10 February 2011 Internal T.I. 2010-0382491I7 - Federal Transit Tax Credit

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.

Principal Issues: Whether passes issued by the transit company in the fact situation provided meet the definition of an "eligible public transit pass" for the purposes of the transit pass tax credit.

Position: Yes.

Reasons: The passes give the holder the right to use the transit service to the maximum number of trips possible.

									February 10, 2011:

									Income Tax Rulings
Suzanne Albert								Directorate
Manager								Ontario Corporate Tax
Tax and Charities Appeal Directorate				Division
250 Albert Street, 13th Floor Appeals Branch		Tom Posadovsky
Ottawa ON  K1A 0L5						(613) 952-8283

      Attention: Suzanne Albert					2010-038249
	

Public transit pass tax credit

I am writing in response to your correspondence dated October 4, 2010, in which you requested our comments in respect of a taxpayer's eligibility for the public transit pass credit. We apologize for the delay in our response.

Unless otherwise indicated, all statutory references herein are references to provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c.1, as amended (the "Act").

Our understanding of the situation you have submitted is as follows:

• The taxpayer claimed the transit pass tax credit under section 118.02 of the Act on his income tax return for the 2007 taxation year.
• Transport Thom Ltée (the "transit company") is a "qualified Canadian transit organization" that provides "public commuter transit services", as each is defined in subsection 118.02(1) of the Act.
• The transit company operates on three routes, providing four one-way trips both in the morning and evening, Monday to Friday. The transit company's schedule lists approximate departure times as follows:

Route		Morning Departures 				Departure Times
500 		Arnprior to Ottawa				6:00 - 6:15 am
502 (1) 	Pakenham/Carleton Place to Ottawa		5:40 - 6:20 am
502 (2) 	Pakenham/Carleton Place to Ottawa		6:30 - 7:15 am
503 		Perth/Carleton Place to Ottawa		5:30 - 6:30 am

Route		Evening Departures 				Departure Times
500 		Ottawa to Arnprior				15:45 - 16:15 pm
502 (1) 	Ottawa to Carleton Place/Pakenham		16:00 - 16:10 pm
502 (2) 	Ottawa to Carleton Place/Pakenham		17:00 - 17:45 pm
503 		Ottawa to Carleton Place/Perth		16:00 - 16:30 pm

• The taxpayer purchased a combination of monthly transit passes, two consecutive two-week passes and four consecutive one-week passes in respect of his commute from XXXXXXXXXX to downtown Ottawa, Ontario. The taxpayer retained the original transit passes and his signature appears on the back of every pass.
• Monthly, weekly and bi-weekly transit passes are sold by the bus drivers. The transit company does not require that the passes be signed by the customer to be valid.
• The one and two-week passes include a unique serial number, the year, the month, the route for which the pass is valid, the price paid and ten or 20 numbered spaces that are used by the bus driver to punch in the trips (ten spaces for one-week passes and 20 spaces for the two-week passes).
• The monthly transit pass includes a unique serial number, the year, the month, the route for which the pass is valid and the price paid. The bus driver does not punch in the trips and there is no space available on the pass to do so.
• The taxpayer used the transit service ten times a week to commute to work (five round trips).
• The passes are not personalized. However, you indicated that administratively, the CRA will accept a unique number on the pass as the identifier as a transitional measure for 2006 and 2007, when no signature block or picture ID is displayed on the pass.
• The full public transit pass credit claimed by the taxpayer was disallowed for 2007.

Issue

You would like our comments on whether the one and two-week passes issued by the transit company gave the taxpayer the right to use the transit service on an unlimited number of occasions, thereby meeting the definition of an "eligible public transit pass".

Our Comments

To qualify for the transit pass tax credit, a taxpayer must have purchased either an "eligible public transit pass" or an "eligible electronic payment card" that was issued by or on behalf of a "qualified Canadian transit organization" as defined in subsection 118.02(1) of the Act. An "eligible public transit pass" is a document:

(a) issued by or on behalf of a qualified Canadian transit organization; and

(b) identifying the right of an individual who is the holder or owner of the document to use public commuter transit services of that qualified Canadian transit organization

(i) on an unlimited number of occasions and on any day on which the public commuter transit services are offered during an uninterrupted period of at least 28 days, or

(ii) on an unlimited number of occasions during an uninterrupted period of at least five consecutive days, if the combination of that document and one or more other such documents gives the right to the individual to use those public commuter transit services on at least 20 days in a 28-day period.

Assuming the transit company is a "qualified Canadian transit organization" that provided "public commuter transit services", the focus is on whether or not the one and two-week passes give the holder the right to use the transit services on an "unlimited number of occasions during an uninterrupted period of at least five consecutive days, if the combination of that document and one or more other such documents gives the right to the individual to use those public commuter transit services on at least 20 days in a 28-day period".

In the past, we looked at whether or not a "ten-trip ticket" issued by Go Transit was eligible for the public transit tax credit. We also looked at electronic swipe cards that provided a limited number of rides that the user could choose to use within a month or to carry forward for use in another month. Neither met the definition of an "eligible public transit pass" as they did not entitle the holder to "unlimited transit use".

In the case of Go Transit, the ten-ride ticket is redeemed according to a rider's usage and is valid indefinitely on an extensive interregional transit network. Each ticket, which is good for any transit vehicle, at any time on any Go Transit route, can be used by multiple riders at the same time. Purchasing a ten-ride ticket is essentially the same as purchasing ten separate tickets at one time for a discounted price.

In contrast, it is our understanding that passes issued by Transport Thom are issued in respect of a particular month, week or two-week time period for a particular route and cannot be carried over to another period or used on a different route. Each pass gives the holder the right to use the commuter service to the maximum possible given the schedule, which is ten trips per week.

In this regard and based on the particular circumstances, it is our view that the one and two-week passes issued by the transit company effectively gave the taxpayer the right to use the transit service on an unlimited number of occasions. As such, each pass meets the definition of an "eligible public transit pass" provided the combination of that document and one or more other such documents gives the right to the individual to use the public commuter transit service on at least 20 days in a 28-day period.

If the taxpayer could have used the service more than one return trip per day or on different routes, like in the case of the ten trip ticket from Go Transit, our opinion would have been different.

We hope that these comments will be of assistance to you.

For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CRA's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Mrs. Celine Charbonneau at (613) 957-2137. In such cases, a copy will be sent to you for delivery to the taxpayer.

Yours truly,

Randy Hewlett
Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch