2017-0693671I7 Elected officials - Deductibility of Travel Expense

Principal Issues: 1. Can elected members of a provincial legislature deduct travel and motor vehicle expenses?

Position: 1. Question of fact. Where the allowance is excluded from income under subsection 81(2) of the Act, no deduction is permitted. If the allowance is not excluded under subsection 81(2) of the Act, and the travel expenses are incurred while carrying out the duties of employment, the actual expenses incurred in respect of the travel may be deducted in certain circumstances.

Author: Dubis, Robert
Section: 8(1)(h); 8(1)(h.1); 81(2)

                                                                                                                                                         May 5, 2017

Matthew Rankin                                                                                                                               Robert Dubis
Socio-Economic Policy Analyst                                                                                                       (905) 721-5191
Strategy and Integration Branch
320 Queen Street, 21st Floor
Ottawa ON
                                                                                                                                                         2017-069367

Employment expenses

We have reviewed the enquiry from XXXXXXXXXX and offer the following comments.

XXXXXXXXXX cited the comments provided in Interpretation Bulletin IT-266, Taxation of Members of Provincial Legislative Assemblies (Cancelled), as the basis for denying the request of a XXXXXXXXXX for a signed form T2200, Declaration of Conditions of Employment. The XXXXXXXXXX requested form T2200 for purposes of claiming motor vehicle expenses incurred. IT-266 was dated November 10, 1975 and was cancelled effective September 30, 2012. IT-266 was not updated between 1975 and 2012 to reflect important legislative amendments made during that period.

Specifically, IT-266 did not reflect the change to paragraph 8(1)(h) of the Income Tax Act (“Act”) or the introduction of paragraph 8(1)(h.1) of the Act. These amendments were made in 1994, but effective for 1988 and later years. As a result of these amendments, paragraphs 8(1)(h) and (h.1) refer to the “duties of the office or employment” rather than only to the “duties of employment”.  The comment in paragraph 8 of IT-266 was based on the pre-1994 version of 8(1)(h), and as a result was no longer accurate since it did not reflect the expanded wording of paragraph 8(1)(h) or the introduction of paragraph 8(1)(h.1).

Paragraph 8(1)(h.1) of the Act allows an officer or employee to deduct motor vehicle expenses if all of the following conditions are met:

1. The officer or employee was normally required to work away from their employer's place of business or in different places.

2. Under their contract of employment, the officer or employee was required to pay their own motor vehicle expenses. An officer or employee is not considered to have been required to pay their own motor vehicle expenses if their employer reimburses them or they refuse a reimbursement or reasonable allowance from their employer.

3. The officer or employee did not receive an allowance for motor vehicle expenses that was excluded from their income because of paragraph 6(1)(b) of the Act. Generally, an allowance is excluded from income under subparagraph 6(1)(b)(vii.1) of the Act when it is based solely on a reasonable per-kilometer rate.

4. The officer or employee keeps with their records a copy of form T2200 which has been completed and signed by their employer.

Whether an XXXXXXXXXX satisfies the above conditions is a question of fact and each situation must be considered on a case-by-case basis.

If the allowance received by an XXXXXXXXXX for motor vehicle expenses is excluded from the XXXXXXXXXX’s income by subsection 81(2) of the Act, the XXXXXXXXXX cannot claim motor vehicle expenses because he or she will not be considered to have been required to pay his or her own motor vehicle expenses (i.e., condition 2 not met).

Please note that the CRA has an administrative practice that allows a taxpayer to deduct motor vehicle expenses incurred while carrying out the duties of the office or employment where the taxpayer voluntarily includes in income the motor vehicle allowance that would otherwise be excluded from income under paragraph 6(1)(b). This administrative practice does not extend to allowances excluded by subsection 81(2) of the Act.

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CRA’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure, including information that could reveal the identity of the taxpayer.

We trust these comments will be helpful.

Ms. Nerill Thomas-Wilkinson
Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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