15 January 1990 Income Tax Severed Letter 8-0323 - [Parking Benefits]

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.

JAN 15 1990

Legislative and Intergovernmental Affairs Branch J.A. Szeszycki (613) 957-2103

SUBJECT: OBJET: Parking Benefits

FILE DOSSIER 8-0323

We are responding to your letter of October 23, 1989, in which you requested our views concerning the Department's position on parking benefits.

The point at issue is whether the cost of employer-provided parking constitutes a benefit in relation to the use of an automobile. It is the taxpayer's view that it does and that consequently the benefit is exempt from tax by virtue of subparagraph 6(l)(a)(iii) of the Income Tax Act (the "Act").

It has been noted that the Department's position had been set out in paragraph 7 of IT-63R2 as follows:

"Costs of parking are not related either to the use or the operation of an automobile within the meaning of subparagraph 6(l)(a)(iii)."

In the course of preparing revisions to IT-63R2 that particular statement was deleted prompting speculation as to a change in the Department's position. In addition, reference has been found in the Report on the White Paper on Tax Reform (Stage 1) (November, 1987) ("Report") to "operating costs" as including the costs of parking. Such references further fuel speculation that parking was intended to be included in the operating costs of an automobile.

Our Comments

It remains the Department's position that a benefit in respect of employer provided parking is a benefit under paragraph 6(1)(a) of the Act and is not considered a benefit "in relation to the use of an automobile" as the latter phrase contained in subparagraph (iii) was meant to be construed.

That position was reflected in paragraph 7 of IT-63R2 . In the process of revising the bulletin with respect to other issues the decision was made to delete the statement because it was considered to be a contentious issue and that its presence might spark debate on the subject. Unfortunately, its deletion appears to have had the same effect.

Where an employer provides a parking space to an employee the cost of which would otherwise be considered a personal expense of the employee, the value of the parking space is treated as a taxable benefit to the employee under paragraph 6(1)(a) of the Act. Subparagraph 6(1)(a)(iii) excludes any benefit in relation to the use of an automobile, except to the extent that it relates to the operation of the automobile. If the parking benefit were considered to be in relation to the use of an automobile then it would clearly be affected by the provisions of subparagraph 6(1)(a)(iii) of the Act.

The total benefit in relation to the use of an automobile was divided with the introduction of subparagraph 6(1)(a)(iii) in 1982 between the portion of the benefit related to the operation of the automobile, which continues to be included in income under paragraph 6(l)(a), and the portion related to the availability to the employee of an automobile that is owned or leased by the employer which is included in income under paragraph 6(1)(e).

The availability benefit under paragraph 6(l)(e) is specifically intended to cover the benefit derived when an automobile is provided to the employee for his personal as well as employment use, relieving him of the necessity of providing an automobile for himself. Consequently, words found in paragraph 6(1)(e) such as "available" and "standby" are clearly not intended to be interpreted to include parking. It remains to be determined, therefore, whether parking is a benefit related to the operation of an automobile.

Expenses incurred such as gasoline and oil, repairs and maintenance clearly relate to the operation of a motor vehicle. In addition, legal requirements provide that a license and insurance are also necessary in order for a vehicle to be driven. Parking costs, on the other hand, are not required to be incurred in order for an automobile to be driven or operated. In Price v. MNR 80 DTC 1311, Member Taylor stated in his findings on page 1314 that "A distinction may also be made between licence and insurance requirements for the automobile on the one hand, and parking charges on the other". The appellant's automobile could not be operated without the licence nor ... without insurance ...".

In our review of jurisprudence involving parking cost, direct or indirect references, none were found to address the specific question directly (the rice case came close). We noted, however, that in the other cases parking charges were presented before the Court alternatively as automobile expenses, as travelling expenses (other than automobile expenses) and as expenses distinct from automobile expenses. Consequently, no strong support could be found in these cases for either the taxpayer's or the Department's view. We recognize further that the popular perception may well be that a parking charge in respect of an automobile would be an automobile expense; that is, if a poll were undertaken where the question asked was whether parking charges are an automobile expense, the vast majority would likely respond in the affirmative. It is not surprising therefore, that a document such as the Report might include a reference to operating costs as including parking charges. In contrast, the response to the direct request to define "operating costs" as reported in the Commons Debates of March 10. 1983 was "... this includes gasoline, repairs, insurance and other charges that would be applied against the vehicle to keep it on the road"; a statement which could be used to support the Department's position. All of the above comments should be considered in determining the significance of the statements in the Report.

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We hope that our comments will be of some assistance.

M.G. Hiltz for Director General Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch