18 July 1995 External T.I. 9515435 - PAYMENTS TO MP BY POLITICAL PARTY

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Payments & benefit to MP's from their political parties

Position TAKEN:

General comments provided on taxation of salary supplements and benefits.

Reasons FOR POSITION TAKEN:

Provisions in the Act and previous opinions.

		951543
XXXXXXXXXX	Sandra Short
(613) 957-8953

July 18, 1995

Dear XXXXXXXXXX:

Re: Payments to a Member of Parliament by a Political Party

This is in reply to your letter of June 5, 1995 and further to your telephone conversation of June 27 with the undersigned. Your most recent correspondence asks the following:

1.Are subsidy payments (clothing, furniture, rent etc.) made by a Political Party to a member MP taxable benefits or other taxable income to the MP?

2.Are salary (income) supplements paid by a Political Party to a member MP taxable in his or her hands?

3.You have also commented that since a Member of Parliament is a salaried person and not required to pay any expenses directly related to his or her employment, it is difficult to visualize how an MP could receive a benefit from his or her Party which would not be taxable. You have asked whether we can agree with this observation.

We comment as follows:

1.The answer to this question depends upon whether the payment represents a reimbursement or payment of an amount incurred in the performance of the duties of the office. As stated in Mr. Gravelle's letter to you of June 28, 1994, a payment or personal benefit of any kind from a political party to a prime minister or other member of Parliament is subject to tax as a benefit received in the course of, or by virtue of, an office unless the amount received represents a reimbursement of an amount incurred in the performance of the duties of the office.

As discussed in our telephone conversation, our comments are necessarily restricted to general comments pertaining to the interpretation of the provisions of the Income Tax Act. We are prohibited from discussing the tax affairs of any individual without his or her authorization.

2.We have assumed that your reference to a "salary (income) supplement" is a reference to a payment by a political party to a member over and above any salary which the member receives from his or her employer. Such payments, assuming they are not reimbursements or payments of an amount incurred in the performance of the duties of the member's office, would be taxable income in the member's hands. As mentioned in our letter of May 26, 1995 to you, any allowance paid by a political party to a member of Parliament would also be included in the member's income.

3.We are unable to categorically agree that a member of Parliament is not required to pay any expenses directly related to his or her office and hence believe that it may be possible for a member to receive a payment from his or her political party which would not be subject to tax.

Members of Parliament receive, among other things, a sessional allowance (salary) plus a tax-free expense allowance. Those who travel in Canada on official business and are at least 100 kilometres from their principal residence may claim accommodation, meal and incidental expenses up to $6,000 per year. The intent of these allowances is to help defray the job-related expenses incurred by members. It is also in keeping with normal practice in the private sector where employees are compensated for their expenses while on business travel. It is possible that expenses may be incurred in the course of such job-related travel (to attend community events, to address concerns of constituents or to attend conferences for example) which may exceed the annual limit provided by Parliament. Should the member's political party reimburse these additional expenses, the amount would not be included in the member's income.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch