Tourism And Hospitality Recovery Program, The Hardest-Hit Business Recovery Program And Other COVID-19 Support Programs And Changes

• Published date: 30 December 2021
• Subject Matter: Corporate/Commercial Law, Employment and HR, Media, Telecoms, IT, Entertainment, Tax, Corporate and Company Law, Employee Benefits & Compensation, Tax Authorities, Hotels & Hospitality, Executive Remuneration
• Law Firm: McCarthy Tétrault LLP
• Author: Tax Perspectives, Colton Dennis, Stefanie Morand and Jeremy Ho

On Friday, December 17, 2021, Bill C-2, An Act to provide further support in response to COVID-19 ("Bill C-2") received Royal Assent and is now law. This legislation implements the new COVID-19 recovery programs and changes to certain existing programs that the Government of Canada (the "Government") announced on October 21, 2021, as well as some additional changes. Notably, while the enacted version of Bill C-2 is substantially the same as the version first tabled on November 24, 2021, the enacted version also includes:

(i) provisions intended to prevent publicly traded companies and their subsidiaries from paying dividends while benefiting from wage subsidy support, and

(ii) a provision mandating that the Auditor General of Canada undertake a performance audit in respect of the Canada Emergency Response Benefit ("CERB"), the Canada Emergency Wage Subsidy ("CEWS"), the Canada Worker Lockdown Benefit and the Canada Recovery Benefit.

These additional provisions were introduced following First Reading pursuant to a report of the Standing Committee on Finance (linked here).

Subsequently, on December 22, 2021, the Government announced that it intends to further expand (on a temporary basis) the Local Lockdown Program and the Canada Worker Lockdown Benefit using the regulatory authority granted to it in Bill C-2. The Government's news release and backgrounder relating to the December 22, 2021 announcement can be found here and here.

Our prior commentary on the October 21, 2021 announcement is available here. In that commentary:

• we provided an overview of the October 21, 2021 announcements and a high level summary of the employer support programs applicable to Period 22 (i.e., October 24, 2021 to November 20 2021) and onwards; and
• noted that certain details of the new programs were still forthcoming (e.g., (i) what constitutes a "qualifying business" for purposes of the new Tourism and Hospitality Recovery Program, (ii) confirmation that the general lockdown support (now referred to as the "Local Lockdown Program") would include a CEWS and CERS component and specifics as to when the Local Lockdown Program would apply and (iii) particulars of the Canada Worker Lockdown Benefit).

This commentary updates our prior commentary by:

(i) providing particulars of what constitutes a "qualifying business" for purposes of the new Tourism and Hospitality Recovery Program;

(ii) providing additional specifics in respect of the Local Lockdown Program and confirming that it contains a CEWS and CERS component;

(iii) summarizing certain additional measures included in Bill C-2 that did not form part of the October 21, 2021 announcement; and

(iv) addressing the proposed temporary expansion of the Local Lockdown Program and the Canada Worker Lockdown Benefit announced on December 22, 2021.

Readers should read this commentary in conjunction with our prior commentary on the October 21, 2021 announcement.

Tourism and Hospitality Recovery Program

According to the Government, the Tourism and Hospitality Recovery Program is intended to provide support to eligible organizations in the tourism and hospitality industry that have been deeply impacted since the outset of the pandemic and that are still struggling. While the Government provided a general description of the types of business that would constitute a "qualifying business", specifics were not provided at the time of the October 21, 2021 announcement.

Bill C-2 introduces the new definition "qualifying tourism or hospitality entity" in subsection 125.7(1) of the Income Tax Act (Canada) (the "Tax Act"), and provides that this term has the meaning assigned by regulation. New Regulation 8901.1(2), in turn, provides that a qualifying tourism or hospitality entity for a qualifying period means an eligible entity that meets the following conditions:

• stated generally, more than 50% of the organization's pre-pandemic revenue was earned from carrying on one more of the following activities:¹

(i) operating or managing a facility providing short-term lodging, such as a hotel, a motel, a cottage, a bed and breakfast or a youth hostel,

(ii) preparing and serving meals, snacks and beverages made...