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 section 252.1 of the Income Tax Act (the "Act") only deems each local of a union to be a single employer for the purposes of items listed in subsection 252.1(a) to (d) of the Act.
Position: Yes.
Reasons: Section 252.1 of the Act provides that a union and its locals and branches are considered to be a single employer for the purposes of certain of the retirement savings rules.
XXXXXXXXXX
Attention: XXXXXXXXXX John Parker CMA
2012-044125
October 12, 2012
Dear XXXXXXXXXX:
Re: Section 252.1 of the Income Tax Act (the “Act”)
We are writing in response to your letter of March 23, 2012, wherein you asked our opinion as to whether section 252.1 of the Act, only deems each local of a union to be a single employer in regard to items listed in section 252.1(a) to (d) of the Act and whether locals of a trade union are treated as separate employers or as one employer for purposes of determining the size of payroll withholdings and the corresponding deadline on which payroll withholdings must be remitted.
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. Also, where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. Nonetheless, we are prepared to offer the following general comments.
Section 252.1 of the Act provides that a union and its locals and branches are deemed to be a single employer for the purposes of certain retirement savings plans. The section applies, first, for the purposes of the provisions relating to the computation, reporting and application of pension adjustments (PA) and past service pension adjustments (PSPAs). Second, 252.1 is applicable commencing in 1995 for the purpose of determining whether a pension plan is a multi-employer plan (MEP) or a specified multi-employer plan (SMEP). The rule will ensure that a plan is not considered to have more than one participating employer simply because a union and its various locals participate in the plan. Third, section 252.1 applies, commencing October 8, 1996, with respect to subsection 207.6(5.1) of the Act. That subsection determines which contributions made to a foreign pension plan are subject to the retirement compensation arrangement (RCA) tax pursuant to subsection 207.6(5.1) of the Act. Fourth, the section applies with respect to the provisions of the Act relating to a failure to withhold RCA tax from contributions to an RCA or to remit tax that was withheld.
The administration of payroll withholding tax is handled by the Taxpayer Services and Debt Management Branch (TSDMB). Their policy entitled “Unions and Remitting Rules (Reg. 108)” is as follows: “Reg. 108(1.2) states the average monthly withholding amount (AMWA) is the aggregate of all amounts each of which is an amount required to be remitted. According to this policy, each local, branch, national and international unit of a union is considered to be a part of the same entity hence all union accounts form part of the aggregate for calculating the AMWA.”
Whether a specific union local is a separate business entity, for payroll remittance purposes, is a question of fact. We suggest that you contact the TSDMB for any such determinations of specific factual situations. For more information contact Andre Bertrand, Manager, Business Number Operations, TSDMB, Ottawa, Ontario, K1A 0L5 (613-941-2749).
We trust that our comments will be of assistance to you.
Yours truly,
Doug Watson
for Director
Financial Industries Division
Income Tax Rulings Directorate
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