Tax Alert: Time Is Running Out For Certain ULCs, LLCs And Partnerships

The Fifth Protocol to the Canada-United States Income Tax Convention (the "Treaty") came into force on December 15, 2008. It contained a number of significant amendments to the Treaty, including the addition of new "anti-hybrid rules" (in new paragraphs 7(a) and 7(b) to Article IV). The anti-hybrid rules will become effective January 1, 2010 and will deny benefits under the Treaty in respect of amounts received or derived by Canadian and U.S. residents through certain hybrid entities (generally entities that are "fiscally transparent" for tax purposes in one country but not in the other). Many investments made through unlimited liability companies (ULCs), limited liability company (LLCs) and partnerships will be affected if they are not restructured. To ensure there is sufficient time to properly consider alternative structures and implement any necessary reorganizations, taxpayers potentially affected by the anti-hybrid rules should be considering their planning