13 March 2000 External T.I. 2000-0005985 - AMOUNTS REC'D BY VOLUNTEERS

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 benefits received by volunteer workers working for the taxpayer, a church-based agency which provides relief, social benefits and social services to people in need, are taxable. These benefits include reimbursement for housing and food, travel costs, and allowances for vacation and personal expenses.

Position: It is our view that the volunteers are likely receiving employment benefits. As such, it is our view generally that, unless the exemption for a special work site in subparagraph 6(6)(a)(i) of the Act applies, the amounts received by the volunteers are either taxable benefits under paragraph 6(1)(a) of the Act or taxable allowances under paragraph 6(1)(b) of the Act.

Reasons: Although a ruling received by the taxpayer from CPP/UI Rulings in 1989 indicated that the volunteers were not under a contract of service, it appears to us from the description of the volunteers' work conditions that many of the relevant factors point to an employee-employer relationship.

XXXXXXXXXX 	J. Gibbons
		2000-000598
Attention:  XXXXXXXXXX 

March 13, 2000

Dear XXXXXXXXXX:

We are replying to your letter of January 27, 2000, in which you requested our views on the taxability of amounts received by volunteer workers working for your client, the XXXXXXXXXX. We also acknowledge receipt of a copy of a ruling issued XXXXXXXXXX, in which they ruled that the volunteers of the XXXXXXXXXX are not under a contract of service. They also stated in their letter that the ruling would remain valid until there was a significant change in the facts, at which time, a new ruling should be requested.

As requested, we have considered the situation outlined in your letter and have provided some comments below. However, we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Thus, our comments are of a general nature only.

Facts:

The XXXXXXXXXX is a church-based agency providing relief, development and social services to people in need. The XXXXXXXXXX operates both domestic and international programs. The backbone of these programs is its volunteers. (According to your letter, those volunteers that serve outside Canada are generally considered to be continuing residents of Canada for income tax purposes.) The "general volunteers," as opposed to the supervisors, do not receive compensation per se for their time or services; however, they receive the following payments, which bear no relationship to the type of services rendered or the hours of service provided:

1. Reimbursement of travel costs. The volunteers are reimbursed for the amounts that they have paid for travel to the orientation session, assignment in Canada or to the foreign country and work-related activities.

2. Reimbursement of housing and food costs. The volunteers are reimbursed for the amounts that they have paid for housing, utilities, food, necessary toiletries, and certain non-prescriptive drugs.

3. Vacation. The XXXXXXXXXX provides volunteers with a vacation allowance that affords them a modest vacation of XXXXXXXXXX per year, depending on the particular volunteer's years of service.

4. Personal expenses. The XXXXXXXXXX provides each volunteer with a non-accountable monthly allowance of $XXXXXXXXXX or $XXXXXXXXXX , based on the particular volunteer's years of service, to cover personal expenses. The XXXXXXXXXX also provides general medical care including surgical, maternity, optical, dental and psychiatric services.

5. Resettlement. Resettlement assistance accumulates for volunteers beginning with the XXXXXXXXXX of service and is given upon termination and return home. The volunteer receives $XXXXXXXXXX per adult and $XXXXXXXXXX per child per month; however, the accumulation is limited to XXXXXXXXXX of continuous service and the disbursement is made only upon termination.

6. Home leave. Volunteers planning to return overseas for a continuing or new assignment are eligible for home leave, which includes assistance for transportation and maintenance support at home. The length of leave and amount of support will depend on the total months of services completed and months committed to future service.

Our views:

For purposes of the Act, the determination of whether the relationship is that of employer/employee or an independent contractor is a question of fact. The Agency relies on the basic tests developed by the courts in deciding whether a particular contract is a contract of services (employer/employee relationship) or a contract for services (client and independent contractor relationship). These tests generally consist of the control test, the integration test, the economic reality test and the specified results test. In this regard, the contract between the parties, which sets out the rights and obligations of each of the parties, provides important information in determining the type of relationship that exists. However, in our view, even more important than the contract is the actual circumstances surrounding the performance of services and whether such findings of facts agree with what is stated in the contracts.

Although the ruling received by your client from CPP/UI Rulings in 1989 indicated that the XXXXXXXXXX volunteers were not under a contract of service, it appears to us from the description of the volunteers' work conditions that many of the relevant factors point to an employee-employer relationship. For example, on page 11 of the 1998-1999 "Employer's Guide to Payroll Deductions - Basic Information," it states that the Agency generally considers a taxpayer to be an employer if:

• the taxpayer pays salaries, wages (including advances), bonuses, vacation pay, or tips to your employees; or
• the taxpayer provides certain benefits, such as board and lodging, to your employees.

Based on the foregoing, it is our view that the volunteers are likely receiving employment benefits. As such, it is our view generally that, unless the exemption for a special work site in subparagraph 6(6)(a)(i) of the Act applies, the amounts received by the volunteers are either taxable benefits under paragraph 6(1)(a) of the Act or taxable allowances under paragraph 6(1)(b) of the Act.

For additional comments on the special work site exclusion, we refer you to paragraphs 4 through 11 of IT-91R4, "Employment at Special Work Sites or Remote Work Locations." In particular, you should note our comments in paragraph 6 concerning the term "temporary," which is not defined in the Income Tax Act. This paragraph states that, as a general rule, duties will be considered to be of a temporary nature if it can reasonably be expected that they will not provide continuous employment beyond a period of two years.

You also asked whether the same treatment will apply for volunteer workers in the Canadian programs and in the international programs. Based on your statement that the volunteers which serve outside Canada are generally considered to be continuing residents of Canada for income tax purposes, our comments above apply equally to volunteers under either program. Volunteers under the international program may, however, be entitled to the overseas employment tax credit in section 122.3 and/or the non-business foreign tax credit under subsection 126(1).

If you wish to pursue your concerns further, we suggest that you contact officials in the XXXXXXXXXX Tax Services Office. You may wish to request a new ruling from Revenue Collections concerning the relationship between XXXXXXXXXX and its volunteers.

We trust that these comments will be of assistance.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate

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