Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
deductibility of union dues and taxation of strike pay
Position:
strike pay not taxable, union dues to support reasonable costs during a legal strike are deductible
Reasons:
Wally Fries v. The Queen (90 DTC 6662), it-103
MINISTER/DEPUTY MINISTER'S OFFICE YS 7-06432M
ASSISTANT DEPUTY MINISTER'S OFFICE
RETURN TO RULINGS, 15TH FLOOR, ALBION TOWER
January 29, 1998
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your letter of October 14, 1997, concerning the deductibility of union dues and the taxability of strike pay. Minister Dhaliwal has asked that I write to you on his behalf.
In your letter, you ask that the Income Tax Act (the "Act") be amended to disallow additional dues paid to a union for the purpose of funding strike activities. You have also asked that consideration be given to taxing strike pay, to the extent that such pay exceeds dues paid by the worker.
As you have noted, a member of a union who is on strike or locked out need not include strike pay in income. In the decision of the Supreme Court of Canada in Wally Fries v. The Queen, (90 DTC 6662), payments by way of strike pay were held not to be "income from a source" and therefore not taxable.
The Act denies a deduction for annual dues to the extent that they are levied for any purpose not directly related to the ordinary operating expenses of the trade union to which they are paid. When a trade union incurs reasonable costs in prosecuting a legal strike (such as rental of strike headquarters, telephone expenses, publicity and advertising expenses and travelling expenses) and, during such strike provides relief payments to members in need but to which they are not entitled as a contractual right, such costs are viewed as being related to the ordinary operating expenses of the trade union. For this reason, that part of annual dues levied for the purpose of providing for the current or anticipated costs of prosecuting legal strikes of the union is, if reasonable in the circumstances, deductible for tax purposes. Levies made during a year on some or all members of a trade union to provide funds for the prosecution of a legal strike of the union are considered to be annual dues provided that such levies are capable of recurring and have not been designated by the union as special assessments.
While there are limitations which restrict the amount which may be deducted as annual dues each year by a union member, an amendment to the Act would be required to limit this deduction to the extent suggested by you. The Act would also have to be amended to make strike pay taxable. As such amendments are the responsibility of the Honourable Paul Martin, Minister of Finance, it was appropriate that you sent him a copy of your correspondence for consideration. I trust that the Department of Finance will give your recommendations due consideration.
I hope that these comments will be of assistance to you.
Yours truly, Denis Lefebvre Assistant Deputy Minister Policy and Legislation Branch
Sandra Short
November 25, 1997
957-2136