(b)-(l)

Respecting requested clarification as to when a particular work location is considered a regular place of employment for an employee, CRA stated:

[T]ravel between an employee’s home, including a home office, and a regular place of employment (RPE) is generally considered personal travel … .

A RPE is any location where an employee regularly reports for work or performs the duties of employment. In this case, “regular” means there is some degree of frequency or repetition in the employee’s reporting to that particular work location in a given pay period, month, or year. This “place” does not have to be an establishment of the employer. For example, a work location may be considered to be a RPE for an employee even though the employee may only report to work at that particular location on a periodic basis (e.g., once or twice a month) during the year.

An employee who is auditor at an accounting firm must travel to various of the firm's clients in a year for engagements of approximately one to two weeks per client. Is the allowance received by the employee from the firm for travel in the course of these engagements taxable?

After repeating its position that “personal travel includes travel between the employee's home and ‘regular place of employment’,” and noting that “regular place of employment” was described in T4130 as including “a client's premises when an employee reports there daily for a six month project” and “a client's premises if the employee has to attend biweekly meetings there,” and before noting that it could only make general comments, CRA stated:

If the place of business of a client of the firm constitutes a "regular place of employment " for the auditor, the travel between the auditor’s residence and the place of business of that client is considered personal travel and is therefore not considered travel "in the performance of the duties of the employee’s office or employment". Consequently, the allowance received from the firm by the auditor in the year for this travel must be included in the auditor’s income by virtue of paragraph 6(1)(b).

The employer provides fixed monthly payments to school bus drivers to cover such employees’ cost of the use of a personal cellular phone, bus washing (e.g., at a car wash), and electricity consumption (to cover the cost for plugging in the employer’s school bus at the employees’ residence to ensure that the bus would start in the morning) should be included in the employee’s income. Before finding that these amounts were taxable under s. 6(1)(b), CRA stated:

[T]he use of a personal cellular phone, bus washing, and electricity consumption would be considered an allowance because the employees are not required to submit receipts to receive the payments from the employer.

Errors in the Phoenix pay system used by the employer resulted in employees being overpaid and/or underpaid in 2016 or 2017, and their T4 tax slips being incorrect. The employer will reimburse for the cost of tax advisory services provided by an accountant to help the employees understand the impact of such errors on their 2016 or 2017 income taxes, prepare their 2016 or 2017 income tax return in cases where their income tax situation has been affected by the errors, and reconcile income reported on an employee’s 2016 or 2017 tax slip against income actually received by the employee. CRA stated:

Generally, compensation paid to an employee by their employer for financial loss incurred due directly to the employer’s error is not included in income since the employee is being restored to a previous economic position. Therefore, reasonable employer reimbursements for the cost of tax advisory services incurred as a direct result of Phoenix pay system errors will not be included in the employee’s income and will not have to be reported on the employee’s T4.

CRA confirmed its view in 2014-0552731E5 that employees, who were required to use cell phones in the performance of their duties, received a taxable allowance when their employer paid them a fixed monthly amount (calibrated to each employee's duties) not in excess of their costs, given that the employer “did not require detailed receipts.”

Employees, who are required to use cell phones in the performance of their duties and to have their cell phone contracts approved by the employer, but bear the monthly costs of the contracts personally. However, the employer pays each a fixed amount based on the particular requirements of each employee not in excess of their costs. The employees do not systematically provide copies of their invoices, but are required to retain them for possible future inspection. CRA stated (TaxInterpretations translation):

Given that you do not require detailed receipts…the monthly payments to your employees for using their personal cell phones required in the performance of their employment do not constitute a reimbursement of expenses. …[T]he monthly payment constitutes an allowance. Consequently, the monthly payment must be included in computing the income of the employee… .

Mr. X who was employed abroad by Company Y, is relocated to work for Company X (an associated Canadian corporation) at a Canadian location. Company X wishes to provide him with relocation compensation that Mr. X could use to acquire new furniture and new supplies. The expenses associated with the relocation of the household articles of Mr. X would be greater than the amount of the compensation amount that would be paid to him. The compensation amount would have a fixed amount and would only be paid on presentation of supporting invoices by Mr X. Would this amount be taxable? CRA stated:

While generally a relocation allowance for which the recipient does not have to justify the use is taxable, [CRA] has an administrative position with respect to relocation allowances of an employee…. This CRA administrative position does not apply to expenses related to the purchase of new goods (such as furnishings, carpets, bedding and household items) or to improvements and repairs of household articles.

What is the tax treatment of amounts paid to taxpayers for using their cars in providing lifts for the organization? CRA stated (TaxInterpretations translation):

Services are rendered in the course of employment where there is an employer-employee relationship between the parties. In order to determine whether there is such a relationship, it is necessary in Quebec to take into account the principles of the Civil Code of Québec in analyzing the following three essential elements: performance of work, remuneration and a relationship of subordination between the parties. ...

In situations similar to the particular situation, where the services are not performed in the course of an employment or business, we are of the view that the amounts received do not have to be included in the computation of income of the taxpayer.

The only compensation received by taxpayers from a non-profit organization for transporting, using their own automobiles, people with reduced mobility so that they can make health-care appointments, is $0.42 per kilometer traveled. Is this taxable? CRA responded:

In situations similar to the given situation, where the services are not rendered in the course of an employment or business, we are of the view that the amounts received do not have to be included in the computation of income of the taxpayer.

Monthly allowances received by a former employee of a US charitable trust is not income to him given that they are "financial assistance is based on the individual's personal financial needs" so that "the amounts received from the Fund are likely received in the individual's personal capacity rather than by virtue of the individual's employment." However, "since the criteria of paragraph 56(1)(u) appear to have been met, the financial assistance should be included in the individual's net income under that paragraph and deducted under paragraph 110(1)(f)."

Have the CRA auditors been directed to consistently treat motor vehicle allowances exceeding the Reg. 7306 limits as unreasonable for s. 6(1)(b) purposes?

Is a motor vehicle allowance considered to be reasonable if it satisfies the amounts set by the Treasury Board of Canada Secretariat (“TBCS”) to be reasonable, if all other ITA requirements are met?

CRA responded:

No direction has been given to CRA auditors that allowances for the use of a motor vehicle exceeding the limits set out in ITR section 7306 will be systematically considered unreasonable for the purposes of ITA paragraph 6(1)(b).

[T]he limits in section 7306 are only a guide to determining the reasonableness of an allowance for the purposes of paragraph 6(1)(b). Depending on the particular circumstances of each situation, a rate that differs from that provided for in that section could therefore be considered reasonable. In addition, the CRA is of the view that the amounts that the TBCS sets as a travel allowance are reasonable amounts for the purposes of paragraph 6(1)(b).

When an employee (a truck driver) reports to work but must return to the employee’s residence because a truck is not yet available, the employer pays him an allowance for travel expenses based on the number of kilometers traveled between his usual place of work and his residence and between his residence and his usual place of work. CRA stated:

We generally consider travel expenses incurred by an employee to travel between their residence and their usual place of work as personal expenses of the employee. Those are generally not travel expenses incurred in the course of the employee's duties; rather, they are expenses that allow the employee to perform those duties.

An employer who does not have a cafeteria or dining room, pays its employees a meal allowance per day worked, which barely covers the cost of food (or, alternatively, meal voucher could be issued for use in grocery stores or restaurants). The employer also partially reimburses the cost of public transportation for commuting to and from work.

After noting its practice in IT-470R, para. 28 respecting subsidized meals provided to employees being a taxable benefit “provided the employee is required to pay a reasonable charge,” CRA stated that, in contrast:

[M]eal allowances constitute a benefit from an office or employment, to be included in the computation of the employee's income for the year. As a result, the total amount of the allowances, as well as meal vouchers, should be included on the T4 slip in box 14 … .

Furthermore:

[W]here an employer provides an employee with an allowance for transportation between the employee's residence and the employee’s regular place of work, a taxable benefit is usually conferred on the employee.

Employees, who are called upon to travel within the metropolitan area of their usual place of work to meet clients, receive a daily meal allowance of $17 per day worked (including those where they are not travelling) so that they can remain on the road and thus be more efficient. Is the allowance taxable?

After noting its position in ITTN No. 40 that “a travel allowance paid by the employer in respect of travel within the municipality or metropolitan area of an employee for the purpose of the performance of the duties of the employee’s office or employment may be excluded from income if … the allowance is reasonable [and] is paid primarily for the benefit of the employer,” CRA stated:

[A]n allowance would be paid primarily for the benefit of the employer if the principal objective of the allowance is to ensure that the employee's duties are undertaken in a more efficient manner during the course of a work shift, and where allowances paid are not indicative of an alternate form of remuneration.

In such a case, we are generally of the view that the allowance of $17 paid for the days during which the employees are travelling should not be included … . However, they should include in computing their income the allowance of $17 they receive while they are not travelling, as that allowance is not based on an estimate of the average travel expenses they incur.

Allowances paid as expense allowances to contract forestry workers to reimburse the gasoline and oil expenses for their tree trimmers and calculated at a rate of 6% of the contracted price for their services in accordance with the industry practices, were taxable allowances

An additional $5 per hectare is paid for safety equipment (boots, helmets, protective trousers and protective glasses and ear muffs) that the employee must procure was also a taxable allowance, except that:

a reasonable allowance paid by the employer for the cost of protective clothing that an employee purchased without having to justify purchase by a receipt is non-taxable if all of the following conditions are satisfied:

(i) the law requires the wearing of protective clothing on the site;
(ii) the employee purchased the protective clothing;
(iii) the amount of the reimbursement is reasonable.

Volunteer directors who attend four meetings a year of the board of directors of a not-for-profit organization do not receive any attendance fees, but receive reimbursement for automobile expenses incurred in attending meetings and, where they live more than 500 kilometres away, are reimbursed for their airfare. They also receive allowances for meals consumed while attending the meetings and, if accompanied by their spouses, the same amounts are paid as spousal meal allowances.

After stating that although “a director is generally considered to hold office, this is not the case for a director who works for a company solely on a voluntary basis,” which references the situation where “individuals who work on a volunteer basis receive no remuneration or at most minimal remuneration for services rendered on a volunteer basis” – with remuneration considered minimal where the remuneration paid to the individual is “significantly less than that which would have been paid to an employee or self-employed person rendering similar services,” so that “it is unlikely that minimal remuneration is sufficient to secure the volunteer's services.” CRA stated that here:

[I]f the facts as a whole show that the individuals perform their duties as directors on a volunteer basis and not in the course of an office or employment or as self-employed persons, in our view, reimbursement of automobile expenses, reimbursement of airfare and meal allowances for attending board meetings (including allowances paid to cover meals for their spouses while travelling) would not be considered employment or business income if they are the only amounts received by them.

Allowances paid in lieu of paying moving or real estate agent expenses are allowances that the employee includes under s. 6(1)(b) except that as per Guide T4130, the first $650 is not taxable since it is considered to be a reimbursement of expenses incurred by the employee for an employment-related move.

Where an existing stock option plan is amended by permitting employees to request cash payment for the value of their stock options, s. 7(1)(b) will not apply where an employee requests cash payment and the employer chooses to settle this obligation by issuing shares having a fair market value equal to the economic value of the option.

Employees who are required to work more than a specified number of hours before or after their shift are paid a meal allowance. Is it a taxable benefit? The Directorate stated:

In general … there is no taxable benefit [where]:

• the value of the meal or meal allowance is reasonable: in general, an amount up to $17 is considered reasonable;
• The employee works two or more hours of overtime right before or right after their scheduled hours of work.
• The overtime is not frequent and is occasional in nature. In general, less than three times a week will be considered infrequent or occasional. In addition, this condition may be satisfied where a meal or allowance is provided at least three times a week on an occasional basis to meet ad hoc workload requirements such as major repairs or periodic financial reporting.

… [A]n allowance that is higher [than $17] may still be reasonable if the cost of meals in a particular location is higher or if there are certain circumstances that justify a higher amount.

Generally, if employees perform their duties within the municipality and the metropolitan area, where applicable, the CRA generally does not consider a "meal allowance" given to an employee working overtime within the employer’s metropolitan are to be income if

(a) the employee works at least three hours of overtime immediately following the employee’s regular working hours;

(b) the allowance is reasonable (not exceeding the value or cost of a normal meal); and

(c) the overtime is infrequent or occasional in nature (less than three times a week).

Is the employee's travel time and meal time included in the overtime hours worked for purposes of (a)? CRA responded:

No, the employee must work at least three hours of overtime.

Employees are compensated between $1.00 and $2.00 per hour for the employment-related use of their own tools, equipment, and supplies (e.g., fax machine and supplies, computer, or video cameras), or $0.30 per minute of their cell phone usage, and are also compensated for their internet use. In indicating the inclusion of these amounts under s. 6(1)(b), CRA stated:

[A]n amount calculated on the basis of an estimate of possible costs is an allowance, not a reimbursement. The same is true of an amount paid on the basis of a rate per hour of use. If, on the other hand, the employer makes a payment to the employee based on receipts or vouchers submitted by the employee, this would be a reimbursement.

In this situation, we are of the view that the $1.00 to $2.00 per hour for use of equipment and supplies is an allowance. If the amount of $0.30 per minute for cell phone use is calculated based on an estimate of costs rather than actual costs, this amount would also constitute an allowance.

… [W]e do not know whether the compensation paid for the Internet fees represents an allowance or a reimbursement of actual expenses incurred. … If it is … a reimbursement of actual expenses … [and] the facts show that this Internet access is essential for the employees to perform their employment duties, we are of the view that it is unlikely that a significant taxable benefit will result to the employees from the reimbursement of the Internet and modem fees. In such a case, the reimbursement would not be included in employment income. …

[S]upplies [under s. 8(1)(i)](iii)] would not include the cost of tools or equipment or amounts paid for a cell phone connection or communication licence fee.

Following the decision in The Queen v. Huffman, 90 DTC 6405 (FCA), it is the Department's position "that a reasonable allowance in respect of dry cleaning and uniform maintenance would not constitute a taxable benefit to the extent that it is actually expended for that purpose."

The employer, which sells the products of manufacturers, employs salaried sales representatives, who meet with various customers within their territory between 15 and 45 times per week; perform most of their work at the customer's premises; do not have a place of employment with the employer; leave their home in the morning to go directly to their first client; at the end of the day they leave the last client to return to their home; and are under no obligation to report to the employer. The employer requires the representatives to maintain an office at their residence to be used for administrative work. They receive a motor vehicle allowance based on the actual mileage driven.

In finding that the allowance likely was not taxable under s. 6(1)(b), CRA stated:

[T]he trips made by the representative with his motor vehicle to go from the employee’s residence to the first client place of business and from the last client place of business to the individual’s residence could be considered to be trips made in the performance of the duties of his office or employment, as long as such client places of business do not constitute a regular place of work to the individual. … [I]t is unlikely that the clients' places of business would constitute a regular place of work of the representative.

By virtue of a clause in their collective agreement, police officers who are required to work in civilian clothing on a temporary basis are entitled to be reimbursed for clothing expenses by their employer in a stipulated amount per day. In finding such amounts likely to be taxable, the Directorate stated:

[T]he amounts of per diem reimbursements for clothing expenses to which police officers are entitled are, a priori, a taxable allowance for the purposes of paragraph 6(1)(b) since it appears that they do not have to justify their use and the civilian clothing worn by them on a temporary basis does not constitute distinctive uniforms or special clothing. However, you may wish to consider the latter point to determine whether, in fact, such clothing is distinguishable from regular clothing that may be worn for personal purposes, at locations other than the place of employment and at times other than work hours.

Mr. A's employer (the "Employer") granted him 10 months’ study leave to obtain a master's degree and agreed to pay an allowance (the "Allowance") of $17,500, as well as reimbursing the tuition costs. In finding that the Allowance might in fact be a reimbursement, in which case, it likely would be non-taxable, CRA stated:

[E]ven if the employer uses the term "allowance" to refer to the payment made to an employee, it is possible that … the allowance may be a reimbursement of expenses. Consequently, if … the Allowance is, for example, based on an estimate of the travel and accommodation costs that the Employee will incur during the training period, or that Mr. A must show the Employer how the Allowance was spent, then it may be that the Allowance is more of an expense reimbursement and not a taxable allowance pursuant to paragraph 6(1)(b). … [G]iven that … the training appears to be primarily for the benefit of the Employer, the $15,500 Allowance may be non-taxable to Mr. A.

Employees are required to acquire, at their own expense, a laptop or computer to be used in the course of their work (the "equipment"). This equipment remains the property of the employees and the employees must use it primarily (or in some cases, solely) for work. CRA indicated that where the employer pays a monthly allowance which takes into account the employees having to buy equipment and maintain it, the monthly allowance should be included in their income pursuant to s. 6(1)(b).

Although a non-accountable allowance for uniform dry cleaning and maintenance would not constitute a taxable benefit to the employee provided the allowance was reasonable and actually expended, a non-accountable personal grooming allowance would constitute a taxable benefit.

"An employee would not be considered to be in receipt of a taxable benefit with respect to special or protective clothing (including safety footwear) which, by reason of the hazards inherent in the employment duties or by a law of a province or Canada, the employee is required to wear, where the employer provides the employee with a clothing allowance to the extent the allowance is expended on such special or protective clothing."

A relocation allowance equal to 1/12 or 1/24 of one year's salary of a member of the RCMP will be taxable as remuneration from employment in light of McLay v. MNR, 92 DTC 2261 (TCC).

RC generally accepts that a non-accountable allowance for overtime supper money that is less than or equal to the value or cost of a normal meal, where payment of the allowance is not governed by a collective agreement and the requirement to work overtime does not occur frequently, is a reimbursement on account of the cost of the meal and, therefore, it is not subject to tax in the employee's hands.

Amounts received by employees pursuant to a Quebec regulation requiring construction contractors to pay a set amount per day to employees to cover the employees' cost of travelling between home and the work site are included in their income under s. 5(1), and are not allowances for travelling expenses within the meaning of s. 6(1)(b).

An allowance paid to employees paid by reference to their increased commuting distance resulting from an employer's relocation would be included in their income.

Where the employers' practice was to provide a periodical lump sum payment for trips within a 16-kilometre radius from the employer's place of business, and to provide a reasonable allowance based on the distance travelled for trips outside this radius, the full amount of lump sum payment received with respect to travelling within the 16-kilometre radius was taxable under s. 6(1)(b).

Per diem judges and per diem justices of the peace, who are former full-time judges and former full-time or part-time justices of the peace, are paid a fixed rate per day of work, and are not provided with an office space, office supplies or secretarial/administrative assistance. In finding that such receipts are taxable under s. 6(1)(c), CRA stated that the:

case law on the subject...specifies that a legal entitlement to a per diem rate of remuneration established in advance is sufficiently "fixed or ascertainable" to meet the definition of an "office".

Where a non-profit corporation holds an annual conference each year in a selected Canadian city and asks each of its directors to attend the conference free of charge, the waived conference fee will not be considered to be in the nature of a director's fee if the main purpose in requesting the directors' attendance was to further the aims and objectives of the corporation.

An employee profit sharing plan (EPSP) received dividends from taxable Canadian corporations that were included in computing its income and that were allocated to beneficiaries of the EPSP, including a non-resident who had performed the individual’s employment duties in Canada. After noting its position in IT-379R, para. 19 that such allocations would not be subject to Part XIII tax, CCRA stated:

Paragraph 6(1)(d) requires the inclusion in a taxpayer's taxable income from an office or employment of amounts allocated to the taxpayer by a trustee under an EPSP, as provided by section 144, other than subsection 144(4). Since the dividends to which subsection 144(8) applies are amounts that are allocated by the trustee of a trust governed by an EPSP, and since paragraph 6(1)(d) does not specify that subsection 144(8) is to be disregarded, it follows that these amounts come within paragraph 6(1)(d). Consequently, to the extent that they relate to duties performed in Canada by the non-resident, the amounts so allocated will be required to be included in computing the non-resident's taxable income pursuant to subsection 2(3) and subparagraph 115(1)(a)(i).

A corporation ("Autoco") with an individual as its sole shareholder, director and officer owns collector automobiles for its investment purposes. The individual uses the automobiles exclusively in order to go to collector automobile shows, to perform automobile maintenance or to avoid damage to the mechanical parts of these automobiles that may occur when they do not travel a minimum number of kilometers per year. In discussing whether there is a taxable benefit, CRA stated:

Where an automobile, collector or otherwise, is made available to an individual in the capacity of employee and the employee uses it in part for personal purposes, a taxable benefit under paragraph 6(1)(e), in the form of a reasonable standby charge, must generally be included in the employee’s income. In addition, if an amount is paid or payable in respect of the operation of the automobile related to the individual’s personal use, the individual must include a taxable benefit in that individual capacity under paragraph 6(1)(k). …

Where a person is both a shareholder and an employee of a corporation and receives a benefit from that corporation, the Canada Revenue Agency generally considers that there is a presumption that the person benefited from that benefit as a shareholder where that person exercises significant influence over the conduct of the affairs of the corporation. However, where a similar benefit is offered by the corporation to all of its employees, including those who are also shareholders, the latter are usually considered to have received a benefit by reason of their employment.

Respecting where an electric vehicle used for business purposes or in the course of employment is charged at home and there is no electricity meter specific to the vehicle, CRA referenced use of the per-kilometre electricity standard provided by the manufacturer in determining the annual electricity cost, stating:

[T]he establishment of an average per-kilometer energy cost could be a reasonable method. In such a situation, the taxpayer would also need to take into account the use of pay-charging stations or free charging stations in establishing those costs.

In discussing whether there is a taxable benefit to the driver of an executive's employer-provided automobile, CRA noted that it was its long-standing position "that travel between employees’ homes and their regular place of employment (RPE) is personal travel," and then commented:

Where a driver picks up and drops off an executive at his or her residence on a regular basis, it is the CRA’s view that the executive’s residence is a RPE for the driver. Travel between the driver’s home and the executive’s residence would therefore be personal travel for the driver....However, if the driver only occasionally drives the executive to his or her residence, then the executive’s residence will not be a RPE for the driver providing there are various times and locations for the daily pick-up and drop-off of the executive.

In finding that occasional use of an employer-provided automobile for meetings at locations away from the employee’s usual place of work did not give rise to a taxable benefit, the Directorate applied the principles that:

[W]here an employee, at the employer's request or with the employer's permission, travels directly from the employee’s home to a place other than the employer's place of business where the employee is ordinarily required to report or to return to the employee’s home, it is considered that such travel is not for personal purposes.

That exception applies in particular if the employer provides the employee, on rare and irregular occasions, with a vehicle with which the employee returns to the employee’s home the day before a business trip and the next day (or vice versa), the employee travels from the employee’s home to attend, as the case may be, a meeting with an out-of-town client, a training course (away from the place of business) or a conference (away from the place of business).

Employees are required, during the period during which they are on call, to use at all times an employer-provided automobile that has the employer’s logo and is equipped so as to respond effectively to emergency calls, both for the trip between their residence and their regular place of work, and outside regular working hours for travel (limited to that immediate area) that is essentially of a personal nature.

Before finding that a taxable benefit was required to be computed under s. 6(1)(e) as a standby charge and respecting the automobile's operating expenses under s. 6(1)(k), CRA stated:

[T]he use by an employee of an employer-provided vehicle for travel between the employee’s residence and the employee's regular place of work, as well as all travel not directly related to the employee's employment, is considered personal use, even if the vehicle is made available to the employee for the purpose of responding quickly to an emergency situation while the employee is on call. However, when an employee uses the vehicle from the employee’s residence to get to or from the place where there is an emergency other than the employee's regular place of work, the use of the vehicle will generally be considered to be related to the employee's employment.

A City provides the foremen of the Public Works Department with vans for travel during working hours but with the vehicles left at their disposal of the foremen at all times other than during vacations since they are sometimes called upon to carry out tasks related to their employment outside of normal working hours. Although travel of a personal nature is generally prohibited, a portion of the kilometres driven by foremen is for personal use. The employer pays for all expenses related to the operation of the vehicles, such as gas, maintenance and insurance, whether the vehicles are used for job-related or personal purposes.

CRA indicated that as the vans were at their disposal in part for personal use, a taxable benefit must be included in the foremen's income for each taxation year in which the van is available to them. A reduction in this benefit may be made if the employer requires the employee to use the vehicle in the performance of the duties of the office or employment and the total distance travelled by the van was primarily in the performance of the duties of the employee's office or employment.

In addition, to the extent that the operating expenses associated with the personal use of the vehicles are borne by the City they would be a taxable benefit under s. 6(1)(k).

The Employer requires accidental death and dismemberment coverage ("Insurance Coverage") for those of its employees traveling to high-risk areas ("Employees"), irrespective whether they have a personal policy that covers their death or disability while working in such an area. Without the Insurance Coverage, the Employees would refuse to work in those areas. Is the Insurance Coverage a taxable benefit?

After stating that s. 6(1)(e.1) “applies to premiums or contributions paid by an employer to a group sickness or accident insurance plan unless it relates to an income insurance benefit payable on a periodic basis (a non-lump sum),” CRA stated:

[A] plan by virtue of which a number of employees (two or more) are insured under a policy between the insurer and an employer is a group insurance plan.

… [T]he term "group … insurance plan”… includes, in particular, accidental death and dismemberment insurance plans. Therefore, if the Insurance Coverage is a group insurance plan, we are of the view that the total amounts paid by the Employer in respect of an employee during a year of Insurance Coverage is to be included in computing the employee's income from an office or employment under paragraph 6(1)(e.1).

… [T]hat the Insurance Coverage primarily benefits the Employer … is not relevant for the purposes of paragraph 6(1)(e.1).

In the context of a general discussion of the taxation of amounts related to a group insurance plan, CRA stated:

[U]nder subparagraph 6(1)(a)(i), the benefits that arise from the contributions that the employer pays, among other things, under a group insurance plan for illness or accidents and a group term life insurance policy are generally non-taxable. The term "group sickness or accident insurance plan" … includes accidental death and dismemberment insurance plans and disability and critical illness insurance plans.

However, notwithstanding the exception in subparagraph 6(1)(a)(i), an employee must include, under paragraph 6(1)(e.1), in computing the employee’s income from an office or employment, the total of all amounts contributed in the year in respect of the taxpayer by the taxpayer’s employer to a group sickness or accident insurance plan, except to the extent that the contributions are attributable to employment insurance benefits paid on a periodic basis pursuant to paragraph 6(1)(f), excluding subparagraph 6(1)(f)(v). …

In addition, despite the exception in subparagraph 6(1)(a)(i), subsection 6(4) could apply to confer a taxable benefit on an employee respecting premiums paid by the employee’s employer in respect of a group term life insurance policy calculated in accordance with the provisions of sections 2700 to 2704 of the Income Tax Regulations (the "Regulations").

Consequently, we are of the view that, to the extent that premiums paid by an employer (out of its own funds) relate to one or more plans listed in subparagraph 6(1)(a)(i), no taxable benefit shall be included in the calculation of an employee's employment income, subject to subsection 6(4) in respect of a group term life insurance policy and paragraph 6(1)(e.1) in respect of contributions that an employer pays, in certain circumstances, under a group illness or accident insurance plan.

Background

Parentco (a taxable Canadian corporation) filed for and obtained protection under the CCAA (or Bankruptcy and Insolvency Act) by order of the Court. Parentco was responsible for the adequacy of long term disability plan (the “LTDP Fund”) that had been established for resident disabled employees. Upon any termination of the LTDP Fund by Parentco, its Trustees were required to satisfy all claims and obligations arising under the Plan up to the termination, and Parentco to fund such payments.

Proposed transactions

1. As contemplated in the CCAA plan, and after an actuarial computation of the net present value of each of the Disabled Employees’ future entitlement to benefits under the Plan as at the Termination Date, the Trustees will direct the Custodian to make one or more cash payments out of or under the LTDP Fund to each Disabled Employee in lieu of the Disabled Employee’s future entitlement to benefits under the Plan (described in the CRA summary as “lump sum payment out of a health and welfare trust in lieu of continued wage loss replacement plan benefits”) equal to the amount shown in the Actuary’s report.
2. If following such payments there are any remaining assets the Trustees will equitably allocate them “to the beneficiaries of the LTDP Fund who were entitled to benefits thereunder as of a specified date (the ‘Residual Beneficiaries’) subject to a Residual Beneficiary revoking in writing their distribution in which case the revoking Residual Beneficiary’s entitlement amount will form part of the pool to be distributed to the other Residual Beneficiaries.”
3. The LTDP Fund will be wound up.

Rulings

A. The payments to a Disabled Employee [in 1 above] will not be included in a Disabled Employee’s income for purposes of the Act and the payor will not be required to withhold and remit income tax or file an information return in respect of the payments.

B. The payment to a Residual Beneficiary [in 2 above] will be included in the income of a Residual Beneficiary under sections 5 and 6 of the Act in the year of receipt and will be subject to the appropriate income tax withholding … .

The CRA summaries state the respective rationales for the two rulings as “being consistent with established jurisprudence in respect of such settlement payments” and “the payment represents a taxable benefit from employment.”

CRA noted that an employer's group disability plan which was administered by an administrator (such as an insurance corporation) on an administrativee services only basis nonetheless would qualify as an insurance plan ("IP") (and a wage loss replacement plan ("WLRP")) for the purpose of paragraph 6(1)(f) of the Act, if it contained "an undertaking by one person to indemnify another person, for an agreed consideration, from a loss or liability in respect of an event, the happening of which is uncertain." When asked whether the "decision in Tsiaprailis, 2005 DTC 5119, would apply to characterize a payment made by the administrator to an employee in settlement of future periodic benefits under the disability plan as a capital receipt from the disposition of a right," CRA stated:

…where it is established that the ASO plan is an IP and therefore a WLRP, the decision of the SCC in Tsiaprailis would apply to characterize the amount of a settlement for future WLRP benefits as a capital receipt from the disposition of a right….

Subparagraph 39(1)(a)(iii)...would exclude the capital receipt from the disposition of an employee's right under an ASO plan, if the plan was an IP, from the employee's income.

However where an employee receives such a settlement amount under an employer's ASO plan that is not an IP, the amount would be included in the employee's income under subsection 5(1) or section 6….

It is contemplated that a lump sum would be paid to the individual plaintiffs in a class action suit in settlement of their allegation that monthly long-term disability benefits received by them should not have been reduced by monthly benefits under the Pension Act. Applying the surrogatum principle in Tsiaprailis, CRA found that this amount would be taxable and included in the recipient's employment income in the year received under s. 6(1)(f), although it would qualify for relief under s. 110.2(2).

An individual who had been receiving long-term disability benefits after an illness had prevented continuation of the individual’s employment, brought an action when the insurance company ceased the benefit payments. The action was settled after the individual’s death by payment to the estate of long-term disability benefits that were unpaid during the individual's lifetime, and a survivor's benefit. After noting that the disability payments received by the individual would have been taxable during the individual’s lifetime under s. 6(1)(f) pursuant to what should be characterized in accordance with IT-428 as a "wage loss replacement plan", CRA went on to find that, in accordance with Tsiaprailis, the amount of the settlement that was referable to such unpaid amounts was taxable.

Following an employee's death, the employer was incorrectly of the opinion that the estate could not make a claim against the insurer under an insurance policy that, in fact, covered such death. Would the payment by the employer to the estate of an amount equivalent to the insurance proceeds that the estate would have been entitled to receive had it made a claim under the policy, be taxable? CRA stated:

[I]f the estate had filed a claim with the insurer under the policy, we understand that a lump sum - and not compensation payable periodically - would have been payable to it. Such a lump sum would not have been taxable under paragraph 6(1)(f). In applying the surrogatum principle … the amount paid by the employer - to replace an amount that would not have been taxable - should not be taxable either.

A government Ministry is the policyholder for the group insurance plan for the staff at Quebec daycare centres who pay the premiums, If the policyholder applies a rebate under the plan to reduce the long-term disability insurance premiums payable by the employees, would that affect the non-taxable status to them of their benefits? CRA stated:

[I]f the policyholder chooses to pay the rebate to a portion of the premiums for the long-term disability benefit, it is our view that the policyholder is contributing to the plan in this situation. Thus, a beneficiary who receives benefits under this plan would receive a taxable benefit pursuant to paragraph 6(1)(f). That benefit could be reduced by the amount of the premiums paid by the beneficiary.

Since the rebate is payable to the policyholder under the group insurance contract, the employees have no right to claim it and cannot legally demand it under the contract. The rebate therefore belongs as of right to the policyholder, who has exclusive control over it, even though it is derived from premiums that were originally paid by the employees.

After indicating that payment by employer of all rather than half the premiums for a group insurance plan would not oust the exclusion in s. 6(1)(a)(i), CRA went on to note:

The general rule, as set out in paragraph 6(1)(f), is that a taxpayer is taxed on the total of all amounts received in the year as compensation payable from time to time under, inter alia, a disability insurance plan to which the employer contributes, i.e., where the plan is not fully funded by the employees.

… [I]t is the obligation to pay the contribution that determines who is responsible for funding a plan.

… IT-428 [para. 17] states that the Canada Revenue Agency will not accept a retroactive change to the tax status of a plan. For example, an employer cannot change the tax status of a plan by adding to the employee's income at the end of the year employer contributions to a wage loss replacement plan that are normally deemed to be non-taxable benefits.

Where an employee-pay-all disability plan becomes a plan in which the employer makes 100% of the contributions, an employee in receipt of benefits at the time the plan is converted may continue to receive non-taxable benefits in such amount and for such length of time as may have been specified in the plan when benefits commenced. If an employee's benefits commence after the conversion, the benefits will be included in income under s. 6(1)(f) and, given that such conversion results in a new plan, contributions made by the employee to the prior plan cannot be deducted from benefits received from the new plan.

A member of the Canadian armed forces who had been injured and in receipt of disability benefits from the Department of Veterans Affairs and the Service Income Security Insurance Plan administered by the Maritime Life Assurance Company ("Maritime Life") was found to have received a lump sum corresponding to the present value of the taxpayer's right to receive future benefits under such plans as non-taxable proceeds of disposition of an interest in an insurance policy under s. 39(1)(a)(iii) rather than as a taxable receipt under s. 6(1)(f), in light of Tsiaprailis.

There also were no tax consequences to forgiveness of the individual’s obligation to repay overpayments of disability benefits that he had received.

In response to a query as to CRA’s position regarding the taxability of lump sum payments of long-term disability benefits that do not represent arrears, it stated:

On the basis of … Tsiaprailis … taxable amounts under paragraph 6(1)(f) … include lump sum settlements that are attributable to disability payments in arrears and accruing to the date of the settlement. However, where an individual receives a lump sum payment in lieu of future benefits that would have been otherwise paid under an employer long-term disability plan, in circumstances such that the payment can reasonably be considered to be proceeds of disposition of an interest in an insurance policy, it is our view that the proceeds are not taxable under paragraph 6(1)(f) of the Act or as a capital gain pursuant to subparagraph 39(1)(a)(iii) … .

The employer undertakes to pay the full premium for a so-called taxable short-term and long-term disability insurance, providing a certain level of coverage in case of disability. However, the employee may choose to opt for a different, so-called non-taxable coverage, in which case the employer would pay the employee in cash an amount corresponding to the premium the employee would have paid for the so-called taxable disability insurance. CRA stated:

[I]n order for the periodic benefits received from a disability insurance plan to be tax-free, the plan must be fully funded by the employees. A plan is fully funded by the employees if the employees are legally obliged to pay the full premiums. Where the employer pays a portion of the disability insurance premiums for certain employees, we are of the view that all periodic benefits received by employees covered by the plan are taxable by virtue of paragraph 6(1)(f), even for those employees covered by the plan for whom the employer does not pay premiums. However, an employer may contribute to separate plans for different groups or classes of employees. The Agency's general position is that two separate disability insurance plans exist to the extent that:

• the plans are administered separately;
• the premium rate is determined separately for each plan;
• the amount of benefits, premium rates, conditions of membership and other conditions of each plan are not dependent on the existence of the other plan;
• there is no cross-subsidization between the two plans, i.e. the premiums or returns from one plan should not be used to fund the other plan;
• the administration of the plans must indicate that each plan can be considered separate from the other.

If in the situation presented the facts show that there are two separate employer-sponsored disability insurance plans, it is our view that periodic disability benefits received by employees from a wholly employee-funded plan would be non-taxable as they do not come within paragraph 6(1)(f).

Under a group disability insurance plan, the cost of contributions was allocated as:

• Life, accidental death and dismemberment insurance: $8/month
• Short-term disability insurance: $25/month
• Long-term disability insurance: $15/month
• Medical care insurance: $60/month

The collective agreement stated, without elaboration, that the employer's contribution for all employees was 50% of the cost of the group disability plan, with the other 50% of the contributions being paid by the employees. The employee contributions were allocated by the employer to equal 100% of the above costs of the long term and short term disability insurance and life insurance, with the balance ($6) allocated to the medical insurance ($6).

CRA stated:

… [T]he employer's contribution for all employees is 50% of the cost of the group disability plan while the other 50% of the contributions are borne by the employees. The fact that an employer arbitrarily allocates the contributions collected from employees so that they constitute 100% of the contributions paid to the long-term and short-term disability insurance plans does not make the disability insurance plan a fully employee-funded plan. … [T]he legal obligation to pay premiums is shared equally between the employer and the employees. Consequently, the benefits received by an employee from the long- and short-term disability plan are taxable in computing the employee's income pursuant to paragraph 6(1)(f) … .

Regarding the availability of the s. 6(1)(f) exclusion regarding payments received pursuant to individual long-term care policies (without a return of premium rider at maturity) that had been provided to senior executives (non-shareholders) by their employer, CRA stated:

Periodic payments received by employees under such long-term care insurance are not taxable by virtue of paragraph 6(1)(f) if they are received as a result of the fulfillment of certain conditions stipulated in the insurance contract as compensation for care received at home or in an institution and not for the loss of income from an office or employment.

Regarding pay-outs under critical illness insurance, CRA stated:

Where the executive employee receives the lump sum payment for this insurance, we are of the view that this amount is not taxable by virtue of paragraph 6(1)(f) since, inter alia, this type of insurance does not provide the beneficiary with income in the form of periodic payments.

Various wage-loss replacement plan were modified. CCRA noted that where there was not a new plan, then it would be possible for individuals who eventually receive disability insurance benefits to deduct the contributions made in the years prior to the event – but if there was a new plan, they would only be able to deduct their contributions since the start of the new plan. For various of the scenarios considered, CCRA indicated that the changes affected the insurance contract and not the plan. In another scenario, where there were separate contracts of insurance for employees in each province but the terms province-to-province were essentially the same, CCRA considered there to be one plan, so that there would not be a loss of continuity when an employee moved provinces.

CCRA also stated

[T]wo separate plans could co-exist to the extent that both:

• the plans are administered separately;
• the premium rate is determined separately for each plan;
• the amount of benefits, premium rates, terms of enrolment and other conditions of each plan do not depend on the existence of the other plan;
• there is no cross-funding between the two plans, i.e., the premiums or returns from one plan should not be used to fund the other plan; for example, if funds were already accumulated in the old plan and used to fund the new plan, then the new plan would be considered a continuation of the old plan;
• the administration of the plans should indicate that each plan can be considered separate from the other.

In finding that a taxpayer could deduct contributions made to a disability insurance plan between 1990 and 2001 from an equalization adjustment received in 2001 that related to disability insurance benefits received by the taxpayer in 1988, the Directorate stated:

[T]he wording of the Act does not restrict the deductibility of contributions made between 1990 and 2001, even though they were made after the first benefits were paid in 1988 … .

For a disability insurance plan to be an employee-pay-all plan, the employees must be legally responsible for paying all the premiums, notwithstanding that the employer may withhold the premiums from the employees' wages and remit them on behalf of the employees.

In the course of a general discussion as to whether a disability insurance plan was an employee-pay-all plan, so that any benefits received by the employee under the plan would not be taxable under s. 6(1)(f), and premiums paid by the employee would not be deductible by the employee and would not be taxable pursuant to s. 6(1)(a), CCRA stated:

If, in fact, a disability insurance plan is a plan funded entirely by employees, we are of the view that the mere fact that an employer pays an employee additional remuneration, taxable under subsection 5(1), equal to the premiums payable by the employee does not mean that the employer will be considered to have contributed to the disability insurance plan.

In finding that a taxpayer could deduct contributions made to a disability insurance plan between 1989 and 2001 from a parity adjustment received in 2001 relating to disability insurance benefits received in 1988, the Directorate stated:

An amount received by reason of a parity adjustment in respect of benefits obtained in the past retains the same nature as the amounts to which it relates. …

[T]he wording of the Act would not restrict the deductibility of contributions paid between 1989 and 2001, even though they were paid after the time that triggered the payment of the first benefits in 1988.

Would the benefits under a wage-loss insurance plan whose premiums are paid in full by the employees remain non-taxable where the employer pays the 9% Quebec sales tax on those premiums and, if the employees pay the tax, would this represent a contribution? Would the payment of the sales tax by the employer give rise to a taxable benefit to the employees? CCRA responded:

[T]he insurance premium paid by the employee does not constitute a contribution paid by the employee under the wage-loss replacement plan. … Consequently, the amount of sales tax would not reduce the amount received from this plan, which is otherwise taxable. …

[T]he payment of sales tax on wage-loss insurance premiums by the employer [would not] represent a contribution by the employer under the wage-loss insurance plan for the purposes of determining whether a wage-loss insurance plan is a plan to which an employer has contributed for the purposes of paragraph 6(1)(f). …

[I]f the employee has a contractual or legal obligation to pay all wage-loss insurance premiums, the employer's payment of sales tax on such premiums would not make the benefits from the wage-loss insurance plan taxable. However … the employer's payment of sales tax on insurance premiums [is] a taxable benefit to the employee pursuant to paragraph 6(1)(a) … .

The existence of an employee-paid-all plan is not determined by looking at the manner in which payments are made or reported, but rather is determined by ascertaining who is contractually obligated to pay the premiums. If the legal obligation for paying the disability plan premiums is split 50-50 between the employer and the employee, an employee would be subject to tax on any benefits received under the plan under s. 6(1)(f) to the extent that they exceed the deduction under s. 6(1)(f)(v) in respect of employee contributions.

An employee pay-all plan can be considered to exist separate from a plan to which the employer contributes even if the plans are co-ordinated to ensure that disability income does not exceed a stipulated percentage of pre-disability income.

Where the employer makes all contributions to one long term disability plan and it is intended that the employees will make all the contributions to a second long term disability plan, the fact that the premium in the first year will be identical for a member of either plan would not, by itself, result in the existence of two plans. However, if in light of all the circumstances, the employer premiums paid to the insurance company in respect of the first plan should have been lower than the premiums for the second plan, the excess premiums paid by the employer would be regarded as a contribution made by the employer to the second plan.

