Revenue Canada Taxation Head Office
G. Ozols (613) 957-2127
OCT 21 1988
Dear Sirs:
Re: Membership Dues
Further to our meeting of September 19, 1988, we have reviewed the draft regulations you provided us with to determine if they recognize a professional status for appraisers for the purpose of the Income Tax Act (the "Act") deduction under subparagraph 8(1)(i)(i) for the payment of professional membership dues.
The draft regulations are in respect of the appraisal of real estate assets of loan companies pursuant to the Loan Companies Act. The regulations define an appraiser, in the case of an individual, as "a person who
(i) is trained and experienced in the appraisal of real estate,
(ii) is a member in good standing of a recognized appraisal institute, and
(iii) is designated an 'Accredited Appraiser Canadian Institute' ("AACI") or an equivalent".
A recognized appraisal institute is defined as
"(a) the Appraisal Institute of Canada, or
(b) another institute or society of appraisers that has entered into an agreement with the Appraisal Institute of Canada respecting the use of the 'Accredited Appraiser Canadian Institute' ('AACI') designation".
The issue is whether these draft regulations recognize the professional status of appraisers for the purpose of the professional membership deduction available to employees under subparagraph 8(1)(i)(i) of the Act. It is our opinion that they do not. In M.N.R. v. Montgomery 70 DTC 6080, the Court stated, in discussing the intention behind this deduction, that
"Parliament had in mind, I feel sure, the present day concept of organized societies and associations of doctors, dentists, lawyer, engineers, chartered accountants and other professional persons, which have been given a special status by statute and have the power to make regulations governing the issue of certificates and licenses to practice the profession, examinations of candidates for membership and the right to practice, discipline of members, and a variety of other matters, including the regulation of the practice and the professional conduct of its members."
We agree that an appraiser is carrying on a profession. We also assume that the XXXX has certain standards which a person must meet and maintain in order to become and remain a member in good standing. However, to our knowledge, the Institute has not been given this authority by any statute. The draft regulations to the Loan Companies Act do not confer on the Institute the authority to regulate the practice of appraising. They merely provide that an appraisal done pursuant to the regulations (which apply only for the purposes of the Loan Companies Act) must be done by an appraiser who is a member of the Institute or a related institute. The regulations do not recognize the professional status of appraisers in the manner set out in the Montgomery case cited above.
We trust the above comments fully explain our position.
Yours truly,
Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch