17 December 2010 External T.I. 2010-0384511E5 - Honorarium Payments to Union Members

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.

Principal Issues: Whether honorarium payments from a union to some of its members are taxable and whether they are subject to withholding requirements.

Position: Depends on the reason for the payment - specifically whether services were provided to the union by the union member.

Reasons: Honorariums are usually payments for services and are generally taxable as income from an office or employment. Withholding is required under 153(1)(a) on salary, wages or other remuneration and amounts should be reported by the payer on a T4 slip. If no services are provided, then the amounts might be considered non-taxable gifts. If the amount of the gift is significant, however, consideration may be given to the application of subsection 8(5) with respect to the employee's deduction of union dues.

XXXXXXXXXX
									2010-038451
									Andrea Boyle, CGA

December 17, 2010

Dear XXXXXXXXXX :

Re: Honorariums Paid to Union Members

I am writing in reply to your email dated October 22, 2010, in which you indicated that the University has been asked to process payments of honorariums, on the behalf of a union, to some of the university's staff who are union members. You have asked if the payments are subject to withholding requirements and have indicated that the union is of the opinion that the amounts are not subject to withholding because they are not "employment income" from the University.

You have not specified the reason why the union is making the payments to some of its members, nor have you indicated the dollar amount being paid.

The particular situation outlined in your email relates to a factual one, involving specific taxpayers. 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. We are, however, prepared to offer the following general comments, which may be of assistance.

All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended.

The term "honorarium" is not defined the Income Tax Act. Usually, an honorarium is a payment for a service; accordingly, in most instances, it would not be appropriate to characterize such a payment as a non-taxable gift. In our view, honorariums are generally taxable as income from an office or employment. It should be noted that the definition of employee in subsection 248(1) includes an officer.

Whether an individual is an employee or officer of the union is a question of fact. However, where a member of a union is an employee or officer of the union, an honorarium or "gift" provided by the union to that individual will be a taxable benefit to the employee under 6(1)(a) or an officer under 6(1)(c). Such amounts should be reported by the payer (in this case the University) on a T4 slip.

In our view, where a union member is not an employee of the union, and the amount is not a payment for services rendered by a member to the union, a "gift" provided by a union from union funds to a member of the union is probably not taxable as "income from a source" within the meaning of section 3.

It should be noted that our view is premised on the understanding that the amount of the "gift" is relatively insignificant. If the gift were significant, however, consideration may be given to the application of subsection 8(5) with respect to the employee's deduction of union dues. Subparagraph 8(1)(i)(iv) provides that union dues are deductible in calculating a taxpayer's income from an office or employment to the extent that they are not reimbursed. It is possible that a portion of the union dues equal to the value of a "gift" would not be deductible in calculating the member's income from an office or employment if the gift is akin to the reimbursement of union dues.

We trust that these comments will be of assistance.

Yours truly,

Randy Hewlett
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch