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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: (a) Whether an honorarium received by a councillor for representing a municipality on an external board, is employment income when the amount is voluntarily turned over to the municipality. (b) Whether the councillor is entitled to a deduction from employment income for the amount. (c) Whether the councillor is entitled to a non-refundable tax credit for a donation made to a Canadian municipality.
Position: (a) Yes. (b) No. (c) Yes.
Reasons: (a) Subsection 5(1), paragraph 6(1)(c) and subsection 56(2). (b) Subsection 8(2). (c) Subsection 118.1.
Randy Hewlett, B.Comm.
XXXXXXXXXX 613-957-8973
2002-017458
February 26, 2003
Dear XXXXXXXXXX:
Re: Council Remuneration Donated To A Municipality
We are writing in response to your letter of November 6, 2002, regarding your technical interpretation request on the above-noted issue, as it pertains to elected officials (the Councillors) of XXXXXXXXXX (the County). We also acknowledge the additional information sent in your letter of February 12, 2003.
In your correspondence, you indicated that the County is a municipality under the Municipal Government Act (Revised Statues of Alberta, 2000, Chapter M-26). The County pays the Councillors an annual salary for their services. Part of the Councillors duties as elected officials is to represent the County on boards and commissions. In particular, the County has representation on the XXXXXXXXXX (the Commissions).
In addition to the annual salary a Councillor receives from the County, if he or she is a member on either of the Commissions, the particular Commission must pay them an honorarium. You inquire whether the honorarium is taxable employment income when:
(a) It is paid to the Councillor and then turned over by the Councillor to the County; or
(b) The Councillor requests that the Commission pay it directly to the County.
Further, if the honorarium is considered taxable employment income, you inquire whether the Councillor is entitled to a deduction from employment income or a non-refundable tax credit for a charitable donation.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following general comments.
Subsection 5(1) of the Income Tax Act (the Act) includes in a taxpayer's income from an office or employment, the salary, wages and other remuneration received in the year. Further, paragraph 6(1)(c) of the Act includes in a taxpayer's income the director's or other fees received in the year in respect of, in the course of, or by virtue of an office or employment. An amount not directly received or enjoyed by a taxpayer may also be included in income under these provisions by virtue of subsection 56(2) of the Act.
In our view, if a Councillor receives the honorarium and then turns it over to the County, the amount must be included in employment income pursuant to subsection 5(1) or paragraph 6(1)(c) of the Act. Further, if a Councillor requests that the honorarium be paid directly to the County, subsection 56(2) of the Act will apply to include the amount in employment income in the same manner as if it were paid directly to the Councillor by the Commission.
You should also note that the Councillor would not be entitled to a deduction from employment income under section 8 of the Act for the amount of honorarium in either situation. However, if the amount is a bona-fide gift to the County, the Councillor will be entitled to a non-refundable tax credit under section 118.1 of the Act. Generally, a gift will be considered made to a Canadian municipality if the transfer is voluntary and made without expectation of return by the donor. For more information with respect to the other general requirements that must be met for gifts and donations, see Interpretation Bulletins IT-110R3 Gifts and Official Donation Receipts and IT-297R2 Gifts in Kind to Charity and Others.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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