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:
how to determine the exempt portion of a municipal officer's allowance
Position:
comments in IT-292 followed. Letter explains which allowances to include when determining exempt portion
Reasons:
963181
XXXXXXXXXX Sandra Short
Attention: XXXXXXXXXX
May 13, 1997
Dear Sirs:
Re: Subsection 81(3) of Income Tax Act
This is in reply to your letter of September 18, 1996, which asks what portion of a school board trustee's general expense allowance, and "per kilometre" payments, may be excluded from income under subsection 81(3) of the Act, in the situation described below. We apologize for the delay in responding to your enquiry.
The trustee receives an honorarium in the amount of $10,000 and a general expense allowance of $5,000. In addition, the board of education provides the trustee with a $0.29 per kilometre amount for each kilometre actually travelled as reimbursement for using his or her automobile on board business, including travel related to attendance at the Board and standing committee meetings. The per kilometre payments require that all claims be submitted and verified.
The per kilometre allowance paid by the Board is not a nonaccountable allowance as the allowance requires that claims be submitted and verified. To the extent that this accountable allowance is for business travel, it will not be included in a trustee's income. However, to the extent that the Board reimburses a trustee for personal travel, the allowance, or reimbursement, is required to be included when computing the exempt portion of the trustee's income. As a general rule, travel between one's residence and work location is personal travel. Ordinarily, the work location for a school board trustee is the Board office. An exception to the general rule occurs when the employee or officer is required or permitted to proceed directly from home to a point of call other than the ordinary place of work. In these situations, the travel is considered related to the duties of the office or employment rather than personal.
Consider the following two examples.
I.The Board pays salary of $10,000, a general expense allowance of $5,000 and pays the $0.29 reimbursement/accountable allowance for business travel only. Personal travel, such as between a trustee's home and the board office is not reimbursed. Business travel equals $900 and all claims must be submitted and verified.
II.The Board pays salary of $10,000, a general expense allowance of $5,000 and pays the $0.29 for all travel undertaken by the trustee. Business travel, for which claims must be submitted and verified, equals $900. Personal travel, such as travel between the trustee's home and board office, is reimbursed only upon submission of receipts. Personal travel, also reimbursed at $0.29 per kilometre, equals $600.
In both examples, the $900 reimbursed business travel is neither included in the trustee's income nor included in calculating the total of the amounts received from the board (see paragraphs 4 and and 5 of Interpretation Bulletin IT-292).
In example I, the total of amounts received from the board is considered to be $15,000. The exempt portion is 1/3 of $15,000, or $5,000. The trustee must include $10,000 into income. An explanation follows.
Paragraph 6 of Interpretation Bulletin IT-292 states that the Department's policy is, where the Municipal Act so deems a proportion of the total amount paid (as calculated in paragraph 3 of the the IT) to be an allowance for expenses, the proportion deemed to be an expense allowance will be accepted as such (up to one third of the total paid) notwithstanding what the particular board may be actually paying. Section 255 of the Ontario's Municipal Act deems one-third of amounts paid to be for expenses incident to the discharge of the duties of the member of the board.
In example II, the total of amounts received from the board, calculated under paragraph 3 of the Bulletin, is $15,600. The $600 of reimbursed personal travel is not excluded because such personal reimbursements are not for specific duties performed by the trustee nor are they nonaccountable allowances. The Municipal Act deems 1/3 of the total, or $5,200, to be an expense allowance. As a result, the trustee is required to include $10,400 in income.
We trust our comments will be of assistance to you.
Yours truly,
John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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