20 July 1999 External T.I. 9919585 - TAX EXEMPTION FOR UNIONS

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: tax exemption for unions

Position: wording of 149(1)(k)

Reasons: N/A

XXXXXXXXXX 						991958
							957-2098
July 21, 1999

Dear XXXXXXXXXX:

We are writing in reply to your facsimile transmission of July 14, 1999, in which you ask, on behalf of your constituent XXXXXXXXXX, why unions do not pay taxes.

Paragraph 149(1)(k) of the Income Tax Act (the “Act”) exempts from Part 1 tax all taxable income of a “labour organization or society”. There is no definition of “labour organization” in the Act.

In L.I.U.N.A. Local 527 Members’ Training Trust Fund v. The Queen [1992] 2 CTC 2410 at 2422, the Tax Court of Canada referred to the meaning of this term and cited a U.S. case for the following explanation:

The expression “labour organization” has not been judicially defined in any Canadian court, but in Stone v. Textile Examiners & Shrinkers Employers’ Ass’n, 137 App. Div. 655 at 658, 122 N.Y.S. 460 at 462, Dowling, J. Said:

The ordinary definition of trade union or labour organization is thus stated: “A combination of workmen of the same trade or of several allied trades, for the purpose of securing by united action the most favourable conditions as regards wages, hours of labour, etc., for its members.”

28 Am. & Eng. Ency of Law [2nd Ed.] 440. “An association of workmen usually, but not necessarily, employed in the same trade, for the purpose of combined action in securing the most favourable wages and conditions of labor.” 24 Cyc. 816.

Thus “trade union” in the view of the Court has the same meaning as “labour organization”.

In a telephone conversation of July 19, 1999 (Spice/XXXXXXXXXX) with XXXXXXXXXX of your office, XXXXXXXXXX suggested that XXXXXXXXXX might wish to know the policy reasons for a union’s exemption from income tax. For an explanation concerning the tax policy reasons for exempting labour organizations from income tax, please contact Lucie Vermette of the Department of Finance at the following address or phone number:

Tax Legislation Division
Tax Policy Branch
Department of Finance
Ottawa, Ontario
K1A 0G5
(613) 992-5636

We trust the foregoing comments will assist you in answering your constituent’s question.

Yours truly,

P. Spice
for Director
Financial Industries Division
Income Tax Rulings &
Interpretations Directorate