28 March 1988 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.

MAR 28 1988

MEMORANDUM TO: Mr. Pierre Gravelle
               Deputy Minister

           RE:  XXXX
               Deductibility of Membership Dues

I am writing in response to your memorandum of March 18, 1988 concerning the subject matter.

Background

Professional membership dues are deductible in computing income of an employee for a year under subparagraph 8(1)(i)(i) of the Income Tax Act (the Act) if;

(a) they are annual dues paid in the year,

(b) they are necessary to maintain the taxpayer's professional status, and

(c) the taxpayer's professional status is recognized by statute.

Subparagraph 8(1)(i)(i) of the Act was first enacted in 1951 as subsection 11(10) of the 1951 Act. Since that time there has only been one change (applicable to the 1956 and subsequent years) which deleted the requirement that a taxpayer was to maintain a professional status as "... was required by his contract of employment ...".

Issue

Membership dues paid to the XXXX are not deductible because the professional status of its members is not recognized by statute.

Comments

Our Interpretation Bulletin IT-158R deals with the requirements of subparagraph 8(l)(i)(i) of the Act. The Bulletin emphasizes that it is the employee's professional status that must be recognized by statute and that dues are only deductible where membership in an organization is necessary for the employee to retain his professional status.

The Tax Review Board, in the case of James Sterling Stewart v. MNR (82 DTC 1767) dealt with the very issue of whether a membership fee paid to the Institute was deductible under subparagraph 8(1)(i)(i) of the Act. Mr. Stewart, a resident of Ontario who was employed as Chief Appraiser for Revenue Canada, Taxation, paid annual membership fees of $150 to the Institute. The Board held that the fees were not deductible as the Province of Ontario did not have legislation which recognizes a real estate appraiser as having professional status.

The Robert Swingle case (77 DTC 5301) was cited in the Stewart case. The Federal Court, Trial Division held that the term "professional" inferred some special skills or qualifications and that Mr. Swingle who was a chemist had a professional status in his field. However, the taxpayer lost his case because he failed to prove that there was a statute recognizing the professional status of a chemist.

We do not appear to have corresponded directly with the XXXX concerning the deductibility of membership dues. We did, however, advise the XXXX on September 25, 1985, that membership dues paid to the XXXX were not deductible. The taxpayer's enquiry was brought to the attention of the Department of Finance.

Our understanding is that representations were made in the past to the Department of Finance by the XXXX . Correspondence from the Deputy Minister of Finance to the Minister of State (Finance) indicates that the XXXX has requested deletion of the "recognized by statute" requirement from the law. Finance is opposed to this for a number of reasons, including difficulties in administering the deduction in that the "professional" status of each case would have to be determined. Accordingly, Finance has confirmed that no change to the existing law is being contemplated.

Original Signed by

Acting Assistant Deputy Minister Legislative and Intergovernmental Affairs Branch