29 May 2014 External T.I. 2014-0518901E5 - Municipal officer-travel and meal reimbursement

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 reimbursement of travel and meals to officers to attend meetings outside of his or her municipal district should be included in the officer's income and the determination of the officer's expense allowance under subsection 81(3) of the Act.

Position: Question of Fact.

Reasons: Reimbursements for personal expenses are generally taxable as a benefit under paragraph 6(1)(a) of the Act. If an amount is a reimbursement of a personal expenditure, it is included in the determination of the municipal officer's expense allowance that is exempt under subsection 81(3) of the Act. If the expense was incurred in the performance of the officer's duties, the reimbursement is generally not taxable and thus excluded in the determination of the municipal officer's expense allowance that is exempt under subsection 81(3) of the Act. Travel between an officer's home and a regular place of employment (RPE) is personal travel. It is always a question of fact whether a location is a RPE for an officer.

XXXXXXXXXX
2014-051890

May 29, 2014

Dear XXXXXXXXXX:

Re: Municipal officer's travel and meal reimbursement

We are writing in response to your email dated January 16, 2014, concerning the tax treatment of reimbursements made to XXXXXXXXXX ("officer") of an incorporated municipality for travel expenses incurred while travelling from home to meetings taking place outside of the officer's municipal district ("municipality'). These reimbursements are in addition to the non-accountable allowance received by the officer to cover expenses within the officer's municipality.

In the situation described, the officer is paid a salary, of which one third is considered to be a non-accountable allowance. The non-accountable allowance is allotted to cover expenses (e.g., mileage, meals) incurred within the officer's municipality and the officer does not submit claims for these expenses. Furthermore, the officer submits claims and is reimbursed for travel expenses incurred outside of his or her municipality for council and committee meetings. The municipality currently includes these reimbursements in the officer's income.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act ("Act") and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.

The proper treatment of a reimbursement made to an officer depends on whether the reimbursement was incurred primarily for the benefit of the officer or the employer (i.e., personal versus municipal business).

The CRA considers a reimbursement to be a payment to repay a specific amount spent on a specific expense. If an office reimburses an officer for personal expenses, the officer must include the reimbursement in his or her income pursuant to paragraph 6(1)(a) of the Act. The CRA accepts that an amount paid by an office for an item that is primarily for the benefit of the office is generally not considered to be a taxable benefit to the officer.

For officers, subsection 81(3) of the Act exempts from tax an officer's expense allowance amount, which is generally considered to be equal to one-third of the officer's income from the office. Where the actual expense allowance is less than one-third of the officer's income, the actual amount will be used to determine the amount that is exempt under subsection 81(3).

A reimbursement that is taxable under paragraph 6(1)(a) of the Act would be included as part of the total income received from the office to determine the expense allowance amount that is exempt under subsection 81(3) of the Act.

Meals

Regarding the reimbursement of meals, it is a question of fact whether an officer would be in receipt of a taxable benefit. A municipality may reimburse meals consumed by officers while carrying on their municipal duties away from the municipality and no inclusion in the officer's income is required. However, the reimbursement of any personal expenses, including meals consumed within the local municipality, would be a taxable benefit to the officer and included in the officer's income from the office under paragraph 6(1)(a) of the Act and in the determination of the officer's expense allowance amount that is exempt under subsection 81(3) of the Act. A reimbursement for meals consumed within the municipality may not be included in the officer's income when the principal objective was to ensure that the officer's duties were undertaken in a more efficient manner during the course of a work shift, and where amounts paid are not indicative of an alternate form of remuneration.

Travel

Although it is a question of fact whether the officer's travel is personal or office-related, it is the longstanding position of the CRA that travelling between an officer's home (including a home office) and a location at or from which an officer regularly reports for work and performs the duties of the office ("RPE") is generally personal travel. The determination as to whether a particular work location is a RPE for an officer is always a question of fact. It should also be noted that an officer may have more than one RPE. Any reimbursement of personal travel is included in the officer's income under paragraph 6(1)(a) of the Act and in the determination of the officer's expense allowance amount that is exempt under subsection 81(3) of the Act.

You make reference to Campbell v. R., 2003 TCC 160 [Informal Procedure] where the Tax Court of Canada ("TCC") concluded that the taxpayer was travelling from one RPE (the main base of work at home) to another RPE (the Board office) and therefore the allowance was not subjected to tax. Section 18.28 of the Tax Court of Canada Act states that informal TCC decisions should not be treated as a precedent for any other case. In particular, the CRA does not consider the informal decision in Campbell to have precedential value.

In summary, one-third of any reimbursement that is included in the officer's income under paragraph 6(1)(a) of the Act will be included in the determination of the officer's expense allowance that is exempt from tax under subsection 81(3) of the Act. Effectively, only two-thirds of these reimbursements will be taxed.

We trust these comments will be of assistance to you.

Yours truly,

Nerill Thomas-Wilkinson, CPA, CA
Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate