20 October 2010 External T.I. 2010-0374351E5 - Out of province political contribution 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: Can a taxpayer claim a political contribution tax credit for a political contribution made to a provincial political party that is in a province other than the taxpayer's province of residence on December 31?

Position: In this particular case, no.

Reasons: In this case, the eligibility criteria pursuant to the tax acts of the provinces in question and the eligibility criteria pursuant to subsection 127(3) of the Income Tax Act (Canada) are not met.

XXXXXXXXXX
									2010-037435
									T. Elsey

October 20, 2010

Dear XXXXXXXXXX :

Re: Out of province political contributions

We are writing in response to your email dated July 12, 2010, regarding the availability of the political contribution tax credit for contributions made by a taxpayer to a political party in a province other than the taxpayer's province of residence on December 31.

Specifically, in your email, you described a scenario where a taxpayer moved from Nova Scotia to Ontario during the XXXXXXXXXX calendar year and was a resident of Ontario on December 31, XXXXXXXXXX . In XXXXXXXXXX , but prior to the move, the taxpayer made a political contribution to a Nova Scotia political party. You contacted the Canada Revenue Agency ("CRA") and were told that, because the taxpayer had no tax payable in XXXXXXXXXX in the province of Nova Scotia, the Nova Scotia political contribution tax credit would not be available to him. You were also told that the taxpayer could not claim the Ontario political contribution tax credit because that credit can only be claimed for "Ontario political contributions". You have asked us to confirm that the comments provided to you are correct.

Our Comments

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other CRA publications can be accessed on the Internet at http://www.cra-arc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to provide the following general comments.

In Canada, taxpayers, who are individuals, are liable to pay provincial or territorial income tax to the province or territory where the taxpayer is resident on the last day of the taxation year, which in most cases is December 31. If the taxpayer has income from carrying on a business through a permanent establishment located in a province or territory other than the taxpayer's province or territory of residence, the taxpayer is liable to pay income tax to that other province or territory. If the taxpayer carried on business in more than one province or territory, the business income must be allocated among those jurisdictions. It is our understanding that in the situation you described the taxpayer did not have any business income and, therefore, is only liable to pay provincial income tax to Ontario in respect of the XXXXXXXXXX taxation year.

The Ontario political contribution tax credit is calculated pursuant to subsection 102(1) of the Ontario Taxation Act, 2007 (the "Ontario Act"). It allows an individual who, on December 31, is both a resident of Ontario and at least 16 years of age, to claim an amount in respect of eligible contributions. Subsection 102(6) of the Ontario Act defines "eligible contributions" as follows:

"eligible contributions" means, in respect of an individual for a taxation year, all contributions made by the individual in the year to candidates, constituency associations or parties registered under the Election Finances Act;

Only candidates, constituency associations and parties in Ontario can register under the Ontario Election Finances Act. In the situation you described, the contributions were made to a Nova Scotia political party. Therefore, the taxpayer would not have had any eligible contributions and, consequently, is not eligible to claim an Ontario political contribution tax credit for XXXXXXXXXX .

The Nova Scotia political contribution tax credit is calculated pursuant to paragraph 50(2)(b) of the Nova Scotia Income Tax Act (the "Nova Scotia Act"). It allows a taxpayer to deduct from the amount of tax otherwise payable under the Nova Scotia Act an amount equal to the lesser of 75% of the aggregate amount contributed to a maximum of $750 or the amount of the tax payable.

Since the taxpayer had no tax payable for XXXXXXXXXX under the Nova Scotia Act, the amount of the Nova Scotia political contribution tax credit for the year would be nil.

Subsection 127(3) of the Income Tax Act (Canada) (the "Federal Act") provides a federal tax credit for monetary contributions to a registered party, a provincial division of a registered party, a registered association or a candidate. A "registered party" refers to a political party that is entered in the registry of parties maintained by the Chief Electoral Officer under the Canada Elections Act. These parties are federal political parties only. Since the taxpayer's contribution was to a Nova Scotia political party, it does not meet the criteria pursuant to subsection 127(3) of the Federal Act and therefore no federal political contribution tax credit is available.

The role of the CRA is to administer the Federal Act and the provincial and territorial income tax acts (other than the Quebec Taxation Act and the Alberta Corporate Tax Act) as they are enacted by Parliament or the applicable provincial or territorial legislature. With regard to the Ontario Act, should you wish to pursue this issue further, you may contact the Corporate and Commodity Taxation Branch of the Ontario Ministry of Finance by writing to Frost Bldg N, 2nd Floor, 95 Grosvenor St, Toronto ON, M7A 1Z1.

We trust that these comments are of assistance.

Yours truly,

Jenie Leigh
for Director
Charitable and Financial Institution Sectors
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch