19 May 2005 External T.I. 2005-0126961E5 - Union levy

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.

Principal Issues: Whether the local union levy fees deducted from school board employee pay is deductible and should be included in box 44 of T4 slips.

Position: The local union levy fees are deductible for the employees and can be included in box 44 of T4 slips.

Reasons: In order for membership dues to be deductible under 8(1)(i)(iv), the amounts paid must be, among other things, "annual" dues to "maintain membership" and not a special assessment made during the year. The Agency accepts the decision in Lucas vs. The Queen (87 DTC 5277) that to be considered "annual" there need not be recurrence from year to year. It is sufficient that the amount be capable of recurring and that the dues paid in the year were required to "maintain membership". In the situation at hand, the local levies are related to the cost of a replacement teacher that a bargaining unit has to pay as set out in the collective bargaining agreements. It is our view that these levies are annual dues directly related to the ordinary operating expenses of the trade union to which they are paid. Accordingly, these due can be included in box 44 of T4 slips.

2005-012696
XXXXXXXXXX Charles Rafuse
(613) 957-8967
May 19, 2005

Dear XXXXXXXXXX:

Re: Local Levy Fees

This is in reply to your fax of April 22, 2005, requesting whether or not local levy fees deducted from union staff salaries would be deductible in computing their income for a taxation year and should be reported in box 44 of their respective T4 slips.

Specifically, you have indicated that school board employees pay a local union levy to repay the school board for releasing a teacher for duties to act as a local union president. The levy is contemplated in the relevant collective bargaining agreements. The amount of the levy varies by bargaining unit and is determined based on the cost of a replacement teacher that is invoiced by the school board to the bargaining unit. A pro rata amount of the total levy is paid by each member of the bargaining unit. These amounts are deducted from their pay cheques.

Our Comments

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.

Subparagraph 8(1)(i)(iv) of the Income Tax Act (the "Act") provides that in computing a taxpayer's income for a taxation year from an office or employment, there may be deducted amounts paid by the taxpayer in the year as "annual dues to maintain membership in a trade union trade union ...or to maintain membership in an association of public servants...". However subsection 8(5) of the Act provides that annual dues of a member of such a trade union or association are not deductible, to the extent that they are, in effect, levied:

(a) for or under a superannuation fund or plan,

(b) for or under a fund or plan for annuities, insurance (with some exceptions) or similar benefits, or

(c) for any other purpose not directly related to the ordinary operating expenses of the association or trade union to which they were paid.

In the situation at hand, the local levies are related to the cost of a replacement teacher that a bargaining unit has to pay as set out in the collective bargaining agreements. Based on the limited information provided, it is our view that these levies would be deductible by the relevant employees pursuant to subparagraph 8(1)(i)(iv) of the Act. This is so since these levies are, inter alia, annual dues paid to maintain membership, as contemplated in subparagraph 8(1)(i)(iv) of the Act and are directly related to the ordinary operating expenses of the trade union or association to which they are paid.

Paragraph 10 of Interpretation Bulletin IT-103R indicates that where, by an arrangement between an employer and a union, the employer is willing to report the deductible amounts of the annual dues paid by the employees on the employees' T4 slips, such a procedure will be accepted by this Department provided the following conditions are met:

(a) the amounts are reported in the designated box for union dues of the T4 slips;

(b) a "certification", in the form set out in Appendix I, is to be completed and duly signed by authorized officers of the employer and the union, and filed with the employer's T4-T4A return; and

(c) the union does not issue receipts for the deductible annual dues.

We trust this information is helpful.

Yours truly,

Milled Azzi, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch