16 January 1995 External T.I. 9425675 - DEDUCTIBILITY OF UNION DUES

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.

Principal Issues:

A union establishes a scholarship fund. Will dues paid by its members into the scholarship be deductible under subparagraph 8(1)(i)(iv)?

Position TAKEN:

No

Reasons FOR POSITION TAKEN:

The dues paid into the scholarship would be considered to have been levied for a "purpose not directly related to the ordinary operating expenses of the ... trade union to which they were paid" for the purposes of paragraph 8(5)(c).

		942567
XXXXXXXXXX	M. Eisner

Attention: XXXXXXXXXX

January 16, 1995

Dear Sirs:

Re: Deductibility of Union Dues

This is in reply to your letter of September 29, 1994 in which you asked us for our comments on whether or not certain union dues are deductible under subparagraph 8(1)(f)(iv) of the Income Tax Act (the Act).

The situation which has been set out in your letter appears to relate to an actual set of circumstances. Confirmation of the tax consequences of proposed transactions will only be provided in response to a request for an advance income tax ruling following a review of the relevant facts and documentation. The procedures for requesting an advance income tax ruling are set out in Information Circular 70-6R2 and the related Special Release dated September 30, 1992. On the other hand, if the transactions have already occurred, you may wish to submit the relevant information to your local your local District Taxation Office. We are, however, prepared to provide you with the following general comments.

Our Comments

You are concerned with the type of situation where a trade union establishes a fund for the purposes of providing scholarships to dependent children of current, retired and deceased members of a trade union with respect to certain defined educational institutions in Canada. To qualify for a scholarship, such an individual will be required to satisfy certain requirements related to education. In order to raise the funds for the scholarships, the trade union will increase the amount of its annual dues currently charged to its members.

With respect to the above situation, subparagraph 8(1)(i)(iv) of the Act permits an employee to deduct in computing income from an office or employment any annual dues paid for membership in a trade union or in an association of public servants which has the improvement of employment conditions as its primary object. However, paragraph 8(5)(c) of the Act denies a deduction where the dues are levied for any purpose not directly related to the ordinary operating expenses of the association or trade union to which they were paid.

It is our view that the payments into a special fund such as a scholarship fund would not qualify for deduction under subparagraph 8(1)(i)(iv) of the Act because the dues will be used for a purpose that is not directly related to the operating expenses of the trade union to which they were paid.

We trust our comments will be of assistance to you.

Yours truly,
P.D. Fuoco
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch