1 June 2006 External T.I. 2006-0174331E5 - Employer Payment Of Union Dues

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: Where due to an administrative error of the employer, an employee's union dues were in arrears and the employer subsequently paid the union dues and included the amount in the employee's income as a taxable benefit, whether the employee in entitled to a deduction for the amount included in employment income.

Position: Yes, if the union dues would have been otherwise deductible in computing the employee's income had they been paid by the employee himself or deducted from the employee's salary and paid by the employer, the employee is entitled to a deduction for the amount paid directly by the employer and included in income as a taxable benefit.

Reasons: Reasonable interpretation of the law. Further, there is currently a legislative proposal to amend paragraph 8(1)(i) of the Act to clarify that an expense described in that paragraph that is paid on an employee's behalf is deductible by the employee if the amount paid is required to be included in computing the employee's income

XXXXXXXXXX 							Randy Hewlett
								2006-017433
June 1, 2006

Dear XXXXXXXXXX

Re: Taxable Benefit/Deduction For Employer Payment of Union Dues In Arrears

We are writing in response to your letter of March 2, 2006, wherein you requested our opinion on the above-noted issue.

You described a situation where, due to an administrative error of the employer, an employee's union dues were in arrears. The employer subsequently paid the union dues and included the amount in the employee's income as a taxable benefit. You inquired whether the employee is entitled to a deduction for the amount included in employment income.

Paragraph 8(1)(i) of the Income Tax Act (the "Act") permits an employee to deduct certain dues and other expenses incurred by the employee in the performance of employment duties. Specifically, subparagraphs 8(1)(i)(iv) and (v) of the Act deal with the deductibility of union dues. In our view, in the situation described, if the union dues would have been otherwise deductible in computing the employee's income had they been paid by the employee himself or deducted from the employee's salary and paid by the employer, the employee is entitled to a deduction for the amount paid directly by the employer and included in income as a taxable benefit. Further, we would also note that there is currently a legislative proposal to amend paragraph 8(1)(i) of the Act to clarify that an expense described in that paragraph that is paid on an employee's behalf is deductible by the employee if the amount paid is required to be included in computing the employee's income.

We trust our comments will be of assistance to you.

Yours truly,

Randy Hewlett
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch