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Generative AI: A global guide to key IP considerations
Artificial intelligence (AI) raises many intellectual property (IP) issues.
Canada | Publication | November 24, 2020
As part of Canada’s COVID-19 economic response plan, the federal government recently provided the framework for the new Canada Emergency Rent Subsidy (CERS) program, which serves as a replacement to and stands separate from the now-expired Canada Emergency Commercial Rent Assistance (CECRA) program. Bill C-9 introduced the new CERS program on November 2 and it received royal assent on November 19. The CERS program shares many legislative and definitional features with the Canada Emergency Wage Subsidy (CEWS) program. For more information on the CEWS program, please see our previous bulletins published on April 12 and July 23, 2020.
The CERS program will provide targeted financial relief to entities affected by the ongoing COVID-19 pandemic. Like the CEWS program, it is not necessary for an entity to demonstrate a link between the pandemic and the entity’s revenue decline, though part of the subsidy is specifically designed to support those entities that have been affected by public health lockdown orders.
The CERS is available to assist with certain expenses incurred with respect to “qualifying property” (e.g., rent, as well as certain mortgage interest payments, insurance costs and property and similar taxes paid for an owned qualifying property). The expenses that qualify under the CERS program are referred to as "qualifying rent expenses" and must have been paid by the entity claiming the rent subsidy, even though not all of these expenses relate to leases.
An entity that uses a qualifying property primarily to earn rental income will generally not receive a rent subsidy under the CERS program, unless the rental income is earned from a non-arm’s length party that is not itself using the property to earn rental income. The CERS is also not available for properties that are “self-contained domestic establishments.” These exclusions appear to disqualify most commercial landlords and those who work out of their homes from eligibility under the CERS program.
Many of the eligibility criteria for the CERS program are shared with the CEWS program. An organization that is an "eligible entity" under the CEWS program (including individuals, taxable corporations, certain partnerships, non-profit organizations and registered charities) will qualify to participate in the CERS program if (in addition to meeting certain application requirements) the entity (i) had a payroll account or had been using a payroll service provider as of March 15, 2020, or (ii) had a business number on September 27, 2020, and provides records and other information satisfactory to the Canada Revenue Agency (the CRA) in support of its application. Additional program requirements may be prescribed by regulation at a future date. An eligible entity that qualifies for the CERS is referred to as a "qualifying renter," which may lead to confusion since the entity need not necessarily lease property from a landlord.
Currently, the CERS program would apply to four-week periods beginning retroactively on September 27, 2020, until December 19, 2020 (mirroring the "qualifying periods" under the CEWS program), with the potential that the program may be extended for additional periods until June 30, 2021, albeit perhaps with adjustments.
The CERS is available to qualifying renters that have suffered a revenue decline in the particular qualifying period, computed in the same manner as under the CEWS program. There are two components to the CERS:
The legislation contains anti-avoidance rules, which may be triggered if an eligible entity takes or fails to take an action, resulting in the reduction of qualifying revenues or the increase of qualifying rent expenses. If one of the main purposes of such action or inaction can reasonably be considered to be to increase the amount of CERS received, the applicant will be denied CERS and may also be liable for a penalty of 25% of the amount claimed. Accordingly, CERS applicants should be mindful about inadvertently triggering anti-avoidance rules and should consult with their legal counsel regarding any future transactions that may engage these measures.
The legislation appears to have addressed some of the limitations of the CECRA program, notably by eliminating the requirement that landlords apply for their tenants (thereby granting tenants control over the application process) and the restrictions on business size, making the new program more direct, accessible and “tenant friendly.” One obvious challenge is timing (payment of qualifying expenses vis-à-vis receipt of the CERS) and the potential cash flow issue that qualifying renters may still face. As the CERS program appears to engage certain tax-specific matters, we encourage future applicants to remain vigilant in light of potentially adverse tax implications.
The authors would like to thank Richard Li, articling student, for his contribution to this legal update.
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