10 August 2007 External T.I. 2007-0223881E5 - Municipal Officers Allowance

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 a private individual who is not an officer of a municipal utilities board is allowed to exclude from his/her income, a portion of his/her allowance paid by the commission, pursuant to paragraph 81(3)(b) of the Act.

Position: No

Reasons: Unless the board member is elected, he or she is not eligible for the exemption.

XXXXXXXXXX 						2007-022388

August 10, 2007

Dear XXXXXXXXXX,

Re: Municipal Officers Allowance

We are writing in reply to your letter of February 9, 2007, wherein you asked whether private individuals who sit on the XXXXXXXXXX (the "Commission") are eligible for the municipal officers' expense allowance pursuant to subsection 81(3) of the Income Tax Act (the "Act").

The situation outlined in your letter appears to relate to a factual one, involving specific taxpayers. It is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advanced income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other CRA publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the Canada Revenue Agency ("CRA") website.

The CRA's general views regarding the municipal officers' allowance are contained in Interpretation Bulletin IT-292, "Taxation of elected officers of incorporated municipalities, school boards, municipal commissions and similar bodies". Although we cannot comment definitively on your specific situation, we are prepared to provide the following general comments, which may be of assistance.

Subsection 81(3) of the Act provides that elected officers and members of certain municipal organizations may exclude from their income for a year an amount received as an allowance for expenses connected with carrying out employment duties, provided that the amount does not exceed 50% of their salary or other remuneration. In order to qualify for this exempt allowance, an individual must be either:

(a) an elected officer of an incorporated municipality,

(b) an officer of a municipal utilities board, commission or corporation or any other similar body, the incumbent of whose office as such an officer is elected by popular vote or

(c) a member of a public or separate school board or similar body governing a school district.

For members of the Commission to qualify for the exemption, they would have to meet the criteria in (b), above. Your inquiry distinguishes between Commission members who are "private individuals" and those who are "municipal officers". The exact nature of the distinction is not clear. However, in order for an allowance paid to Commission members to be exempted under subsection 81(3) of the Act, the individual must become a member either by election by popular vote directly into the position, becoming a member ex officio because of an election by popular vote in some other body or by being elected by popular vote for the purposes of being appointed to a similar body.

We trust that these comments will be of assistance.

Yours truly,

Renée Shields,
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch