Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Continuing education requirement to profession. Do amounts expended on professional development courses qualify as professional membership dues under 8(1)(i)(i)?

Position: No.

Reasons: Fees levied are more appropriately classified as on account of training rather than as membership dues.

2001-011269
XXXXXXXXXX L. Holloway
613-957-2104
April 24, 2002

Dear XXXXXXXXXX:

Re: Technical Interpretation Request - XXXXXXXXXX - Dues

This is in reply to your letter of November 23, 2001 requesting a written opinion on the application of paragraph 8(1)(i) of the Income Tax Act (Canada) (the "Act") to amounts required to be expended by the members of your provincial licensing bodies in order to fulfill their professional development requirements. All references herein are to the Act unless otherwise indicated.

Background

XXXXXXXXXX

Our Comments

The particular circumstances in your letter on which you have asked for our views is a factual situation. As explained in Information Circular 70-6R4 issued by Canada Customs and Revenue Agency ("CCRA") on January 29, 2001, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. If you wish to obtain a binding commitment with respect to an actual case similar to that outlined in your letter, an advance income tax ruling application should be submitted. Although we are unable to provide any binding assurance with respect to the interpretations requested, we do provide the following general comments for your information.

Subsection 8(1) sets out deductions that are allowed in computing a taxpayer's income from an office or employment for the year. Paragraph (i) of that subsection deals with the deduction of "Dues and other expenses of performing duties" and the portion which is relevant to your enquiry is reproduced as follows:

8(1)(i)amounts paid by the taxpayer in the year as
(i) annual professional membership dues the payment of which was necessary to maintain a professional status recognized by statute,
...to the extent that the taxpayer has not been reimbursed, and is not entitled to be reimbursed in respect thereof;

We agree with your observation that some of the provincial licensing bodies have professional development requirements that must be fulfilled before the members can legally practice in their field. In some instances (i.e. XXXXXXXXXX) if the educational requirements are not met, the provincial body can actually refuse to issue a license. However these are amounts paid on account of continuing education requirements, whether mandatory or self-regulating, they are not amounts paid for annual membership dues.

Paragraph 1 of Interpretation Bulletin IT-103R -Dues Paid to a Union or to a Parity or Advisory Committee (copy included) sets out the CCRA's position with respect to the word "annual" as used for purposes of subparagraph 8(1)(i)(iv) as follows:

"annual dues" means annual dues paid by a member to maintain membership in a trade union, and does not include initiation fees or special assessments made during a year on some or all members of the trade union. The Department has accepted the Federal Court -Trial Division's conclusion in the Darrel H. Lucas case of 1987 that amounts only need to be capable of recurring in order to be considered "annual" for purposes of subparagraph 8(1)(i)(iv) and that the additional amount paid by Mr. Lucas was not a special assessment but an increase in annual dues;

This interpretation has also been extended to subparagraph 8(1)(i)(i) so that in order for dues to be deductible, the amounts paid must be, among other things, "annual" "membership dues" and not a special assessment made during a year which may, for example, cover the cost of attending a course or a seminar. In fact, the one provincial act that was submitted with your letter as an example,

XXXXXXXXXX

While, in order to obtain a licence XXXXXXXXXX must pay the annual membership and licensing fees XXXXXXXXXX as a further condition, distinct from the payment of fees he or she must also meet the educational requirements prescribed by the regulations XXXXXXXXXX An individual member may incur continuing education fees in several years, however the fees paid would be in respect of different courses and seminars and generally would not be recurring in nature. Although a member may have to fulfill a continuing education condition in order to continue to practice his or her profession, we do not agree that such costs expended would be in the nature of annual professional membership dues as contemplated under 8(1)(i)(i). As mentioned in paragraph 8 of IT-357R2 the Act generally does not provide for an employee to deduct training expenses, although a tax credit in respect of tuition fees paid to certain educational institutions is available. It is a question of fact whether any of the fees paid to the XXXXXXXXXX qualify for the tuition credit. We have included IT-516R2 - Tuition Tax Credit for your further reference.

The word "dues" is not defined in the Act and therefore in the absence of a definition of a term in the Act, the Courts have used the ordinary dictionary meaning of a word. The Concise Oxford Dictionary (8th Edition) defines the noun "due" as a "...(usu. in pl.) toll, fee, legally demandable (harbour, light, tonnage, university, dues)...". Webster's Ninth New Collegiate Dictionary defines "due" as "a payment or obligation required by law or custom: DEBT pl: FEES CHARGES." Finally, Black's Law Dictionary defines "dues" as follows:

Dues. Certain payments, rates or taxes. As applied to clubs and other membership organizations, refers to sums paid toward support and maintenance of same and as a requisite to retain membership (emphasis ours).

We note that subparagraph 8(1)(i)(i) of the Act refers exclusively to "membership dues", which is generally understood to mean the fee or charge required for membership or affiliation. The provision does not include other types of payments, even where such amounts may be expended in order for an individual to maintain a professional status.

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R4, the above comments do not constitute an income tax ruling and accordingly are not binding on the CCRA.

We trust the above comments are of assistance to you.

Yours truly,

Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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