12 January 1990 Ruling 59183 F - Allowances for Elected Officials and Employees

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.

January 12, 1990

Dear Madam:

Re:  Allowances for Elected Officials and Employees

This is in reply to your letter of November 27, 1989, requesting clarification and rulings on automobile allowances and standby charges for elected officials and employees.

There is a fee charged for advance' income tax rulings, which currently is $65 per hour with a minimum deposit of $325. Furthermore, advance rulings are issued only for proposed transactions.  It appears that in this case, the policy regarding automobile allowances has clearly been set.  We have enclosed a copy of Information Circular 70-6R on advance rulings for your reference.  However, we can give you our opinion as to the probable tax treatment of the issues you have raised.  Also enclosed are copies of Interpretation Bulletin IT-63R3, lT-292 and IT-522.

County Councillors

1.      The Income Tax Act (the "Act") generally treats income from an office in the same manner as income from employment.  Therefore, the comments in IT-522 and IT-63R3 apply equally to employees and elected officials.  As for subsection 81(3) of the Act and IT-292, they apply only to elected officials who meet the criteria set out in that subsection and not to employees' as that word is normally used.  From the information you gave us in our telephone conversation, 19(1) Ozols), it appears that county councillors would qualify for the preferential tax treatment under subsection 81(3) of the Act.

2.     Item 2 in your letter did not contain any questions.

3(a).      We consider travel between the home of a councillor and the County Administration Building to be personal travel.  The courts have held on a number of occasions that the expenses incurred by an employee in reporting to his usual place of work are personal expenses.  In our view, the requirement that the councillors attend at meetings at the County Administration Building (which is the permanent, central establishment of the County) is no different than the requirement that an employee report to his employer's place of business.  In both cases any expenses incurred for this purpose are personal.  As noted earlier, the Act generally does not distinguish between income or expenses arising from employment or from an office.  Any allowance received by a councillor for this travel would be a taxable benefit under paragraph 6(1)(b) of the Act.  It would form part of the total amount from which the amount excluded under subsection 81(3) of the Act is determined, as stated in paragraph 5 of IT-292.

3(b).      The comments in 3(a) above apply as well to travel between home and the County Administration Building on weekends and after business hours.  Please refer to paragraph 5 of IT-63R3.

3(c).      We are assuming that the type of business meeting or event referred to in your letter is analogous to the exception provided for in paragraph 5 of IT-63R3.  On this basis only, it is correct that travel between a councillor's home and a business meeting or event at a point of call other than the County Administration Building is not personal travel.  Therefore, an allowance for this travel would be non-taxable under subparagraph 6(1)(b)(vii.I) of the Act if it meets all of the requirements in that subparagraph and is not disqualified by subparagraphs 6(l)(b)(x) and (xi). This type of allowance is not included in income nor in the total amount from which' the portion excluded by subsection 81(3) of the Act is calculated.

County Warden

1.     It is the Department's position that once an employer-owned automobile (here, the County's automobile) is assigned to an employee (or official) for his use, that automobile is considered to have been made available to him and continues to be available to him until such time as the automobile,, and control over its use, have been returned to the employer.  In short, we consider the employer to have made the automobile available to the employee until such time as he makes it unavailable to that employee. Since the County Warden will have the automobile at home overnight and on weekends, it will be available to him, even though it is not intended to be used for his personal use.  The standby charge is calculated as set out in paragraph 15 of IT-63R3.  Paragraph 8 of IT-63R3 explains how the standby charge may be reduced where the employee drives an average of fewer than 1,000 personal-use kilometres per month in a year, 90% of the total travel mileage is for business purposes, and the employer requires the employee to use an automobile in the course of the employee's duties.  For the purposes of subsection 81(3) of the Act, only those taxable benefits "paid" in satisfaction of the fixed amounts required to be paid are relevant.  In other words, where the councillors enjoy a taxable benefit which does not form part of the fixed amount to be paid as salary or other remuneration, but is rather a deemed benefit under the Act, it does not form part of the total amount from which the portion excluded by subsection 81(3) of the Act is calculated.  Nevertheless, the deemed benefit (i.e. the standby charge) is included in income under paragraph 6(1)(e) of the Act.

2.     "Personal" use refers to the use of an automobile for purposes not directly related to or in the actual course of the carrying out of the duties of an office or employment.  Examples would be vacation trips, personal shopping trips and travel to and from the employee's usual place of work.  However, travel to conventions and business meetings in other cities or to other parts of the country would not be personal use.

County Employees

1.     It is a question of fact to be determined in each case by the District Taxation Office whether an automobile allowance of 27 cents per kilometre is in excess of a reasonable amount.  However, as stated in paragraph 45 of IT-522, we will normally accept as reasonable an allowance based on the deductibility limits for the payor of the allowance, which currently are 31 cents per kilometre for the first 5,000 kilometres and 25 cents for each additional kilometre.

We trust the above is of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch