6 February 2006 External T.I. 2005-0160561E5 - Board Fees - Municipal Officer

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 1/3 of the XXXXXXXXXX remuneration is considered an expense allowance excluded from computing the XXXXXXXXXX income pursuant to subparagraph 81(3).

Position: No.

Reasons: The corporations paying the board fees are taxable entities.

XXXXXXXXXX 						2005-016056
							Kathryn McCarthy, CA
February 6, 2006

Dear XXXXXXXXXX,

Re: Board Fees - Municipal Officer

We are writing in response to your e-mail of June 16, 2005, concerning the above-noted issue. We apologize for the delay in our response.

You described a situation where the XXXXXXXXXX of the City of XXXXXXXXXX is remunerated for services rendered as a Board member of two separate private, for profit and taxable utilities corporations, which are owned solely by the City. The XXXXXXXXXX is appointed to the Boards by the City. You inquired whether 1/3 of the XXXXXXXXXX remuneration earned as a member of the Boards is an expense allowance excluded in calculating income pursuant to subparagraph 81(3) of the Income Tax Act (the Act).

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. We are, however, prepared to offer the following general comments.

Subsection 81(3) of the Act provides that, in certain circumstances, a portion of an elected municipal officer's non-accountable expense allowance received because of the officer's position may be excluded from computing the officer's income. Subsection 81(3) also applies to an officer who is "elected" to a municipal utilities board, commission or corporation.

The CRA will generally extend subsection 81(3) treatment to the remuneration of an elected officer of a municipality that is received from a municipal utilities board, commission or corporation even where the officer is "appointed" to the position, provided there is a sufficient nexus to consider that the appointment arose as a result of the officer's election to the municipality. This extended subsection 81(3) treatment will not, however, apply in respect of remuneration earned by a municipal officer who is appointed to the board of a corporation owned by a municipality where that corporation is taxable under the Act. However, any specific reimbursement of actual expenses incurred to discharge the duties of the officer would still be exempt from income.

We trust our comments will be of assistance to you.

Yours truly,

Randy Hewlett
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch