9 January 1992 Income Tax Severed Letter 9135325 - Club dues and 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.

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: CLUB DUES AND PARKING BENEFITS Section(s): 6(1)(a)]

January 9, 1992

Source Deductions Division Business and General
Mr. A. Bissonnette, Director Division
Marc Vanasse
(613) 952-0243
Attention: Mr. Eric R. Hammond
D.O./T.C. Support Services Section

913532

Employee Taxable Benefits - Club Dues and Parking

This is in reply to your memorandum dated December 30, 1991 wherein you requested our opinion as to whether certain employees of XXX (the "Employer") are in receipt of a taxable benefit with respect to parking and club dues paid for by the Employer.

Club Dues

With respect to your recent memorandum to the Technical Publications Division requesting that they clarify the uncertainty in the wording of paragraph 12 of Interpretation Bulletin IT-148R2 which states, in part, that "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" when compared to paragraph 34 of IT-470R which states, in part, that "where the employer pays the fees required for an employee to be a member of a social or athletic club the employee is not deemed to have received a taxable benefit where the membership was principally for the employer's advantage rather than the employee's", we offer the following comments.

It is our opinion that if it can be clearly shown that the club dues primarily benefit the Employer, rather than the employees, the amounts so paid would not constitute a taxable benefit to the employees. It is obviously a question of fact and the onus remains on the Employer to provide convincing evidence that the use of the facilities primarily benefit the employer rather than the employees. Failure to obtain satisfactory evidence would result in the club dues being taxable to the employees in question.

In this particular case, the Employer's legal representative made strong arguments in their December 2, 1991 letter to the Department that the benefit of the membership accrues primarily to the Employer and not to the employee in accordance with the Employer's policy and procedures. However, as mentioned by the field auditor in a memorandum dated December 13, 1991 to Paul Remillard of your Division, the arguments put forward by the legal representative contradicts the audit findings. As a result, we are unable to make a final determination as to the taxation of the club dues to the employees.

Parking

XXX

As a general rule, employer provided parking constitutes a taxable benefit to the employee based on the fair market value of the parking. It should be noted that the words contained in paragraph 6(1)(a) of the Income Tax Act (the "Act"), which states that the value of "other benefits of any kind whatever" enjoyed by the taxpayer "in respect of, in the course of, or by virtue of" an office or employment be included in income, has been interpreted by the Supreme Court of Canada, in the case of The Queen v. Savage, [[1983] C.T.C. 393] 83 DTC 5409, as a phrase with the widest possible scope intended to convey some connection between two related subject matters.

However, as stated in TOM 36(23)2(3), the Department has taken the position that where the fair market value of the parking cannot be determined, the employee will not be assessed a benefit.

Such situations could arise with businesses operating from shopping centres, industrial parks etc or where the employer provides "scramble" parking (i.e. there are fewer spaces than there are employees and the spaces are available on a first come first served basis). This paragraph further states that the above should not be interpreted to mean that such parking spaces do not provide a taxable benefit but rather the Department will not assess a benefit in the absence of a determinable value.

XXX

As for the remaining XXX parking spaces made available to sales representatives and other personnel, the audit does not seem to have either determined or attempted to determine whether some employees in fact need their automobile on a day-to-day basis in the course of carrying on their duties. Under exceptional cases, employees would not be in receipt of a taxable benefit if, for example, they spent almost all of their time performing their employment duties away from the Employer's place of business and only returned to the office on occasion to make out sales reports etc. However, employees not required to be outside the office on a regular basis would be in receipt of a taxable benefit under paragraph 6(1)(a) of the Act with respect to the parking paid for by the Employer.

The exceptions mentioned in TOM 36(23)2(3) would not seem to apply in this particular case.

Yours truly,

B.W. Dath
Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch