disallowance

In its report, the committee questioned whether "the loans were bona fide arm's length transactions, or whether the transfers were disguised gifts that could trigger gift tax and a disallowance of interest deductions by the related borrowers."

AIG agreed to the disallowance of more than $400 million in foreign tax credits and the imposition of a 10% tax penalty, Strauss said.

Kerri Froc, an assistant law professor at the University of New Brunswick, said the use of disallowance “would probably generate a constitutional crisis.”

Nenshi said that the federal government has tools at its disposal beyond joining a legal challenge, such as withholding federal funding or employing the rarely used power of disallowance to wipe out a provincial statute.

“Please note,” Brooks wrote, “that failure to return federal funds may result in administrative actions including, but not limited to, a disallowance.”