US LLCs May Claim Refunds in Certain Circumstances

The Canada Revenue Agency (CRA) recently announced that it will accept claims for treaty benefits by US limited liability companies (LLCs) in certain circumstances. This announcement is in response to the decision of the Tax Court of Canada in TD Securities (USA) LLC v. Her Majesty The Queen (2010 DTC 1137) released earlier this year, wherein the court held that US LLCs should be treated as residents of the United States for the purposes of the Canada-United States Tax Convention (1980) ("Canada-US Treaty"), and as such may be entitled to the benefits thereunder. This was in contrast to the CRA's longstanding position that LLCs that were fiscally transparent for US tax purposes were not residents of the United States for the purposes of the Canada-US Treaty.