessments and [NAME] in section 152 and subsection 152(4) of the ITA . [ 16 ] How then does this Court determine under what provision of the ITA the [NAME] were made when none are expressly cited in the Requirement to Pay? The Respondent relies on the Federal Court of Appeal decision in [NAME] v Canada , 2010 FCA 50 [ [NAME] ], which involved a motion by the Minister to quash the taxpayer’s appeal on the basis that it was improperly instituted because the reassessment was issued under subsection 152(4.2) of the ITA , which provides that no objection can be made from a reassessment made under that provision. In [NAME] , the Court had to determine under what provision the request was made by the taxpayer in order to determine whether the notice of objection was valid. [ 17 ] The Applicant submits that [NAME] is distinguishable as it involved a request for a correction to a capital loss, which the applicant in that case readily acknowledged was made outside the normal reassessment period. The Applicant considers that since his request was not made after expiration of the normal period for reassessment and involved a different court and legal question, [NAME] is of no assistance in resolving the issues on this application. I disagree. [ 18 ] [NAME] confirms is that where a reassessment does not expressly refer to the section of the ITA under which it was made, it is reasonable for the Court to draw an inference from what appears on the face of the assessment and where a party asks the Court to draw a different inference, they must adduce evidence to support their position ( [NAME] at para 9). [ 19 ] In this case, the [NAME] do not refer to a provision of the ITA , but they expressly state, “[w]e did this based on the taxpayer relief provisions of the Income Tax Act,” which supports the inference that they were made pursuant to subsection 220(3.1) of the ITA . It would therefore follow that the restrictions on collection in subsection 225.1(1) do not apply. As the Respondent notes, there is no reference in the [NAME] to any non-capital losses that were reported and claimed by the Applicant and/or disallowed by the Minister. The Applicant counters that an omission by its nature would not be referenced. That may be so, however, based on [NAME] , if the Applicant is of the view that what appears on the face of the [NAME] does not tell the whole story, it was his burden to show this. [ 20 ] Here however, the Applicant has not provided any evidence pertaining to the Applicant’s request to claim any non-capital losses in respect of the 2010 to 2014 and 2016 taxation years, which were disallowed by the Minister in the [NAME]. This evidence was required to show that the exceptions to the restrictions on collection do not apply despite what appears on the face of the [NAME]. At the hearing, counsel for the Applicant noted that the tax relief granted in the [NAME] was subject to a notice of objection that was settled by the parties and counsel claimed that the [NAME] were not made out of the normal period for assessment; however, there is no evidence of these facts in the record. Nor is it sufficient to point to the content of the First and Second Notices of Objection as they do not assist the Court in determining under what provision(s) of the ITA the request related to the Applicant’s non-capital losses was made ( [NAME] at para 9). [ 21 ] In the absence of evidence showing the provenance of the Applicant’s request, the only reasonable inference is that the [NAME] were made pursuant to the tax relief provisions of the ITA , which are exempted from the collection restrictions in subsection 225.1(1) of the ITA . It follows that it was not unreasonable for the Collections Officer to take steps to collect the Debt including by issuing the Requirement to Pay. B. No error in pursuing collection on the facts of this case [ 22 ] The Applicant submits that it was unreasonable for the Collections Officer to pursue collection of the Debt on the facts of this case. [ 23 ] The Applicant argues that the Minister has confirmed in past publications that collections will be held in abeyance where an assessment is based on a reasonable dispute in the interpretation of the ITA . In this case, the collections history shows that the Collections Officer chose not to take steps to collect the Debt for tax years that were the subject of the First Objection up until it was held to be invalid. The Collections Officer was unaware of the Second Notice of Objection at the time they issued the Requirement to Pay, suggesting that had the Collections Officer known of the objection, they would have held off from issuing it until the Second Notice Objection had been ruled on. The Applicant submits that it was unreasonable for the Collections Officer to have issued the Requirement to Pay in these circumstances and relies on cases related to a fettering of discretion (citing for example, [COMPANY] v Canada (Attorney General), 2011 FCA 299 at para 24). [ 24 ] I find no merit to this argument. Ultimately, as the Respondent points out, the Minister has both a duty to collect taxes but also the discretion as to how to do so ( Optical Recording Corp v Canada (C.A.) , [1991] 1 FC 309 at 323 (FCA)). The facts of this case do not show that the Collections Officer fettered their discretion since the restrictions on collections found in subsection 225.1(1) of the ITA , did not apply based on the clear wording of the [NAME] and the Collections Officer’s reading of them. Given that the First Objection had been held to be invalid, and the Second Objection did not add any new or different objection in respect of the 2014 and 2016 tax years and taking into account that the Request to Pay included amounts for taxation years not in dispute, I do not find the actions of the Collections Officer in taking steps to collect the Debt to be unreasonable. The Collections Officer had no discretion not to collect the Debt ( [COMPANY] v Canada ([NAME]) , 2013 FCA 250 at paras 77-78, Harris v Canada (C.A.) , [2000] 4 FC 37 (FCA) at paras 35-38).

V. Costs [ 25 ] At the hearing, counsel for the Respondent requested costs pursuant to a Bill of Costs calculated under Column II of Tariff B of the Federal Courts Rules , SOR/98-106 and applying a unit value of $200 for a total of $5,600. These costs appear to be reasonable and shall be awarded.

VI. Conclusion [ 26 ] The application is dismissed, with costs to the Respondent.

JUDGMENT in T-3454-25 THIS COURT’S

JUDGMENT is that: The application is dismissed, with costs to the Respondent in the amount of $5,600 payable forthwith. "Allyson Whyte Nowak" Judge FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-3454-25 STYLE OF CAUSE: [NAME] v ATTORNEY GENERAL OF CANADA PLACE OF HEARING: TORONTO, ONTARIO DATE OF HEARING: MAY 12, 2026

REASONS AND

JUDGMENT: WHYTE NOWAK J. DATED: JUNE 3, 2026 APPEARANCES : [NAME] FOR THE APPLICANT [NAME] FOR THE RESPONDENT SOLICITORS OF RECORD : [NAME] and Solicitors Toronto, Ontario FOR THE APPLICANT Attorney General of Canada Toronto, Ontario FOR THE RESPONDENT