Amounts received in settlement of an action relating to an entitlement to long-term disability benefits were viewed as being a settlement of the taxpayer's right to sue for damages and, accordingly, were not required to be included in income.

Where an individual with a degenerative disorder begins to receive L.T.D. benefits subsequent to the conversion of an employee-pay-all Ltd plan to a second plan under which the employer makes all contributions, the benefits likely will be taxable under s. 6(1)(f).

"The issue of whether or not an employee-pay-all plan exists is not determined by considering who paid the related premiums. Rather, the question of whether an employee-pay-all plan exists depends upon whether the plan itself places upon the employees the legal obligation to pay 100% of the premiums ... Of course, where the employer can be regarded as having paid a part of an employee's Ltd premium that the employee is legally obligated to pay, that part must be treated in the manner of salary or wages received by the employee."

Discussion of treatment of payments from the plan after the employer rather than the employees becomes required to make all contributions to the plan.

CRA disagreed with the representation that all the premiums under a wage loss insurance plan required under the collective agreement were borne by the employees. Accordingly, benefits received by employees under the plan were includible in their income under s. 6(1)(f), but with a deduction under s. 6(1)(f)(v) for contributions that they had made to the plan.

Benefits which arise subsequent to the conversion of a taxable plan to a non-taxable plan are included in income unless those benefits are in no way conditional on participation in the old plan.

Discussion of a disability plan which includes a provision whereby the normal employee contributions to a registered pension plan will be funded by the disability plan in the event of disability.

Discussion of various issues arising where an employer provides both taxable and non-taxable disability benefits to employees.

Where an employee is obliged to pay deficiencies under a wage loss replacement plan funded by employee premiums and is entitled to plan surpluses, any payments made by the employer to the plan, voluntary or otherwise, will constitute employer contributions, with the result that benefits received by the employees are taxable.

If the employer pays administration expenses, claim handling charges, legal expenses, actuarial fees or any other charges required in the establishment, operation, or winding-up of a group long term disability plan, then that plan will not qualify as an employee-pay-all plan for purposes of IT-428, para. 16.

It was unclear whether benefits received by the taxpayer (now a Canadian resident) from a “provident fund” (the “PF”), that had been established for the taxpayer by a non-resident employer should be included in income under s. 6(1)(g) as benefits from an employee benefit plan (“EBP”) or under s. 56(1)(a)(i) as benefits from a (foreign) pension plan. CRA noted:

• “A foreign pension plan would generally fall within the EBP definition, but a foreign EBP does not necessarily fall within the meaning of a pension plan.”
• If the PF is an EBP, the amounts received therefrom would be taxable under s. 6(1)(g), subject to exceptions including that in s. 6(1)(g)(iii) regarding pension benefits received out of the plan that are attributable to services rendered by a person while a non-resident in Canada – as to which there would be fully taxability under s. 56(1)(a)(i) regardless of non-deductibility of contributions to the plan or a foreign tax exemption for the benefits.
• Where the amount received out of the PF is a lump sum amount that is taxable under s. 56(1)(a)(i), a deduction may be permitted under s. 60(j) for a transfer to an RRSP or registered pension plan.

An Irish resident transferred the funds from a conventional Irish company pension plan to an Irish Personal Retirement Savings Account (PRSA) and, following taking up Canadian residence, will transfer the PRSA funds to an Irish Approved Retirement Fund (ARF). In finding that neither the PRSA nor the ARF qualified as a pension plan or an employee benefits plan, CRA stated:

If no employer contributions have been made to a foreign retirement plan, the plan will not be considered a pension plan, nor an EBP. In accordance with Abrahamson … the fact that the original source of funds in a foreign individual retirement plan was a pension plan is not relevant.

On this basis, withdrawals from the plan would not be taxable under s. 56(1)(a) as pension income or under s. 6(1)(g) as an EBP distribution. Instead, any income or capital gains generated under the plan would be taxable in Canada on a current, annual basis.

After providing a review of the transitional rules for potential grandfathering of a plan which was an employee benefit plan before February 26, 1986, the Directorate referred to a provision of the plan pursuant to which an employee could elect at the time of retirement to receive all amounts accumulated in the plan either immediately or in instalments (through the purchase of an annuity). Some employees had already retired but not yet exercised their election. On the assumption that the plan was protected under the transitional rules and, thus, was not a salary deferral arrangement, the Directorate indicated that its position, that “if an employee has an unrestricted right to receive amounts from a plan upon retirement, there would, at that time, be deemed receipt of those amounts even if the amounts have not been received,” could be applicable here, so that on retirement such non-electing employees had an inclusion under s. 6(1)(g).

Current structure

Sub1 and Sub2 (both taxable Canadian corporations and wholly-owned subsidiaries of Parent) are currently the sole partners of a general partnership (“Partnership”). RSUs are granted to eligible employees and officers for their employment services. RSUs are settled through cash payments. An RSU liability is measured at fair value. DSUs enable the Board of Directors and certain key executives to elect to receive certain types of remuneration in deferred share units. DSUs are only exercisable upon death or retirement of the participant. DSUs are settled through cash payments. A DSU liability is measured at fair value. Sub1 was indebted to Partnership under the demand non-interest bearing “Sub1-Partnership Note”), and Parent was indebted to Partnership under the “Parent-Partnership Note,” which was interest bearing and payable on demand.

Proposed transactions

1. Sub1 will repay the Sub1-Partnership Note by assuming Partnership’s accounts payable.
2. Sub1 will assume all indebtedness of Partnership, including the Partnership-Parent Note and Partnership’s obligation to pay "Employee Accruals" under various compensation and retirement plans, including under the RSUs and DSUs in consideration for additional Partnership Units.
3. Sub2 will transfer its interest in Partnership to Sub1 in consideration for Sub1 Preferred Shares and a non-interest bearing promissory note (the “Sub1 Note”), jointly electing under s. 85(1). As a consequence Partnership will cease to exist, Sub1 will become the sole owner of all the Partnership property and Sub1 will become subject to all the remaining obligations of Partnership, and immediately after the time that Partnership ceased to exist, Sub1 will carry on alone the business that was the business of Partnership.

Ruling

The fact that the obligations of Partnership under the Employee Unfunded Benefit Plans will become obligations of Sub1 as a consequence of Sub1 becoming the successor to Partnership’s business and successor employer to Partnership’s employees will not, in and of itself, result in a disposition of an employee’s rights under such Employee Unfunded Benefit Plans and a corresponding income inclusion for the employee.

In the course of a general discussion, CRA stated:

[I]f the employee decides during the course of the plan that he will retire at the end of the leave and will not return to work as originally agreed, deferred amounts are taxed in the year in which it is known that the above condition will not be satisfied. Consequently, if unforeseen situations arise when such an agreement is signed, such as the receipt and acceptance of a retirement offer under a retirement incentive program, the employee may decide to retire with the tax implications described above.

… [W]here after taking leave an employee retires, we are of the view that this will not generally affect the salary deferral arrangement where this was not otherwise provided for. This is the case if, on returning to work from leave, the employee is informed that the employee has the opportunity to retire under a retirement incentive plan or any other plan.

A union wishes to return to its members the amounts it has accumulated and over-collected from them. After noting the potential for inclusion under s. 6(1)(j) of certain union-dues reimbursements, CRA stated:

[I]n certain situations a taxpayer may receive amounts from a union that are not a reimbursement of union dues. In such cases, and based on … Fries … those amounts will not be required to be included in the taxpayer's income since they do not represent income from a source in Canada. Similarly, a fund generated over the years for legitimate union purposes that is no longer required as a result of the disposition of the union's operations and that is distributed to union members will not be required to be included in the income of the union members.

