12 March 1992 External T.I. 9134665 F - Expense Allowances

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.

          March 12, 1992

Subject: Municipal Officer's Expense Allowance

This is in reply to the memorandum of December 2, 1991 submitted to this Division by Mr. T. Peters of your Division concerning an enclosed submission made by the Edmonton District Office.  In the memorandum, we were asked to provide our views on whether or not subsection 81(3) of the Income Tax Act (the Act) applied to remuneration paid to members of certain boards who are appointed thereto by the Province of Alberta (e.g., the Minister of Municipal Affairs).

We also note that the enclosed correspondence from the Edmonton District Office indicated that the circumstances of the above problem are similar to those considered in respect of remuneration paid to advisory councillors of "improvement districts" which are located in the Province of Alberta.  In the case of those councillors, the Edmonton District Office indicated to the Department of Municipal Affairs of Alberta that they were described in subsection 81(3)(b) of the Act.

Our Comments

In determining whether or not any remuneration or expense allowance would be exempted under subsection 81(3) of the Act, it is necessary to determine whether the entity in question is (i) an incorporated municipality or (ii) a municipal utilities board, commission, corporation or similar body under paragraph 81(3)(a) or (b) of the Act.

In considering the above situation, we have referred to Alberta's Planning Act and the Agricultural Service Board Act since the Edmonton District Office has indicated that a "Planning Board" and an "Agricultural Board" would be examples of the types of boards under consideration.  For your further information, we have also considered local health boards which are established under that province's Public Health Act.

Information on the various boards we have considered is summarized below:

(a)  Under subsection 4(1) of the Agricultural Service Board Act, the Minister of Municipal Affairs may, by order, establish an agricultural

ervice board in respect of a local improvement district.  Under subsection 4(3) thereof, the members of such a board are appointed by the Minister of Municipal Affairs.

(b)  Under subsection 21(1) of the Planning Act, the Lieutenant Governor in Council is empowered by regulation to establish one or more regional planning commissions and is entitled to make regulations under subsection 21(2) thereof in matters relating to such a commission.  Under subsection 22(1) of that Act, such a commission may be comprised of members appointed by a council and/or members appointed by the Minister of Municipal Affairs with respect to an improvement district.  Under section 27(1) thereof, a Regional Planning Commission is required to report on its past and proposed activities to the Alberta Planning Board.    

(c)  Subsection 7(1) of the Public Health Act of Alberta provides that a health unit in the province of Alberta is established by the Lieutenant Governor in Council.  The members of a local board, which are appointed in accordance with subsection 11(3) of this Act, may include members from an improvement district and/or members from the council of a city, town, municipal district etc.  The local board which is a corporation under subsection 16(1) of the Public Health Act reports to a "Minister" charged by the Lieutenant Governor with the administration of this Act.    

Before commenting on the above findings, we believe that it is useful to set out our general position on paragraphs 81(3)(a) and (b) of the Act in the context of the problem under consideration and provide comments on the situation involving the advisory councillors considered by the Edmonton District Office.  Such councillors may, in certain circumstances, be members of a board described in paragraph 81(3)(a) or (b) depending on their positions as elected advisory councillors.

In this regard, it is our general view that a board, commission, etc. that is established by a province is not one described in paragraph 81(3)(a) or (b) of the Act unless it can be considered to be a "similar body" for the purposes of paragraph 81(3)(b) of the Act.  We are of the opinion that a board, commission, etc., established by a province can be considered to be a similar body provided it can be regarded as being akin or equivalent to a body established at the municipal level of government.  In addition, we are of the view that if any remuneration is to be exempted under subsection 81(3) in respect of a member of a similar body, the member thereof must have become such a member by virtue of his/her elected position (i.e., he/she was elected to the position by popular vote) in respect of some other body or, in the case of advisory councillors, they were elected by popular vote for the purposes of being appointed to a similar body.  

As to the issue of whether the advisory councillors of an improvement district can be regarded as members of a "similar body", we understand that they are appointed under subsection 14(1) of the Improvement District Act and are referred to as an "advisory committee".  It appears to us that such a body is akin to an elected council of an incorporated municipality and that the reason the Province of Alberta appoints the councillors is because of various factors (e.g., the area represented does not have a concentrated population), making it inappropriate for the improvement district to elect a council to carry on its affairs in its own right.  Accordingly, it appears that it can be regarded as a "similar body" for the purposes of paragraph 81(3)(b) of the Act. 

We would like to add the following with respect to a board referred to in (a) or (c) above or to a commission referred to in (b) above, concerning its status as a "similar body".

With respect to a board described in (a) above, subsection 3(1) of the Agricultural Service Board Act provides in part that a council (i.e. the council of a town, city, municipal district etc.) may establish an agricultural service board.  As it appears that the agricultural board referred to in (a) above is akin to the board established under subsection 3(1) of that Act, it can be regarded as a "similar body" for the purposes of paragraph 81(3)(b) of the Act.

The circumstances of (b) above can be contrasted with the board established in (a) above.  Since members of a commission can be appointed from a council as well as by the Minister of Municipal Affairs and the commission is established by the Province of Alberta, it appears to us that the commission cannot be regarded as a "similar body" for the purposes of paragraph 81(3)(b) of the Act.  In other words, no entity of this type is established at the municipal level of government.  For the same reasons, the entity referred to in (c) above should not be regarded as a "similar body".  Accordingly, neither of these two entities should be regarded as being described in paragraphs 81(3)(a) or (b) of the Act.   

We also wish to emphasize that we have attempted to set out informative comments based on the limited information provided to us in the hope that it will be useful in considering the various situations that are involved.  However, if further technical assistance is required, we would be pleased to give the issues further consideration.            

B.W. DathDirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental  Affairs Branch