Principal Issues: [TaxInterpretations translation] 1. What is the scope of the phrase "duties … of a temporary nature" in subparagraph 6(6)(a)(i) of the Act?
2. What is the scope of the words "in respect of a period when the employee was employed in connection with the selling of property or negotiating of contracts for the employee’s employer" for employees of a union?
Position: 1. The general position is that work is considered temporary in nature if it can reasonably be expected not to constitute continuous employment for more than two years. In some specific situations, the work could be considered temporary in nature even if it exceeds two years. In making this determination, we would consider, inter alia, the length of the contract, whether employees are eligible for re-election, and whether an employee is aware of the possibility of reappointment at the beginning of the first term. Thus, an employment could be considered not to be temporary in nature even if reappointments are contingent on employees being re-elected.
2. A union employee does not negotiate contracts for the employee’s employer if the union is not a party to the agreement (where the contract is between the employer's client and a third party), even if the employee’s tasks are related to contract negotiation. Not all duties performed by a union employee are related to contract negotiation. For example, duties related to contract enforcement and representing employees in a grievance would not be part of contract negotiations.
Reasons: 1. Position previously taken in document 2003-0002167.
2. Position previously taken in document 9605855.
XXXXXXXXXX Sylvie Labarre, CA
2004-009713
November 17, 2004
Dear Sir,
Subject: Employment on a special work site and travel allowances
This is in response to your request for a technical interpretation of subsection 6(6) of the Income Tax Act (the "Act") and subparagraph 6(1)(b)(v) of the Act.
Facts
Members of the Executive Board of a trade union are elected every four years to various offices on the Board by vote of the trade union members. The terms of office are for a fixed period but it is possible to stand again for the same office at the end of the term.
Some of the members of the Executive Board and some of the employees of the affiliated unions have as their main task the negotiation of collective agreements and/or grievances between the union and the employers of member unions. This involves conducting discussions with the other side, preparing for these discussions, developing negotiation strategies and identifying the important aspects of each negotiation. All of these essential negotiating tasks require the bulk of their time.
Furthermore, the workload of the union's Executive Board members also requires them to stay for significant periods of time in the XXXXXXXXXX region. Thus, some maintain as their main place of residence an independent establishment in other regions, such as the city of XXXXXXXXXX, which is always at their disposal and to which they often return. In order to carry out their duties on the Executive Board of the union, they are therefore obliged to rent accommodation in the XXXXXXXXXX region and to incur expenses to support themselves when they are away from their principal place of residence.
Questions
Your first question concerns the ability of employees working at a special work site to exclude from their income the value of a reasonable allowance received in respect of the value of their board and lodging expenses, as provided for in subsection 6(6). You seek our interpretation of the scope of the words "duties… of a temporary nature" in subparagraph 6(6)(a)(i) in a case such as the one described here.
Your second question relates to the exclusion from a taxpayer's income of travel allowances received by employees who satisfy the conditions of subparagraph 6(1)(b)(v). You wish to determine the scope of the words "in respect of a period when the employee was employed in connection with the selling of property or negotiating of contracts for the employee’s employer" with respect to when such negotiations begin and end.
Our Comments
As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is the practice of the Canada Revenue Agency (CRA) not to issue written opinions on proposed transactions otherwise than through advance rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you. These comments may not, however, apply to your particular situation in certain circumstances.
In response to your first question, please refer to document 2003-0002167 (copy attached) for the CRA's position on the scope of the words "duties… of a temporary nature" in subparagraph 6(6)(a)(i) in a case such as the one described herein. Thus, in this document, we state our general position that work is considered temporary in nature if it can reasonably be expected not to constitute continuous employment for more than two years. However, it states the following: [TaxInterpretations translation]
We believe that in certain specific situations, the duties performed by an employee may be considered temporary in nature despite the fact that the duration of the contract exceeds two years. Indeed, we have already stated in documents 2001-0103707, 2001-0101967 and 2002-0126993 that when the facts indicate that the work is truly of a temporary nature, we are prepared to accept that the two-year limit is not automatically applied and that a three- or four-year contract can be work of a temporary nature.
As noted in 2003-0002167, when considering the facts of a particular situation, we would take into account, inter alia, the length of the contract, the possibility that the employees could be re-elected, the fact that an employee is aware of the possibility of reappointment at the beginning of the first term, and the fact that there is no evidence that the employees intended to work there temporarily. Thus, in the situation you presented to us, we would likely conclude that the employees could reasonably expect to serve for a longer period of time, although reappointments are dependent on their re-election, and the duties are not temporary in nature.
In response to your second question, we maintain the position set out in Situation II of 9605855 (copy attached). Thus, it is our view that subparagraph 6(1)(b)(v) does not apply in a situation where the union is not a party to the agreement and the union employee is negotiating, on behalf of that individual’s employer, contracts between the employer's client and a third party, even though the employee's duties were related to the negotiation of contracts. Furthermore, not all the duties performed by an Executive Board member whose main task is the negotiation of collective agreements are related to contract negotiations. For example, as stated in Document 9605585, negotiating a collective agreement would not include the duties of ensuring its application and representing the union's employee members in a grievance.
These comments are not advance income tax rulings and do not bind the CRA in any particular situation.
Best regards,
Ghislaine Landry, CGA
for the Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
Encl. (2)