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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Follow-up inquiry to 2002-017458, in which we provided an opinion that an honorarium earned by a councillor for serving on certain commissions, on behalf of a municipality, is employment income when:
(a) The amount was paid directly to the municipality by the commission at the direction of the councillor or
(b) The amount was paid to the councillor by the commission and then turned over to the municipality by the councillor.
We also indicated that if all the conditions of section 118.1 of the Act were otherwise met, the councillor would be entitled to claim a non-refundable tax credit for a gift made to a Canadian municipality.
In the follow-up inquiry, further information was provided which indicated that the municipality has the authority to demand that a certain commission pay it an honorarium without the concurrence of the councillor. The municipality exercises this authority when the councillor already receives an annual salary for performing the duties of his or her office, which includes representing the municipality on the commission.
Position: If the municipality exercises its authority to demand that the commission directly pay it an honorarium, and does so without the concurrence of the councillor, the amount is not required to be included in the councillor's income under the Act. However, the councillor is not entitled to claim a non-refundable tax credit for the amount under section 118.1 of the Act.
Reasons: The councillor has not received the amount or directed the commission to pay it to the municipality. Therefore, paragraph 6(1)(c) and subsection 56(2) of the Act are not applicable. Further, under these circumstances it is likely that the amount can be considered a reimbursement to the municipality of an amount already paid to councillor and included in the councillor's taxable employment income by the municipality.
The councillor would not be entitled to a non-refundable tax credit under section 118.1. The amount would not be considered a "gift" under these circumstances, nor would it be reasonable to allow a credit in this situation since the amount in question is not included in the councillor's employment income.
Randy Hewlett, B.Comm.
XXXXXXXXXX 613-957-8973
2003-000721
April 2, 2003
Dear XXXXXXXXXX:
Re: XXXXXXXXXX Councillor Remuneration
We are writing in response to your letter of March 6, 2003, regarding your technical interpretation request on the above-noted issue. We also acknowledge the additional information sent in your letter of March 26, 2003.
Your request is further to our February 26, 2003 letter to you (our file 2002-017458), in which we provided you with an opinion that an honorarium earned by a councillor (the Councillor) for serving on a commission on behalf of XXXXXXXXXX (the County), is employment income under the Income Tax Act (the Act) when:
(a) The amount was paid directly to the County by the commission at the direction of the Councillor; or
(b) The amount was paid to the Councillor by the commission and then turned over to the County by the Councillor.
We also indicated that if all the conditions of section 118.1 of the Act were met, the Councillor would be entitled to claim a non-refundable tax credit for a gift made to a Canadian municipality.
Your recent correspondence provided further information that indicated the County has the authority to demand that the XXXXXXXXXX (the Commission) pay it an honorarium without the concurrence of the Councillor. The County exercises this authority when the Councillor already receives an annual salary for performing the duties of his or her office, which includes representing the County on the Commission. You inquire whether an honorarium is taxable employment income of the Councillor under these circumstances.
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. However, we offer the following comments.
In our view, if the County exercises its authority to demand that the Commission directly pay it an honorarium, and does so without the concurrence of the Councillor, the amount is not required to be included in the Councillor's income under the Act. It is also our opinion, however, that it is not possible for the Councillor to claim a non-refundable tax credit for the amount under section 118.1 of the Act. In our view, the amount would not be considered a "gift" under these circumstances.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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