Principal Issues: [TaxInterpretations translation] Are cable television services, satellite television transmission services and Internet connection services utilities for the purposes of paragraphs 8(1)(c) and 62(3)(h) of the Act?
Position:
For the purposes of paragraph 8(1)(c) of the Act, these services are generally considered to be personal expenses unrelated to employment income. Consequently, taking into account the preamble to subsection 8(1), these services are not deductible. In order to take this interpretation into account, paragraph 23 of Interpretation Bulletin IT-141R limits the utilities eligible for deduction for the purposes of paragraph 8(1)(c) to electricity, heating, water and sewage.
On the other hand, subsection 62(3) provides for the deduction of certain personal expenses in computing income. There is therefore no need to limit the definition of "utilities" to those that relate to a particular income. In this context, we are of the view that the expression "utilities" used in paragraph 62(3)(h) of the Act is broad enough to encompass telecommunications services such as cable television, satellite television and Internet connections.
Reasons:
The preamble to subsection 8(1) prevents the deduction of expenses that do not relate entirely to employment income or the portion that cannot reasonably be considered to relate to employment income. We generally consider those expenses to be personal to an employee (including a member of the clergy) because the employee generally uses those services for entertainment purposes. The employee would not incur any additional costs for those services if a minimal portion of them were used for employment purposes.
Moving expenses, on the other hand, include personal expenses. Several common definitions of "utilities" lead to the conclusion that they include the telecommunications services at issue in this application.
September 30, 2002
Quebec Tax Services Office Headquarters Client Services, 2nd floor Sylvie Labarre, CA Attention: Ms. Josée Verret (613) 957-8953
2002-015210
Utilities
This is further to your fax of July 15, 2002, in which you asked whether cable television services, satellite television services and internet connection services are "utilities" for purposes of the clergy residence deduction provided under paragraph 8(1)(c) of the Income Tax Act (the "Act") and for purposes of the definition of moving expenses in subsection 62(3).
For the purposes of the deduction for the residence of members of the clergy, provided for in paragraph 8(1)(c), we are of the view that there are two elements to consider in answering this question. First, it must be established that those services are utilities. Next, it must be determined whether those services are wholly applicable to the income from the employment of the member of the clergy or whether a portion of them may reasonably be regarded as applicable thereto. This is the condition set out in the preamble to subsection 8(1) for any of the items mentioned in that subsection to be deductible in computing a taxpayer's income from an office or employment.
We are of the view that cable television services, satellite television services and internet connection services are generally not relevant to the income from employment of a member of the clergy. In fact, we generally consider those expenses to be personal expenses, as is the monthly cost of basic home telephone service. Consequently, we are of the view that the amounts relating to those services are not deductible in computing the employment income of a member of the clergy. Paragraph 23 of Interpretation Bulletin IT-141R reflects this interpretation by limiting, for the purposes of paragraph 8(1)(c), the term "utilities" to the amount spent on electricity, heat, water and sewerage.
On the other hand, subsection 62(1) provides for the deduction of certain personal expenses in computing a taxpayer's income. Amounts paid as moving expenses incurred in connection with an eligible relocation are deductible if certain conditions are satisfied. Paragraph 62(3)(h) provides that moving expenses include the cost of connecting and disconnecting utilities. For the purposes of applying that paragraph, it is not necessary to limit the definition of "utilities" to those that relate to a particular income. In that context, we are of the view that the expression "utilities" used in paragraph 62(3)(h) is broad enough to encompass telecommunications services such as cable television, satellite television and Internet connections.
For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Customs and Revenue Agency's library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, the CRA library version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Ms. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
We hope you find these comments of assistance. Should you require additional information regarding the content of this document, please do not hesitate to contact us.
Ghislaine Landry, CGA
for the Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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