Principal Issues: Whether a daily or weekly pass would be eligible for the tax credit.
Position: No.
Reasons: Draft legislation indicates that an eligible transit pass must provide the individual with the right to use public commuter transit services of a qualified Canadian transit organization on an unlimited number of occasions and on any day on which the public commuter transit services are offered during an uninterrupted period of at least 28 days.
Signed on October 3, 2006
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your correspondence received on August 30, 2006, concerning the 2006 Federal Budget proposal to provide a tax credit for public transit passes. More particularly, you are concerned that the tax credit is unfair in that it will only apply to monthly pass holders. I apologize for the delay in responding.
On August 31, 2006, the Honourable James M. Flaherty, Minister of Finance, released the legislative proposals to implement some of the 2006 Federal Budget proposals, including the proposal with respect to the public transit pass tax credit. The draft legislation to implement this proposal does indicate that an "eligible public transit pass" must provide the individual with the right to use public commuter transit services of a qualified Canadian transit organization on an unlimited number of occasions and on any day on which the public commuter transit services are offered during an uninterrupted period of at least 28 days. This means that those who purchase a daily or weekly pass would not be eligible for the tax credit.
The draft legislation for the 2006 Federal Budget proposals was released in draft form so that taxpayers would have an opportunity to consider it and comment before it is introduced in Parliament. I am therefore forwarding a copy of our correspondence to Minister Flaherty for his consideration.
I note your comment about self-employed individuals being able to fully deduct as a business expense the cost of their daily, weekly, or monthly pass. The law requires that in computing business income, no deduction will be permitted for an outlay or expense unless it is made or incurred for the purpose of gaining or producing income from the business. The cost of a transit pass incurred by a self-employed individual for the purpose of travelling between the individual's home and place of business would not be a deductible business expense.
Thank you again for having taken the time to write.
Sincerely,
The Honourable Carol Skelton, P.C., M.P.
c.c.: The Honourable James M. Flaherty, P.C., M.P.
Minister of Finance
House of Commons
Ottawa ON K1A 0A6
Randy Hewlett
613-957-2049
2006-020431
September 14, 2006