27 May 1996 External T.I. 9607705 - EXEMPT 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.

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:

Whether board members of health districts incorporated under the Health Districts Act qualify under paragraph 81(3)(b) of the Income Tax Act (the Act) as an "other similar body".

Position:

After a review of the Health Districts Act and other relevant provincial legislation a board member is not considered to be "an officer of a municipal utilities board, commission or corporation or any other similar body" for the purposes of paragraph 81(3)(b) of the Act.

Reasons:

It is not considered to be akin or equivalent to a body established at the municipal level of government.

		960770
XXXXXXXXXX	M. Eisner

Attention: XXXXXXXXXX

May 27, 1996

Dear Sirs:

Re: Saskatchewan District Health Boards

This is in reply to your letter of December 13, 1995, which was forwarded to us for reply on February 27, 1996. You asked for our comments on the tax treatment of (i) expense allowances of elected municipal officers as well as (ii) the per diems received by board members.

In connection with the first issue, it must be determined whether elected board members of the above noted board are described under paragraph 81(3)(b) of the Income Tax Act (the Act). In determining whether or not an allowance for expenses incident to the discharge of a person's duties is exempted under paragraph 81(3)(b) of the Act, one of the requirements is that the person must be "an officer of a municipal utilities board, commission or corporation or any other similar body, the incumbent of whose office as such an officer is elected by popular vote."

It is our view that a district health board would have to establish itself to be a "similar body," for the purposes of paragraph 81(3)(b) of the Act since it would not otherwise qualify. Such a board established by a province can only be considered to be a "similar body," if it can be regarded as being akin or equivalent to a body established by a municipal level of government. In addition, the members of a district health board must become an officer through an election by popular vote.

We have reviewed the provisions of the Health Districts Act of the Province of Saskatchewan since the district health boards are established thereunder. In general terms, the powers and duties of the board of directors include (a) the assessment of health needs of persons to whom they provide services, (b) planning, managing, delivering and integrating the provision of health services, (c) promoting health and wellness, and (d) cooperating with and/or enter into agreements with the Governments of Canada or Saskatchewan, district health boards, Indian bands, the Metis Nation of Saskatchewan, or any other person or group for the provision of health services.

We have also reviewed the Public Health Act for the province of Saskatchewan which deals with matters such as the prevention of diseases, sanitary conditions, and health hazards. For the purposes of carrying out the duties and responsibilities with respect to the Public Health Act, the Lieutenant Governor in Council may designate a municipality or a district health board. On the basis of our telephone conversation (Eisner/XXXXXXXXXX), you have indicated that, as far as you know, the overall duties and responsibilities of a district health board, for the most part, would not involve such matters even if it were to be so designated. In addition, it was indicated that, essentially, the functions and responsibilities of a district health board are different from those that may be offered by a municipality. Accordingly, it is our view that a district health board cannot be regarded as being "a similar body" with the result that the provisions of paragraph 81(3)(b) of the Act would not apply to an expense allowance of the elected board members of district health boards.

In regard to the second issue raised your letter, you have indicated that board members must pay certain of their own travel expenses out of their per diem remuneration for which no reimbursement is received. In these circumstances, you have asked us if such expenses could be taken into account in determining the taxable portion of the per diem amount which would be included on the board member's T-4 slip. In addition, you have asked if the portion of the per diem amount that is considered to relate to the non-reimbursed expenses need not be taken into account in determining income taxes that are to be withheld.

With respect to the preparation of T-4 slips, there is no provision in the Income Tax Act which would permit the reduction in respect of non-reimbursed expenses that were paid out of income from an office or employment. Similarly, it is our view that no amount in respect of non-reimbursed expenses may be taken into account in determining income taxes that are to be withheld. On the other hand, an individual in receipt of income from an office or employment may deduct certain travel expenses if the conditions in paragraphs 8(1)(h) or (h.1) of the Act are satisfied.

We hope that our comments are helpful.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

cc: P.M. Paquette
CPP/UI Eligibility Division