Principal Issues: Are membership fees paid to a particular organization deductible pursuant to paragraph 8(1)(i) of the Act?
Position: No, not deductible as an employment expense.
For a member who is self employed, or where membership is purchased by an employer for an employee, the membership fees may be deductible as an expense incurred for the purpose of earning income from business.
Where an employer pays the membership fee for an employee, it will be a question of fact whether the payment results in a taxable employment benefit.
Reasons: Membership in the particular organization is not necessary for the maintenance of a professional status, which is necessary under paragraph 8(1)(i).
2006-018591 XXXXXXXXXX Renée Shields (613) 948-5273 October 27, 2006
Dear XXXXXXXXXX:
Re: Deductibility of annual membership fees
This is in response to your letter of April 20, 2006 inquiring whether annual membership fees paid by individuals to the XXXXXXXXXX (the "Institute") would be eligible for an income tax deduction.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advance Income Tax Rulings." Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office, a list of which is available on the "Contact Us" page of the CRA website at http://www.cra-arc.gc.ca. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.
Under subparagraph 8(1)(i)(i) of the Income Tax Act (the "Act"), a deduction in computing income from an office or employment is permitted for amounts paid by an employee taxpayer for annual professional membership dues, the payment of which are necessary to maintain a professional status recognized by statute. Although our research confirmed that there are provincial statutes governing the practice of professional XXXXXXXXXX and the designation of professional XXXXXXXXXX practitioners, it appears that membership in the Institute is neither required nor sufficient to maintain such professional status. Given the foregoing, it is our view that membership fees paid to the Institute would not qualify for a deduction from employment income under paragraph 8(1)(i) of the Act.
We note that members of the Institute may be self-employed individuals. As noted in ¶2 of Interpretation Bulletin IT-211R, "Membership Dues - Associations and Societies", subject to a limitation not applicable to the Institute, membership fees in professional associations, trade or commercial associations, learned societies, service clubs and cultural organizations will be allowable deductions from income if they can reasonably be shown to related to the earning of income from the business or property. This determination will always be a question of fact.
Similarly, if an employer were to pay the Institute's membership fee on behalf of an employee and could demonstrate that the expense was incurred for the purpose of earning business income, the employer would be entitled to deduct the cost of membership from business income. In that case, it would be a question of fact whether the payment of the membership fee constitutes a taxable employment benefit. Generally speaking, when an employee maintains membership in a particular organization because of a legal requirement or because of a job requirement, such as a specification contained in a classification standard or in a job description, the payment or reimbursement of reasonable membership fees by the employer would not be considered to be a taxable benefit to the employee.
We trust our comments will be of assistance.
Yours truly,
Randy Hewlett
Manager
Business and Personal Section
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch