Principal Issues: [TaxInterpretations translation] Is the annual fee paid to the COMAQ deductible under subparagraph 8(1)(i)(i)?
Position: No.
Raisons: Membership in the COMAQ is not a necessary condition for the retention of the employee's or manager's professional status, even if membership benefits the employee or manager in the performance of their duties.
XXXXXXXXXX 2005-015786
Lucie Allaire, LL.B
June 21, 2007
Dear Madam,
Subject: Deductibility of professional contributions
This is in response to your letter of November 2, 2005, asking whether annual dues paid by municipal employees and officers as members of the Corporation des officiers municipaux agrées du Québec ("COMAQ") are deductible pursuant to subparagraph 8(1)(i)(i) of the Income Tax Act (the "Act").
Unless otherwise indicated, all statutory references herein are to the provisions of the Act.
On August 2, 2005, in response to your letter of January 21, 2005, our Directorate issued technical interpretation number 2005-011287, which states that members of the COMAQ could not deduct professional dues paid to that professional association pursuant to subparagraph 8(1)(i).
Therefore, we understand that you wish us to reconsider your request in the light of the additional facts and comments you have submitted to us.
Our Comments
The situation described in your letter is an actual situation involving taxpayers. As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is our practice not to issue written opinions on proposed transactions otherwise than by way of advance rulings. Furthermore, when it comes to determining whether a completed transaction has received the appropriate tax treatment, the decision is primarily made by our Tax Services Offices. We can, however, offer the following general comments which we hope you will find helpful. However, these comments may not apply to your particular situation in some circumstances.
Subparagraph 8(1)(i)(i) provides that an employee may deduct amounts paid in a year as annual professional membership dues the payment of which was necessary to maintain a professional status recognized by statute to the extent that the taxpayer has not been reimbursed and is not entitled to be reimbursed.
Interpretation Bulletin IT-158R2, Employees' Professional Membership Dues, sets out the following principles in paragraph 3:
3. Since it is the employee's professional status (not the organization's) that must be recognized by statute, dues are only deductible where membership in an organization is necessary for the employee to retain professional status. If membership in a given association does not affect professional status (e.g., the Canadian Medical Association for physicians) dues to it are not deductible even if they entitle the employee to a designation of letters after his or her name. (However, see 5 below for an exception to this rule.) If, on the other hand, membership is necessary to maintain professional status (e.g., the provincial College of Physicians & Surgeons for the physician) the dues to it are deductible. [...].
In Her Majesty the Queen v. Swingle,1 the taxpayer, who was a chemist, claimed a deduction for amounts paid to four organizations that had no bearing on his professional status. The Trial Division of the Federal Court (as it was then called) decided that the taxpayer was not entitled to deduct the amounts paid as they were not necessary for the maintenance of a professional status recognized by statute.
In the Alan Montgomery, British Columbia Assessment Authority and Guy Mousseau v. Her Majesty the Queen2 case that you cited, the Federal Court of Appeal determined that it is the professional status and not the professional association that must be recognized by statute. In this case, the taxpayer was required to maintain the designation of chartered appraiser in order to practise his profession. For dues paid by COMAQ members to be deductible pursuant to subparagraph 8(1)(i)(i), it is necessary, inter alia, that the payment of such dues permit the retention of a professional status.
The jurisprudence3 has also determined that a profession requires specific skills and knowledge.
Membership in the COMAQ is not a necessary condition for maintaining the professional status of an employee or manager, even if membership benefits the employee or manager in their duties.
Consequently, we remain of the view that COMAQ members cannot deduct from their income the annual dues paid to COMAQ pursuant to subparagraph 8(1)(i)(i).
These comments are not advance income tax rulings and, as stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, are not binding.
Best regards
Louise J. Roy, CGA
Interim Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.
ENDNOTES
1 77 DTC 5301.
2 99 DTC 5186.
3 Gilles Décarie v. Her Majesty the Queen, delivered orally on March 31, 1995, and Pierre Tremblay v. Her Majesty the Queen 79 DTC 305.