10 January 1992 Income Tax Severed Letter 9130127 - Fees paid to directors of non-profit organization

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Subject: FEES PAID TO DIRECTORS OF NON PROFIT ORGANIZATION Section(s): 6(1)(b), 81(3.1)]

ROUND TABLE - CGA - JANUARY 10, 1992

Officer: Marcel Querry
File: 7-913012

QUESTION #23

We would like to know Revenue Canada's position in the following situations:

The board of directors of a non-profit organization meets 4 times a year at the organization's headquarters. The board members do not receive directors' fees or any other form of remuneration from the organization. However, board members are reimbursed for kilometres travelled to attend meetings, and for other travel expenses such as airplane and taxi travel.

What tax treatment should be given to these individuals' travel expense refunds?

Would your answer be the same if the meetings were held elsewhere than in the organization's headquarters, for example in a hotel conference room?

Would your answer be the same if the board members received directors' fees?

ANSWER

We are of the opinion that even though the members of the board of directors do not receive directors' fees, they could nonetheless be considered to be holding an office or employment, in view of the definition of these terms in subsection 248(1) of the Act.

The Department considers that expenses refunded or an allowance paid to an employee for travel costs incurred to travel from his residence to his workplace are taxable in the absence of specific statutory provisions to the contrary. For example, subsection 81(3.1) of the Act provides that an amount paid in respect of part-time employment when the duties of the part-time employment are performed at a location not less than 80 kilometres from both the individual's ordinary place of residence and his principal place of employment, shall not be included in computing the individual's income.

Moreover, a payment received for the use of a motor vehicle based on the number of kilometres travelled is considered, for the purposes of the Act, to be an allowance subject to the provisions of paragraph 6(1)(b) of the Act, when such an allowance is received in connection with the performance of the duties of the taxpayer's office or employment. These allowances are generally not taxable when they are reasonable in the circumstances and meet the other requirements of the Act.

Our position is the same regardless of whether the meetings of the board of directors are held at the organization's headquarters or elsewhere and regardless of whether directors' fees are paid.

Moreover, in conformity with Interpretation Bulletin IT-496, for an association to be tax exempt pursuant to paragraph 149(1)(1) of the Act, no part of its income (current or accumulated) may be made available for the personal benefit of any proprietor, member or shareholder of the organization. Failure to comply with this requirement can occur in a number of ways; for example, an organization may directly or indirectly distribute its income over the course of the year to a member or for the member's personal benefit. In that case, the organization would lose its non-profit organization status.

However, it is the Department's view that certain types of payments made directly to members, or indirectly for their benefit, do not, in and by themselves, disqualify an association from being exempted from tax pursuant to paragraph 149(1)(1) of the Act. This view applies to payments such as salaries, wages, fees or honorariums for services rendered to the association, provided the amounts paid are reasonable and in line with those paid in arm's-length situations for similar services. It also applies to payments made to employees or members of the association to assist them in covering their expenses to attend various conventions and meetings as delegates on behalf of the association, provided attendance at such conventions and meetings is to further the aims and objectives of the association.