21 November 1996 External T.I. 9630765 - SALARY, NOT ALLOWANCE, PAIDTO XXXXXXXXXX

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 Department.

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

Principal Issues:

whether XXXXXXXXXX are entitled to exempt 1/3 of their remuneration as XXXXXXXXXX from income under 81(2) or (3)

Position: no

Reasons:

1:no amount paid as an allowance & no deeming provision in the Alta Municipal Gov't act to deem any portion of remuneration to be an allowance
2.XXXXXXXXXX is neither a provincial legislature, an incorporated municipality or a similar muncipical body

A. Humenuk
XXXXXXXXXX							963076

November 21, 1996

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

We are writing in reply to your letter of September 12, 1996, in which you ask for a tax exemption on a portion of the remuneration paid to yourself and other XXXXXXXXXX, similar to that provided to elected officials of incorporated municipalities, of provinces and of Canada.

An amount of remuneration earned by a resident of Canada or by a non-resident of Canada in respect of remuneration earned in Canada is included in income for the purpose of determining the amount of income tax payable for the year unless there is a specific provision in the Income Tax Act (ITA) which excludes it. The statutory authority for the exemptions to which you refer in your letter is found in clause 6(1)(b)(i)(A) and subsections 81(2) and 81(3) of the ITA.

Members of the House of Commons receive a sessional allowance or salary plus an expense allowance under the authority of the Parliament of Canada Act. While the sessional allowance (salary) must be included in income, clause 6(1)(b)(i)(A) of the ITA provides an exemption from income for any travelling, personal or living expense allowances which are expressly fixed in an Act of the Parliament of Canada. For elected members of a provincial legislative assembly or an elected municipal officer, subsections 81(2) and (3) provide an exemption for an allowance received for expenses incidental to the discharge of that person's duties, except to the extent that the allowance exceeds one-half of that person's salary and other remuneration from that office. In order for an amount paid to XXXXXXXXXX to be excluded from income, the amount must clearly meet the criteria set out in one of the provisions, such as those noted above, which exempts amounts from income.

In our review of the by-laws of the XXXXXXXXXX which you submitted with your request, we noted that no provision is made for the payment of an expense allowance to the XXXXXXXXXX. It is further noted that the Municipal Government Act of XXXXXXXXXX has no application to the XXXXXXXXXX. As a result, the comments in paragraph 6 of Interpretation Bulletin IT-292, "Taxation of Elected Officers of Incorporated Municipalities, School Boards, Municipal Commissions and Similar Bodies," a copy of which we sent to you earlier, do not apply to XXXXXXXXXX because the exemption in subsection 81(3) of the Act is only available when an amount is paid as an allowance or is deemed to be paid as an allowance under the relevant provincial Municipal Act. Because the operation of the XXXXXXXXXX is not under the authority of the Municipal Government Act of XXXXXXXXXX, the comments in paragraph 7 of IT-292 also do not apply. Consequently, no amount of the remuneration paid to you by the XXXXXXXXXX can be excluded from your income.

In addition to the foregoing, it is our view that the XXXXXXXXXX cannot be considered to be either a provincial legislature, an incorporated municipality or a governmental body similar to a municipal board, municipal commission, municipal corporation or school board, based on a review of the material submitted and the relevant legislation.

We would like to bring to your attention that paragraph 6(1)(b) of the ITA provides a list of other allowances which may be payable to an officer or employee and not be included in income. Paragraphs 48 and 49 of Interpretation Bulletin IT-522R, "Vehicle, Travel and Sales Expenses of Employees," explain the conditions under which one of the more commonly paid allowances (for the use of an employee's vehicle) can be excluded from income.

Alternatively, Interpretation Bulletin IT-352R2, "Employee's Expenses, Including Work Space in Home Expenses," provides a description of expenses which may be claimed by an officer or employee in respect of expenses that the officer or employee is required to pay by reason of the contract of employment for which an allowance is not received. Copies of these two bulletins are enclosed.

We trust our comments will be of assistance to you.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
Enclosure