Before addressing the treatment of a lump sum paid by a union to an active member on the member’s death, CRA discussed the treatment of amounts paid during a member’s lifetime, stating:

[A] taxpayer who receives, in a year, a dues refund that equals or exceeds the taxpayer’s annual dues paid to the union in that year cannot deduct their annual dues from employment income by virtue of paragraph 8(1)(i). In addition, the portion of the refund that exceeds the taxpayer’s annual dues must be added to the taxpayer’s income by virtue of paragraph 6(1)(j).

A refund of union dues by a union was distributed from its administration fund in 2004 to current members and those who were members on December 31, 2001.

Is the following position in 9530937 still valid?

If the amount refunded to a union member in a year exceeds the individual’s paid dues for the year, the excess will reduce the amount of union dues otherwise deductible by that union member for a subsequent taxation year.

Should individuals who are retired or have left their jobs and received a refund from the union in 2004 add the amounts received, as a refund of union dues, to their income?

After paraphrasing ss. 6(1)(j) and 8(1)(i), CRA stated:

[A] taxpayer who receives, in a year, a refund of dues that equals or exceeds the taxpayer’s annual dues paid to the union in that year cannot deduct the annual dues in the taxpayer’s employment income pursuant to paragraph 8(1)(i). In addition, the portion of the refund that exceeds the individual’s annual dues must be added back to the individual’s income pursuant to paragraph 6(1)(j).

… 9530937 is no longer valid. … [T]he amount of their union dues paid in 2004 reduces or annuls the deduction provided for in subparagraph 8(1)(i)(iv) in computing their income. For those members who received an amount in excess of their 2004 union dues … the excess portion must be included in their income pursuant to paragraph 6(1)(j) in the year it is received.

… [I]ndividuals who are retired or have changed employers and who received a refund of union dues in 2004, given that they were members of the union on December 31, 2001, must include the refund of dues pursuant to paragraph 6(1)(j) in their 2004 income.

A union ceased operations and distributed all its net funds to its members in amounts based on their respective seniority. In indicating that a portion of the sums distributed appeared to be taxable under s. 6(1)(j), with the balance being proceeds of disposition of memberships (having a nominal adjusted cost base), the Directorate stated:

[T]here are good arguments to state that the amount received … by each of the members, up to the amount of their union dues paid in XXXXXXXXXX, constitutes a refund of their annual dues that reduces or cancels the deduction provided for in subparagraph 8(1)(i)(iv) in computing their employment income. For those members who received an amount in excess of their annual contribution of XXXXXXXXXX, we are of the view that it would be more difficult to argue that this excess is a refund of annual contributions from previous years. In our view, the better position would be to treat the excess portion as a capital payment (a distribution of the residual assets of the union) received as proceeds of disposition of their rights.

Employees were provided with a minivan (specially adapted to carry specialized equipment) only during periods that they were on-call to respond to emergency calls from home. CRA indicated that for purposes of computing taxable benefits under ss. 6(1)(e) and (2) (if the minivans were automobiles) or under s. 6(1)(a) (if not), use of the vehicles in responding travelling to and from the customers with emergencies would not be personal use, but conversely for travel between the home and office.

Employees who are provided with electric vehicles for use in performing their employment duties are required to recharge the vehicle battery at home, and may not be able to identify the portion of their monthly electricity bill pertaining to such charging. Before addressing this uncertainty, CRA noted:

• the electricity costs paid by the employee that are established to be attributable to the personal use of the vehicle reduce the operating expense benefit under s. 6(1)(k)
• employer reimbursements for reasonable employment-related electricity costs paid by the employee generally are not a taxable benefit
• where there is no such reimbursement, employment-related electricity costs that are established may be deductible by the employee as motor vehicle travel expenses under s. 8(1)(h.1), where its documentary requirements are met

CRA then stated:

Where it is not possible to produce supporting documentation showing the exact amount of electricity expenses incurred for an electric vehicle, other means for establishing the amount of employment-related electricity costs may be acceptable. For example, the establishment of an average per-kilometre electricity cost could be a reasonable method. However, an employee would need to take into account the use of paid and free charging stations when establishing this cost.

CRA indicated that where an individual had two employers, which were related corporations, and one of the two corporations acquired a car that it made available to Mr. X, which he was free to use for personal purposes but was also required to use in his work for both employers, that:

• A single benefit under each of ss. 6(1)(e) and 6(2), and under s. 6(1)(k), was to be computed.
• Each such single benefit was to be reported in a T4 slip issued by either employer (as they agreed) rather than being split between the T4 slips issued by both corporations.

A free charging station is provided at an employee’s home for a car used in performing employment duties. As the charging station draws on the employee’s electricity, the employee is reimbursing the employer for a portion of the operating costs. How should the operating expense be calculated? CRA responded:

[P]ersonal use of an employer-provided electric automobile (i.e., charging) will reduce the operating expense benefit determined under paragraph 6(1)(k) … where such costs can be established.

A government employee reports to an office 1.5 days a week that serves as a place for preparing reports, meetings with the supervisor and receiving secretarial support. However, for 3.5 days per week, the employee travels to and from home and the office of a third party in another city. Is the latter travel of a personal nature? CRA responded:

[T]ravel by an employee between the employee’s residence and the employee’s workplace is not travel in the performance of the duties of an office or employment, and is travel of a personal nature. …

As a result, the concept of "workplace" is a key element in determining the nature of employee travel.

In this regard, the CRA considers that, in general, a workplace is any place where or from where an employee reports regularly or performs the duties of an office or employment. The CRA also is of the view that an employee may have more than one workplace. …

[T]he regularity and frequency of your visits to the [two] offices are indicators that these two locations could both qualify as “workplaces”.

Is an employer required to obtain an employee's travel logbook when providing the employee with a vehicle; and if such a record is not provided, how should the employer calculate taxable benefits? CRA responded:

The best way to determine that a vehicle is used for commercial or personal purposes is to keep an accurate record of all trips made for the whole year, including for each trip the date, destination, the reason for the travel and the distance traveled.

In general, it is expected that a person who uses a motor vehicle for commercial and personal purposes will maintain a record that objectively determines the use of that vehicle.

In the absence of such a record, an employer must demonstrate by other means how the employer determined the value of the benefit that the employee must include in computing the employee’s income.

A shareholder-employee who uses his $30,000 automobile 75% for business, and 25% for personal purposes sells a 75% interests in the automobile to his corporation for $22,500. The operating expenses also are borne on a 75/25 basis. CCRA indicated that there would be not s. 6(1)(k) benefit if the expenses were reimbursed on a timely basis.

Any amounts paid by an employee to a third party not related to the employer for the operating expenses of an employer-provided automobile will not reduce the operating expense benefit.

"The Department's long standing position that travel between the home and workplace is personal in nature is not altered by the fact that an employer may require an employee to perform an employment-related function (such as an area patrol or a delivery or pick-up) during the course of the trip between the home and workplace. Where the primary purpose of a particular trip is personal in nature, then it is treated as such for tax purposes regardless of any employment activity which may take place during the course of that trip."