Principal Issues: [TaxInterpretations translation] In the situation described, would firefighters have the right to claim the tax credit for volunteer firefighters? If so, could they choose to either claim that tax credit or to claim the exemption under subsection 81(4)?
Position: Question of fact. Normally, the Employer is the best place to decide if firefighters are providing services as volunteer firefighters.
Reasons: The Income Tax Act.
XXXXXXXXXX
2011-042155
January 27, 2012
Dear Madam,
Subject: Volunteer firefighter tax credit
This is in response to your email of September 19, 2011 in which you asked for our opinion on the above subject.
Unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act (the "Act").
In particular, you described the situation of firefighters (the "Firefighters") at XXXXXXXXXX (the "Employer") who are engaged as part-time employees on a permanent basis. The Employer pays them a salary for each hour worked, each hour of training, each hour of drills, each hour of duty and each hour of meetings. On average, according to the information you have provided, Firefighters earn more than $17,000 per year as part of their duties with the Employer and provide more than 200 hours of service in a year. You indicated that the majority of them have another job that is not fire prevention.
Firefighters are entitled to a monthly allowance to serve as an availability allowance, automobile allowance, automobile insurance, sick leave, social leave and other marginal benefits, excluding vacation pay.
In light of that situation, you wish to know if the Firefighters are entitled to claim the new volunteer firefighter tax credit under section 118.06.
You also wish to know if Firefighters can be considered volunteer firefighters under subsection 81(4). If that were the case, you would like to know if the Firefighters would be able to choose between the exemption provided for in that paragraph and the volunteer firefighter tax credit.
Our Comments
It appears to us that the situation described in your letter could constitute an actual situation involving taxpayers. As stated in Information Circular 70-6R5, it is not the practice of the Directorate to comment on proposed transactions that relate to specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involved specific taxpayers and one or more transactions, you should submit all relevant facts and documents to the appropriate Tax Services Office for their opinion. However, we can offer the following general comments that may be helpful to you.
Pursuant to section 118.06, an individual may claim the tax credit for volunteer firefighters for a taxation year if the taxpayer has completed at least 200 hours of eligible volunteer firefighter services in the taxation year for one or more fire departments. The credit amount is the product of $3,000 and the base rate for the year.
For the purpose of that section, eligible volunteer firefighter services are services provided by an individual as a volunteer firefighter to a fire department that consist primarily of responding to and being on call for firefighting and related emergency calls, attending meetings held by the fire department and participating in required training related to the prevention or suppression of fires. Eligible volunteer firefighter services do not include firefighting services provided to a fire department otherwise than as a volunteer.
Furthermore, subsection 81(4) allows an individual who is employed by a government, municipality or public authority to exclude, to the lesser of $1,000 or the amount received, amounts received for the performance, as a volunteer, of the individual’s duties as an ambulance technician, a firefighter, or a person who assists in the search or rescue of individuals or in other emergency situations.
We believe that the term "volunteer firefighter" must have the same meaning, whether for the purposes of subsection 81(4) or for the purposes of section 118.06.
Generally, a volunteer is defined as someone who does something without being remunerated and without being required to do so. In that situation, the volunteer is involved willingly and for the satisfaction of serving his or her community. As a result, it is quite common for a volunteer to be neither an employee nor a contractor serving an organization.
However, many volunteer acts are no longer done entirely without remuneration. Some volunteers receive modest amounts of money, gift certificates, goods or services as compensation. Those payments are not very representative of the amount of work done or the quality of the services rendered.
They are not in themselves real motivators for volunteers to get involved and do not reflect the fair market value of services rendered. Therefore, those payments are not taxable.
However, the volunteer firefighters to which we were referred are not necessarily volunteers as defined above. If that had been the case, the $1,000 exemption and the volunteer firefighter tax credit would be meaningless as they only apply to taxable income.
Nowadays, there are almost no volunteer firefighters who can be qualified as volunteers in the true sense of the word, that is to say, unremunerated. In addition, the compensation paid to those workers in exchange for the work performed strongly suggests that they are employees.
We are confident that an employer (either a government, a municipality, or public authority) is the best-placed entity for determining the status of an employee. Paragraph 81(4)(b) provides that, at the request of the Minister of National Revenue, the employer must certify that the firefighter is a bona fide firefighter for the purposes of subsection 81(4).
On the other hand, subsection 118.06(3) states that an individual making a claim for a taxation year for the volunteer firefighters tax credit must provide to the Minister a written certificate from the fire chief or a delegated official of each fire department to which the individual provided eligible volunteer firefighting services for the year, attesting to the number of hours of eligible volunteer firefighting services performed in the year by the individual for the particular fire department.
As part of an audit, a municipality or other public authority may be required to specify the circumstances that led to its decision to consider a firefighter to be a volunteer firefighter entitled to the exemption under subsection 81(4) or to the tax credit in section 118.06.
Note that a firefighter claiming the volunteer firefighter tax credit will not be able to claim the exemption under subsection 81(4).
We hope that these comments will be of assistance.
Best regards,
François Bordeleau, Advocate
Business and Partnerships Section
Income Tax Rulings Directorate