The Queen v. Mousseau, 95 DTC 5089, [1995] 2 CTC 431 (FCTD)

Rouleau J.:—This is an appeal by the Crown from a decision of the Tax Court of Canada dated January 8, 1990.

The facts are straightforward and not in dispute. The defendant is employed by the British Columbia Assessment Authority as an Appraiser

III. His duties include supervision and real estate appraisal, although the majority of his time is spent on the latter. The position also requires preparation of reports, when necessary, for the Court of Revision, Appeal Board, or any other court. In order to qualify for and maintain the position of Appraiser III an individual must have the following education and experience:

Completion of the twelfth school grade including successful completion of the U.B.C. Diploma Course in Appraisal or Real Estate Tax Assessment option(s) or successful completion of the Appraisal Institute of Canada (the "AIC") requirements leading to eligibility for accreditation as a Registered Appraiser ("AACI") or other accredited courses considered of equal academic standing. A minimum of five years experience in appraising real property or equivalent.

Accordingly, the designation of AACI or equivalent standing is necessary to maintain a position with the B.C. Assessment Authority as an Appraiser III.

The Appraisal Institute of Canada was incorporated on April 11, 1960, by the Secretary of State under Part 2, Chapter 53 of the Revised Statutes of Canada, 1952 as a body corporate and politic without share capital. As part of its mandate, the AIC conducts a series of examinations leading to the designation of AACI, a registered appraiser, which identifies the holder as an individual meeting certain AIC standards of knowledge and experience. In June 1987, the AIC approved by-laws that a person whose fees are not paid within 90 days after the date when they become due and payable shall cease to be in good standing and may have his membership privileges revoked.

The defendant has been a member of the AIC for approximately ten years. In the 1987 taxation year, he paid annual dues in the amount of $235 to maintain his accreditation of AAIC. In computing his income tax for the 1987 taxation year, he claimed the amount as a deduction from employment income pursuant to subsection 8(1) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the ’’Act”).

The Minister, by notice of assessment dated August 2, 1988, disallowed the deduction on the grounds the dues were not necessary to maintain a professional status recognized by statute, as required by subsection 8(1). Mr. Mousseau objected on the basis that in order to both obtain and maintain his position as an Appraiser III, he was required to pay the dues and was not reimbursed by his employer for the cost of his membership to the AIC The Minister confirmed his assessment and the defendant appealed to the Tax Court of Canada. Allan D.J.T.C. allowed the appeal and ordered the Minister to reassess the defendant on the basis he was entitled to deduct the amount in question as professional dues.

The plaintiff now appeals from that decision on the grounds that no federal or provincial statute in effect in 1987 recognized the professional status of AAIC, a requirement which must be met pursuant to subsection 8(1) of the Income Tax Act. The defendant argues there were four such statutes in effect.

Subparagraph 8( 1 )(i)(i) of the Act provides as follows:

8.(1) In computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:

(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 he has not been reimbursed, and is not entitled to be reimbursed in respect thereof;

Four requirements must be met therefore, in order for annual professional membership dues to be deducted by a taxpayer in computing his income from employment:

1. the dues have to be applicable to his office of employment;

2. they must be annual dues (as compared to entrance fees) necessary to maintain professional status;

3. the amount claimed must be paid in the taxation year and the employee has not been, nor is he entitled to be, reimbursed by his employer; and

4. the professional status for which the dues are paid is recognized by statute.

In the present case, there is no question that membership in the AIC, and the payment of the dues in question, is required as a condition of the defendant’s employment as an Appraiser III and therefore is applicable to that source of income. This is clear from the job description contained in exhibit 1. The B.C. Assessment Authority has taken the position that should a person holding the position of Appraiser III not pay dues and, as a result, no longer be eligible for accreditation as an AACI, he or she may be demoted to a lesser position. Accordingly, the first requirement has been met.

Neither is it disputed the second and third requirements are satisfied. The dues are annual and failure to pay them results in revocation of one’s status as an AACI. The by-laws of the Appraisal Institute of Canada are unequivocal in this respect. Furthermore, the dues claimed by the defendant were paid in the 1987 taxation year and he has not been, nor is he entitled to be, reimbursed by his employer.

The Tax Court Judge was prepared to allow the deduction on the basis that payment of the dues was necessary in order to maintain employment as an Appraiser III with the B.C. Assessment Authority. However, that is only one of the requirements prescribed by subsection 8(1) of the Income Tax Act.

The issue here is whether the fourth requirement, that the professional status the dues were paid to maintain, was recognized by statute in effect during the 1987 taxation year. The fact is Mr. Mousseau paid the dues in question to maintain his accreditation of AAIC, a registered appraiser, with the AIC. It is that professional status therefore, which must have statutory recognition. The legislative enactments in effect in 1987, relied on by the defendant, contain reference to ’’competent valuators" and "independent appraisers". However, he was unable to present the Court with any legislation in effect during the relevant taxation year which makes reference to the designation of A ACL The statutes which do so came into effect after 1987.

I am unable to conclude therefore, that during the 1987 taxation year in question, the professional status of AACI was recognized by statute. Without that, the dues paid to maintain the accreditation are not deductible under subsection 8(1) of the Income Tax Act.

For these reasons the plaintiff’s appeal is allowed.

Appeal allowed.