CRA issues a Folio on professional and other dues

CRA has published a new Folio on the s. 8(1)(i) deduction, which expands on comments that it made in Interpretation Bulletin IT-158R2. Comments made on the deduction under s. 8(1)(i)(i) for an amount paid as annual professional membership dues, the payment of which was necessary to maintain a professional status recognized by statute, include:

• Dues must be of a recurring nature in order to qualify as annual dues. Initiation or entrance fees, special assessments, examination fees, licence fees, costs to obtain continuing professional education credits, and dues paid by students before becoming members of a professional organization would not qualify as annual membership fees.
• A professional status refers to possessing advanced education or training and satisfying other conditions and requirements established by a professional organization.
• Montgomery clarified that the phrase “recognized by statute” should be afforded a broad interpretation, and that “recognized by statute” does not necessarily mean that a professional status was incorporated, created, or regulated by a particular statute.
• The employee's professional status does not necessarily have to be recognized by statute in the jurisdiction of the employment, e.g., an Alberta employee belonging to an association in Australia where this professional status of the employee is recognized by statute.
• Payment of dues will likely be considered necessary to maintain a professional status only where membership in the professional organization is mandatory in order to maintain professional status and the non-payment of the annual dues could adversely affect or cause the employee to lose their professional status.
• In some instances, a professional organization may require payment of annual dues that are in part passed on to a national association. In such cases, provided that membership in the provincial organization is necessary to maintain the employee's professional status, the entire amount of the annual dues paid will be considered necessary to maintain that professional status.
• Professional membership dues must reasonably relate to the employment income source, but it is not necessary that the payment of the annual dues be essential for the employee to hold the position; however, there must be a reasonable connection between the professional membership and the position, e.g., professional status as a chemical engineer at a chemicals company.

Neal Armstrong. Summaries of Income Tax Folio S2-F2-C1, Employee Professional Membership and Other Dues under s. 8(1)(i)(i), s. 8(1)(i)(iv), s. 8(1)(i)(vi), s. 8(1)(i)(vii) and s. 8(5).