27 March 1992 Income Tax Severed Letter 9202126 - Remote Location, Minimum Level of Services 24(1)

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 27, 1992

Source Deductions Division              Personal and General
A. Bissonnette, Acting Director          Section
                                        A. Humenuk
                                        (613) 957-2134
Attention: P. Rémillard

                                        920212

Exemption for employer-provided housing under paragraph 6(6)(a) You have asked us several questions relating to the meaning of "remote" as it relates to the exemption for employer- provided housing or allowances for housing given to employees working in remote locations.

                             24(1)

We would like to stress the fact that the answers to many of these questions involve a finding of fact in a particular situation and that extreme caution must be exercised in applying our comments to other situations.

1. Is an employee considered to have established a self- contained domestic establishment (SCDE) if he can only do so by means of the employer-provided housing? If the answer to the first question is that a place cannot be considered remote because the employee could establish a SCDE by means of an employer-provided dwelling, would the place then be considered remote for a single employee who does not qualify for employer- provided housing but is placed in a bunkhouse instead? Alternatively, if a place is considered remote for a particular employee who could not obtain housing other than the employer-provided housing, will the allowance given to an employee who has been successful in obtaining one of the few available spots also be exempt on the basis that the place is remote even though that particular employee could obtain housing?

Our Comments

The manner in which this question was phrased appears to put an unintended emphasis on the availability of housing as a factor in determining whether a particular place is remote. Paragraph 12 of IT-91R3 addresses a particular situation where a work location is within a reasonable distance of a community or group of communities (i.e. is not remote by reason of distance) but that community or group of communities as a whole have limited facilities such that it would be unreasonable to expect the employees to establish and maintain SCDEs near the work location. One of the conditions within the community that is necessary to establish a SCDE is the availability of housing. As we understand it, you wish to know whether the employer- provided housing should be considered as part of the pool of available housing from which an individual could be expected to establish a SCDE.

It is our view that such accommodation would not normally be included in the pool of available housing in that such housing is not available to an employee unless the employer allocates a particular housing unit to that employee. However, the determination of whether a community has sufficient housing is not merely a function of the vacancy rate in a community, as discussed below.

With respect to your follow up question in this area, the Department has taken the position that if a particular place qualifies as a remote location within the meaning of subparagraph 6(6)(a)(ii) of the Act for employees generally, then it will qualify as a remote location for all employees. Accordingly, if the lack of available housing in the community is such that the employees of a company in general cannot be expected to establish a SCDE for themselves and their dependants, then the place will be considered remote for those employees who receive employer-provided accommodation (including accommodation which would itself qualify as a SCDE), for employees who receive allowances to cover the cost of maintaining a residence which they were able to establish as a SCDE and for those employees who are merely provided with bunkhouse accommodations.

2. What is meant by an established community? Specifically, is an employer-established community an established community (i.e. where all the residents transfer in and out on a 2 year basis)? Also, what is meant by "a minimum level of services" as used in paragraph 12 of the bulletin?

Our Comments

A "community" could be described as a group of people who live more or less in the same general vicinity and would thus include a logging camp or drilling site by itself. However, an "established community" is one where there is some degree of permanence to the community at large and the community is of sufficient size to be somewhat self-supporting. In our view, it is not the permanence of the inhabitants that is relevant but rather the permanence of the community. Many larger communities such as Calgary and Ottawa have been characterized as transient communities as there is a higher than average rate of employee transfer, in and out, by one of the community's largest employers yet these places are still considered established communities.

We are unable to provide a checklist of services required that would be considered a minimum level of services. From an individual perspective, each employee's expectations or requirement for a minimum level of services in order to relocate to a particular area may differ. For example, an employee with a physically or mentally challenged dependant could not be expected to establish a SCDE in a place which does not have the necessary support facilities for that dependant whereas an employee with no dependants could reasonably be expected to establish a SCDE in a place even if that place did not have any educational facilities for children.

Notwithstanding these comments, it is our position that once a particular place is determined to be remote during a particular period of time for the purposes of subsection 6(6) of the Act, it will be considered remote for all employees at that location for that period of time and likewise, once a particular place is determined not to be remote, it will not be considered remote for any employees at that location.

For the purpose of determining whether a location can be considered remote in general terms, we would consider the minimum level of services to be that which an "average person" would require of a community in order to be willing to move into that community. The determination is obviously a difficult task because there is no generally accepted level of minimum services. Individuals from different backgrounds will have different views on what level of service would be the minimum acceptable level and what services would be included in that basket of services necessary to establish and maintain a SCDE.

Without limiting the need to examine the overall picture of what is available in a particular community, it is our view that a minimum level of services would include commercial services providing food, clothing and shelter in addition to basic essential services such as medical, police and educational services. On the other hand, while most communities have some level of recreational services, such services are not essential to an employee's ability to establish and maintain a SCDE and thus, the lack of such services would not cause a community to be considered to be a remote location. In short, the community should have the services required to sustain itself on a permanent basis. We would add, however, that factors such as the quality of the educational services, cultural amenities, or the cost and standard of accommodation are not generally relevant to determining whether a particular place is remote. The "remoteness" of a location is not an assessment of the desirability of the location but rather is based on whether it is possible to become resident of that place at all.

3. Must an employee maintain a principal residence elsewhere during the entire time of residence in a remote location in order to be eligible for the exemption under subparagraph 6(6)(a)(ii) of the Act? This question relates to the meaning of "away from his principal place of residence" as that phrase is used in the postamble to 6(6)(a)(ii) and could be restated as "How can an individual be away from his principal residence for 36 hours if he doesn't have a principal residence elsewhere?"

Our Comments

An employee claiming an exemption under subparagraph 6(6)(a)(ii) of the Act need not have a principal residence elsewhere. As stated in paragraph 3 of IT91R3, the 36 hour requirement for an employee claiming an exemption under subparagraph 6(6)(a)(ii) of the Act refers to the period of time the employee must be located at the remote location.

4.   
                               24(1)

Our Comments

     While the information you provided about
     24(1) indicates that a prospective resident
     without access to employer-provided accommodation
     would not be able to either rent or buy any
     accommodation, it does not indicate how much housing
     is available in the area exclusive of the employer-
     provided housing or why a prospective resident is
     prohibited from buying a lot in the area and hiring a
     contractor to build a residence.  As we understand the
     situation             24(1)                 
               is a long term project and the level of
     residents is expected to stay the same or increase. 
     The community offers a broad range of services
     (florist shops, grocery stores, medical services etc.)
     even though the quality of such services may not be
     equivalent to that expected of a larger community. 
     From the description given it would appear that
     24(1) would be considered an established
     community except for the fact that there is no
     available housing other than that which the employer
     provides.  This seems to be a slight contradiction in
     terms of reference in that housing must be available
     for the employees of the companies providing those
     other services 24(1).  

                              24(1)

While it may be possible for 24(1) to be considered remote during the transition on account of the lack of available housing, if it is the employer's policy to provide housing for its employees on a long term basis thereby stifling the natural growth in housing that would be expected of a community with a population that size, then it is our view that 24(1) should not be considered remote solely by reason of the housing situation.

5.

                              24(1)     

Our Comments

As noted above, we cannot offer comments on a particular place without a review of the relevant facts. Where a particular work location is within 80 kilometres of an established community of more than 1000 inhabitants and that community appears to offer a reasonable level of community services, the onus would rest with the taxpayer (either the employee or the employer) to show that it was not reasonable to expect the employees to establish a SCDE in that place.

6.                             24(1)   

In the referral, the District Office states that 24(1) is not a remote location in that there are several established communities within a reasonable distance of the site which together provide a minimum level of services. It appears that their main concern is the temporary nature of site and whether it would be reasonable to expect the employees to establish SCDEs when the employment is of a temporary nature yet the period exceeds 2 years.

Our Comments We refer you to the comments we made in a December 23, 1991 memorandum to you as to whether the 24(1) work site could be considered a remote work site rather than a special work site. Given that the auditors of the 24(1) have stated that the 24(1) site is not remote within the meaning of subparagraph 6(6)(a)(ii) of the Act, it is our view that the exemption under subsection 6(6) will only be available to those employees for whom the site qualifies as a special work site as stated in our memorandum to you on the 24(1) dated November 7, 1991. Copies of the relevant memoranda have been attached.

We trust our comments will be of assistance to you.

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

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