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 retroactive pay equity payments would be considered "qualifying amounts" under paragraph (a) of the definition of this term. In some cases, an arbitrator, whose decision was binding, determined the pay equity settlement.
Position: No.
Reasons: Since the other expressions used in this definition, i.e., "an order or judgment of a competent tribunal" and "a contract by which the payor and the individual terminate a legal proceeding," refer to more formal processes, it is our view, based on the principle of noscitur a sociis or associated words, that an arbitration award for purposes of section 110.2 does not include an award as a result of arbitration under normal collective bargaining.
XXXXXXXXXX J. Gibbons, CGA
2001-006635
March 21, 2001
Dear XXXXXXXXXX:
Your facsimile dated January 12, 2001, to the Surrey Tax Centre was forwarded to us for reply. You are seeking our assistance in determining whether retroactive wage equity adjustments paid by XXXXXXXXXX (the "Employer"), are considered "qualifying retroactive lump sum payments," as that term is used on Form T1198E.
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 70-6R4. Thus, our comments are of a general nature only.
Facts
(i) The Employer and the Union representing its employees (the "Union") established a "XXXXXXXXXX" (the "Committee") comprised of XXXXXXXXXX members appointed by the Employer and XXXXXXXXXX members appointed by the Union.
(ii) The Committee's mandate was to implement revised pay rates for the various classifications. The principle applied was that different wage adjustments were made to the classifications depending on the internal or external comparisons for each particular classification. No employee suffered a reduction in wage rates as a result of this process.
(iii) If the Committee couldn't agree on the revised pay rates, the issue was referred to an arbitrator for a binding decision.
You wish to know whether the payments made either as a result of revised rates agreed to by the Committee or as a result of revised rates decided by the arbitrator would be considered QRLSP.
The term "qualifying retroactive lump sum payment" is used on Form T1198E and is based on the rules in section 110.2 of the Income Tax Act, which provides for the deduction of certain lump-sum payments. In the situation outlined in your letter, the main issue appears to be whether the lump-sum payments made by the Employer would qualify under paragraph (a) of the definition of "qualifying amount" in section 110.2. Paragraph (a) of the definition of qualifying amount describes, among other things, an amount that is received pursuant to an order or judgment of a competent tribunal, an arbitration award or a contract by which the payor and the individual terminate a legal proceeding, and that is included in computing the individual's income from an office or employment.
In our view, an arbitration award for purposes of section 110.2 does not include an award received as a result of arbitration under normal collective bargaining. Accordingly, it is our view that the lump-sum payments paid by the Employer to its employees are not qualifying amounts, regardless of whether the payment was made as a result of revised rates agreed to by the Committee or as a result of revised rates decided by the arbitrator.
We trust that these comments will be of assistance.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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