19 September 1991 Ministerial Correspondence 911954 F - Club Dues Paid by Employer

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.

Dear Sirs:

This is in reply to your letter of July 15, 1991 in which you requested an interpretation concerning the income tax consequences to government employees (including employees of the Government of Canada) where club dues described in subparagraph 18(1)(1)(ii) of the Income Tax Act (the Act) are paid on their behalf by their employer.

With respect to your concern, you have referred to paragraph 12 of Interpretation Bulletin IT-148R2 entitled "Recreational Properties and Club Dues" which is set out below:

Club dues disallowed as an expense to an employer are not necessarily considered a taxable benefit to the employee on whose behalf they were paid.   Where it is clearly to the employer's advantage for an employee to be a member of a club, the employee is not considered to have received a taxable benefit.  On the other hand, where the club membership is in the nature of a fringe benefit with little or no advantage to the employer's business, then the cost of membership is considered to be a taxable benefit to the employee and included in his income.

You have also referred to correspondence issued by this Department which suggests that government employees are considered to have received taxable benefits where club dues are paid on their behalf by their employer.  With respect to those comments, you have requested us to confirm that government employees will be subject to the same tax treatment as other employees in respect of club dues paid by their employer and that the government employees will not be considered to have received a taxable benefit where it is clearly to the employer's advantage for them to be members of the club.

Our Comments

The relevant comments in paragraph 12 of IT-148R2, as well as the comments contained in paragraph 34 of IT-470R, represent the Department's position with respect to the treatment accorded the payment by an employer of club dues on behalf of an employee.  The letter to which you refer places that position within the context of government operations.  Under normal government practices it would be a rare occurrence for the employer to utilise the facilities of a club to conduct its business.  The letter merely reflects the probability that if the employer had paid the club dues on behalf of the employee it would likely be considered of primary benefit to the employee and therefore taxable in his hands.  If such is not the case and the primary benefit is considered to go to the employer then the general guidelines set out in the bulletins apply equally.

We hope that the foregoing comments are of assistance to you.

Your truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch