12 January 1990 Income Tax Severed Letter AC59185 - Allowances for Elected Officials and Employees

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.

5-9183
                                                  G. Ozols
19(1)                                             (613) 957-2139

JAN 12 1990

Dear Madam:

Re: Allowances for Elected Officials and Employees

This is in reply to your letter of November 27, 1989, requesting clarification and rulings on automobile allowances and standby charges for elected officials and employees.

There is a fee charged for advance' income tax rulings, which currently is $65 per hour with a minimum deposit of $325. Furthermore, advance rulings are issued only for proposed transactions. It appears that in this case, the policy regarding automobile allowances has clearly been set. We have enclosed a copy of Information Circular 70-6R on advance rulings for your reference. However, we can give you our opinion as to the probable tax treatment of the issues you have raised. Also enclosed are copies of Interpretation Bulletin IT-63R3 , lT-292 and IT-522 .

County Councillors

I.        The Income Tax Act (the "Act") generally treats income
          from an office in the same manner as income from
          employment.  Therefore, the comments in 
IT-522
 and

IT-63R3
 apply equally to employees and elected
          officials.  As for subsection 81(3) of the Act and

IT-292
, they apply only to elected officials who meet
          the criteria set out in that subsection and not to
          employees' as that word is normally used.  From the
          information you gave us in our telephone conversation,
          19(1) Ozols), it appears that county councillors would
          qualify for the preferential tax treatment under
          subsection 81(3) of the Act.

2.        Item 2 in your letter did not contain any questions.

3(a).     We consider travel between the home of a councillor and
          the County Administration Building to be personal
          travel.  The courts have held on a number of occasions
          that the expenses incurred by an employee in reporting
          to his usual place of work are personal expenses.  In
          our view, the requirement that the councillors attend
          at meetings at the County Administration Building
          (which is the permanent, central establishment of the
          County) is no different than the requirement that an
          employee report to his employer's place of business. 
          In both cases any expenses incurred for this purpose
          are personal.  As noted earlier, the Act generally does
          not distinguish between income or expenses arising from
          employment or from an office.  Any allowance received
          by a councillor for this travel would be a taxable
          benefit under paragraph 6(1)(b) of the Act.  It would
          form part of the total amount from which the amount
          excluded under subsection 81(3) of the Act is
          determined, as stated in paragraph 5 of 
IT-292
.

3(b).     The comments in 3(a) above apply as well to travel
          between home and the County Administration Building on
          weekends and after business hours.  Please refer to
          paragraph 5 of 
IT-63R3
.

3(c).     We are assuming that the type of business meeting or
          event referred to in your letter is analogous to the
          exception provided for in paragraph 5 of 
IT-63R3
.  On
          this basis only, it is correct that travel between a
          councillor's home and a business meeting or event at a
          point of call other than the County Administration
          Building is not personal travel.  Therefore, an
          allowance for this travel would be non-taxable under
          subparagraph 6(1)(b)(vii.I) of the Act if it meets all
          of the requirements in that subparagraph and is not
          disqualified by subparagraphs 6(l)(b)(x) and (xi). This
          type of allowance is not included in income nor in the
          total amount from which' the portion excluded by
          subsection 81(3) of the Act is calculated.

County Warden

1.        It is the Department's position that once an
          employer-owned automobile (here, the County's
          automobile) is assigned to an employee (or official)
          for his use, that automobile is considered to have been
          made available to him and continues to be available to
          him until such time as the automobile,, and control
          over its use, have been returned to the employer.  In
          short, we consider the employer to have made the
          automobile available to the employee until such time as
          he makes it unavailable to that employee. Since the
          County Warden will have the automobile at home
          overnight and on weekends, it will be available to him,
          even though it is not intended to be used for his
          personal use.  The standby charge is calculated as set
          out in paragraph 15 of 
IT-63R3
.  Paragraph 8 of 
IT-63R3
          explains how the standby charge may be reduced where
          the employee drives an average of fewer than 1,000
          personal-use kilometres per month in a year, 90% of the
          total travel mileage is for business purposes, and the
          employer requires the employee to use an automobile in
          the course of the employee's duties.  For the purposes
          of subsection 81(3) of the Act, only those taxable
          benefits "paid" in satisfaction of the fixed amounts
          required to be paid are relevant.  In other words,
          where the councillors enjoy a taxable benefit which
          does not form part of the fixed amount to be paid as
          salary or other remuneration, but is rather a deemed
          benefit under the Act, it does not form part of the
          total amount from which the portion excluded by
          subsection 81(3) of the Act is calculated. 
          Nevertheless, the deemed benefit (i.e. the standby
          charge) is included in income under paragraph 6(1)(e)
          of the Act.

2.        "Personal" use refers to the use of an automobile for
          purposes not directly related to or in the actual
          course of the carrying out of the duties of an office
          or employment.  Examples would be vacation trips,
          personal shopping trips and travel to and from the
          employee's usual place of work.  However, travel to
          conventions and business meetings in other cities or to
          other parts of the country would not be personal use.

County Employees

1.        It is a question of fact to be determined in each case
          by the District Taxation Office whether an automobile
          allowance of 27 cents per kilometre is in excess of a
          reasonable amount.  However, as stated in paragraph 45
          of 
IT-522
, we will normally accept as reasonable an
          allowance based on the deductibility limits for the
          payor of the allowance, which currently are 31 cents
          per kilometre for the first 5,000 kilometres and 25
          cents for each additional kilometre.

We trust the above is of assistance to you.

Yours truly,

for Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch