7 March 2011 External T.I. 2011-0393491E5 - Transit pass 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: Clarification of the meaning of "uninterrupted period" in the definition of an eligible electronic payment card for the purposes of the pubic transit tax credit.

Position: "Uninterrupted period" means that the minimum 32 one-way trips must be taken during a period that comprises 31 consecutive days, but does not mean that a trip or trips must be made on each day during that period.

XXXXXXXXXX
									2011-039349
									Andrea Boyle, CGA
March 7, 2011

Dear XXXXXXXXXX :

Re: Transit Pass Tax Credit

I am writing in reply to your email dated January 19, 2011, in which you asked for clarification of the meaning of "uninterrupted period" in the definition of an eligible electronic payment card for the purposes of the pubic transit tax credit. You have indicated that you are considering using an electronic payment card system and that you want to be sure that the card would be eligible for the transit pass credit.

The particular situation outlined in your email may relate to a factual one, involving a specific taxpayer. Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. We are, however, prepared to offer the following general comments, which may be of assistance.

All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended ("the Act").

The public transit pass credit is calculated based on the cost of an eligible public transit pass or an eligible electronic card where the cost is attributable to the use of public commuter transit services. Specifically, an "eligible electronic payment card" is defined under 118.02(1) as an electronic payment card that is:

• used by an individual for at least 32 one-way trips, between the place of origin of the trip and its termination, during an uninterrupted period not exceeding 31 days, and
• issued by or on behalf of a qualified Canadian transit organization, which organization records and receipts the cost and usage of the electronic payment card and identifies the right, of the individual who is the holder or owner of such a card, to use public commuter transit services of that qualified Canadian transit organization.

In our view, the phrase "uninterrupted period not exceeding 31 days," when taken in the context of the definition as a whole, is not intended to imply continuous usage during a period or to imply that the electronic payment card must be used every day during the period. Rather the phrase is intended to specify that the minimum number of one-way trips (32) must be taken during a period which consists of, at most, 31 consecutive days. For example, the costs on an electronic payment card for a given month would be eligible if an individual uses the card to commute to and from work on at least sixteen days during the given month. The minimum requirement, therefore, provides leeway for days when an individual may not use public commuter transit services.

The second eligibility requirement for the cost of an electronic payment card is that the transit organization must record and receipt the cost and usage of the electronic payment card and must identify the individual who is the holder or owner of the card. Generally, holders of electronic payment cards register their cards with the card provider and they are provided with statements or travel history reports from the card provider to document their usage of the transit services. If the eligibility requirements are met, the cost of the electronic payment card could then be eligible for the transit pass tax credit.

This documentation differentiates the use of an electronic payment card from the use of ride/trip tickets; specifically, there is no way to track an individual's use of ride/trip tickets because the tickets do not provide information on the user of the tickets and the frequency that a particular individual uses the tickets during a given period.

We trust that these comments will be of assistance.

Yours truly,

Guy Goulet C.A., M.Fisc.
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch