12 December 1975 Income Tax Severed Letter

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.

R.G. McCorkle

December 12, 1975

Dear XXXX

This is in reply to your letter of October 21, 1975 and further to several telephone conversations you have had with the writer and other officials of this Department concerning a proposed supplementary unemployment and sickness benefit plan.

XXXX

The Income Tax Act provisions (section 145 and paragraphs 6(1)(a), 20(1)(x), 56(1)(g) and 149(1)(q)) clearly establish what the tax position will be under a registered supplementary unemployment benefit plan. On the other hand if the plan is a supplementary unemployment benefit plan (s.u.b. plan) that could qualify for registration but is not registered or is one that lacks certain requirements for registration and cannot be registered (see Information Circular 72-5R enclosed) then different tax consequences will follow. These may be summarized as follows;

1. the employer cannot deduct his contribution to an unregistered s.u.b. plan (paragraph 18(1)(i) of the Act);

2. an employer contribution to an unregistered s.u.b. plan does not come within the exception under paragraph 6(1)(a) of the Act;

3. the income of a trust governing an unregistered s.u.b. plan is not exempt from tax; and

4. the employee is subject to tax an the benefits he receives out of an unregistered s.u.b. plan (subsection 145(3) and paragraph 56(1)(g) of the Act).

If it is decided to implement a plan that is neither a registered s.u.b. plan nor an unregistered s.u.b. plan then the tax consequences relating to such a plan could only be determined where the full facts, including all pertinent documents, are available for examination. In these circumstances there is no useful comment on the possible application of the provisions of the Act that we can make at this time.

It was mentioned to you in a telephone conversation that if the union wishes to establish what the tax position would be under a proposed fringe benefit plan they could obtain an "Advance Income Tax Ruling" by following the procedure outlined in Information Circular No. 70-4 (copy attached). Where such a ruling is requested full details, including all pertinent documents, of the proposed plan, must be submitted for consideration. The advance ruling would have application provided that the plan that is implemented is exactly the same as the proposed plan on which the ruling was obtained.

We trust that these comments will be useful in dealing with the proposed fringe benefit plan of the union.

Yours sincerely,

for Director Technical interpretations Division

RGM/dl 145 20(1)x 18(1)(i) 56(1)(g) 6(1)(a)