Income taxes

3 Months Ended

Mar. 31, 2022

Income taxes

Income taxes

9.    Income taxes

At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year. The estimate reflects, among other items, management’s best estimate of operating results. It does not include the estimated impact of foreign exchange rates or unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes.

For the three months ended March 31, 2022, income tax expense was $36,236,000, compared to an income tax expense of $8,419,000 for the same period in 2021. The effective tax rate was 17% in the first quarter of 2022, compared to 23% in the first quarter of 2021.

A lower tax rate was observed in Q1 2022 versus Q1 2021 primarily due to the non-taxable gain portion on the sale of a parcel of land including all buildings in Bolton, Ontario. In addition, there was a decrease in the estimate of non-deductible expenses and a write-off of a deferred tax asset upon departure of a management employee of Rouse in 2021 which did not reoccur.

Partially offsetting these decreases were a lower tax deduction for PSU and RSU share unit expenses that exceeded the related compensation expense and a greater estimated proportion of income taxed in jurisdictions with higher tax rates.

The Canada Revenue Agency (“CRA”) is currently conducting an audit of the Company’s 2014, 2015, 2017, and 2018 taxation years. Management believes that the Company is in full compliance with Canadian tax laws. However, the CRA could challenge the manner in which the Company has filed its income tax returns and reported its income. In the event that the CRA challenges the manner in which the Company has filed its tax returns and reported its income, the Company will have the option to appeal any such decision. If the Company is not successful, however, the CRA audit could potentially result in additional income taxes, penalties, and interest, which could have a material adverse effect on the Company.