A majority of Canadian members of parliament voted in favor of the Conservative government plan to tax income trusts other than passive real estate investment trusts (REITs).

The “tax fairness plan” will put into law a new tax on cash distributions from existing trusts starting in 2011. The plan also calls for a reduction of half of one percentage point from corporate taxes in addition to income splitting rules to reduce taxes for senior citizens.

The Conservatives hold only 124 of the 308 seats in the House of Commons.  But the minority government won the vote with support from members of opposition parties including the New Democratic Party (NDP). The Liberal Party holds 101 seats and opposed the motion, but to no avail.

The passage of the Conservative motion makes the new tax legally effective. Finance Minister Jim Flatherty will follow-up with other legislation to further enable the tax changes when he is “ready”.