10 September 2001 Internal T.I. 2001-0090777 - LABOUR UNIONS

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: various questions on labour organizations

Position: general comments

Reasons: N/A

		September 10, 2001

Ms. Debbie Anderson	HEADQUARTERS
	Winnipeg Tax Services Office	Shaun Harkin, CMA
	Client Services Division
		2001-009077

Technical Interpretation Request: Labour Unions (149(1)(k))

This is in reply to your memorandum of June 29, 2001 wherein you requested our opinion on several questions with respect to labour unions when the following scenarios exist:

A) A local or branch of a labour union receives assessed dues from the umbrella organization in order to run their activities. The local or branch has the authority to change their dues at a local or branch meeting of the members.

B) A local or branch receives money from the umbrella organization as a budgeted amount. The local or branch does not assess dues and is dependent on the amount distributed to them by the umbrella organization.

Both types of locals/branches want to use some of the funds for such things as providing union training to members, paying scholarships, sending flowers to bereaved and ill members and providing a supper and/or social evening in conjunction with meetings. Dues or income received is invested to pay for theses activities.

Specifically you asked the following questions:

1) Is the organization restricted in the amount of money it can amass? If so, are the restrictions the same as non-profit organizations?

2) Will the activities listed above cause the organization to lose its exempt status?

3) Is the organization required to file any type of information return?

4) Is there any information available to give clients who have questions?

Our Comments

We will answer each question in the order in which they were raised. The answer to each question applies to both scenarios 'A' and 'B' described above.

1) Paragraph 149(1)(k) of the Income Tax Act (the "Act") exempts from Part 1 tax all taxable income of a labour organization or society. In our view, if a particular entity meets the requirements of a labour organization, paragraph 149(1)(k) of the Act would not, in and by itself, restrict profit-generating activities conducted by a labour organization unless the activities were such that the organization was no longer, in fact, a labour organization. This, however, is a question of fact and can only be determined on a yearly basis following a review of its activities for the year it seeks to be a tax-exempt organization.

There is no definition of "labour organization" in the Act. In L.I.U.N.A. Local 527 Members' Training Trust Fund v. The Queen (1992) 2 CTC 2410 at 2422, the Tax Court of Canada referred to the meaning of this term and cited a U.S. case for the following explanation:

The expression "labour organization" has not been judicially defined in any Canadian court, but in Stone v. Textile Examiners & Shrinkers Employers' Ass'n, 137 App. Div. 655 at 658, 122 N.Y.S. 460 at 462, Dowling, J. said:

The ordinary definition of trade union or labour organization is thus stated: "A combination of workmen of the same trade or of several allied trades, for the purpose of securing by united action the most favourable conditions as regards wages, hours of labour, etc., for its members." 28 Am. & Eng. Ency of Law (2nd Ed.) 440. "An association of workmen usually, but not necessarily, employed in the same trade, for the purpose of combined action in securing the most favourable wages and conditions of labour." 24 Cyc. 816.

2) The activities described in question two above would not, in and by themselves, cause a labour organization to lose the exemption under paragraph 149(1)(k) of the Act.

The income generating activities cannot be the principal activity of the entity and must be undertaken for the purpose of achieving its objective of representing employees to ensure favourable working conditions.

3) It is not necessary for labour organizations to apply for exempt status or be registered under the Act or file an information return. Labour organizations simply self-identify.

4) As for information available for clients, the Tax Court of Canada case mentioned in response to question one above provides a definition of labour organizations. A Directory of Labour Organizations is published by Human Resources Development Canada. The Income Tax Rulings Directorate has published several documents on the subject of labour organizations that are available through access to information and on the Canada Customs and Revenue Agency ("CCRA") database. Also, with respect to regulatory control of labour organizations and their activities, you may wish to contact the Canada Labour Relations Board at 604-666-8225 or by writing to the following address:

Canada Labour Relations Board
Room 410, 757 West Hastings Street
Vancouver, British Columbia
V6C 1A1

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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. Our practice is to make this disclaimer in all instances in which we provide an opinion.

We trust the above comments are of assistance.

Steve Tevlin
for Director
Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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