|January 7, 2000||Volume 7, Number 8|
University reaches parking deal with federal tax agency
After two years of wrangling, and threats of a Revenue Canada tax ruling that could have ordered U of S employees to pay up to $500 in back-taxes for their parking stalls, the University and the federal tax agency have reached a deal on parking stall values for tax purposes.
Dec. 23 the U of S and the tax agency signed an agreement that will see the University pay $240,000 for the taxable benefit assessed on its 1,700 employees with parking stalls for 1997 and 1998.
Laura Kennedy, the Universitys Associate Vice-President, Financial Services, says that payment is based on an agreed-upon value of $21.66 per month. (That is for a 1600-watt electrified parking stall. The value is $20.75 for an 800-watt stall, $20.33 for a 400-watt stall, and $17 for a non-electrified stall.)
Kennedy says the agreement also assesses the same values for the parking stalls for 1999. University employees have already been docked taxes from their September, October and November paycheques to cover much of their parking-benefit tax owed for 1999, based on an estimated monthly stall value of $47. The rate assessed on their December paycheques will now be much lower, so they will end up paying overall tax on the 1999 parking benefit based on the newly agreed $21.66 value.
Kennedy says the agreement with the renamed Canada Customs and Revenue Agency (CCRA) which was Revenue Canada until Nov. 1 also provides that the values for parking stalls for the years 2000 and 2001 will be set by an independent appraisal. Until that is done, the taxable benefit value will be considered the $21.66 rate structure.
The U of S kept in contact with its employee unions during negotiations with CCRA, and Kennedy says "the majority of those groups are very supportive of the course of action chosen payment of the retroactive cost by the University and determination of the taxable benefit rate going forward via the independent appraisal process."
The Universitys Board of Governors helped pave the way for the agreement with the tax agency when it voted at its Oct. 26 meeting to agree to pay the $240,000 in employees back-taxes.
If an agreement hadnt been reached by Dec. 23, 1999, employees were faced with the threat that the federal tax agency would impose a $47 per month value on parking stalls and charge them tax on the taxable benefit for 1997, 98 and 99. The tax cost of the $47-per-month value could have been in the neighborhood of $15 per month, or $540 for three years. On top of that, the U of S would have faced GST, interest and penalty charges.
A U of S appeal of the CCRAs reassessment could have taken a lot of time, and the University wanted to avoid prolonged uncertainty for itself and its employees. With the agreement, employees are saved significant retroactive income tax and interest but if any employee disagrees with the value placed on the taxable benefit for 1999 or beyond, he or she retains the right to appeal under the Income Tax Act.
In return for paying employees 1997 and 98 parking-related taxes, the Board stipulates that the costs will come out of the Universitys parking operation, and also that there will be more flexible parking policies. Parking arrangements currently fall under the scope of the Universitys collective agreement with the Faculty Association.
Kennedy says a number of issues around parking also surfaced as discussions proceeded on this matter between University administrators and its unions. Alternatives, such as scramble parking may be looked at.
The U of S may in the future raise its parking fee from the current $8 per month to the full amount of whatever value the independent appraisal sets for parking stalls but any such arrangements with the Faculty Association will need to be negotiated.
Additional money raised would enable the University to improve parking conditions on campus.
The federal tax agency said it became interested in reviewing the Universitys parking rates and tax implications because it felt the $8 per month the U of S charges employees for an electrified stall isnt reasonable and doesnt reflect fair market value.
Other Canadian universities tend to charge more for parking with annual rates of $182.85 at Guelph, $195 at Lethbridge, $204 at Western Ontario, $225.66 at Regina, $234 at McMaster, $286 at Waterloo, $289.80 at Queens, 345 at York, $660 at Toronto, and $855 at Ottawa.
After reviewing the situation, Revenue Canada stated earlier this year it believed U of S electrified parking stalls had a fair market value of $66 per month, and it intended to assess taxes on the portion of that "taxable benefit" employees received above the $8 per month they had paid, retroactive to January 1997.
Later, after protests from U of S administration and employees, Revenue Canada revised its market value figure to $47 per month, and it dropped its inclusion of 1996 in the reassessment.
The U of S continued to engage Revenue Canada officials on the matter, arguing first that fair market value shouldnt be the basis for parking rates at the University and second, if fair market value is used, it should be much lower than $47 per month.
In a July 20 memo to employees, U of S Vice-President for Finance and Resources Tony Whitworth said an extensive appraisal the University received from Suncorp Valuations Ltd. estimated a market rental rate of $20 per month for faculty and staff parking.
In that memo Whitworth also advised employees they could appeal their retroactive taxable benefit assessments individually with Revenue Canada.
At the same time, he said, the University would have to comply with an order from the federal tax agency that it begin deducting tax from employees for the 1999 parking benefit, based on the monthly $47 rate.
In recent months some U of S employees mounted a letter-writing campaign to members of Parliament, to put pressure on the federal tax agency.
One form letter sent by many support staff states in part: "...This will be a great hardship for me and on my other co-workers. People take their vehicles to work out of necessity, to earn a living and to support their families. Many employees on campus must pick up their children from day care and schools and must have a vehicle at their job site in order to do this. To suggest that we should now have to pay taxes for this is ridiculous."
Battlefords-Lloydminster MP Gerry Ritz wrote to National Revenue Minister Martin Cauchon Sept. 9 stating: "It is these sorts of rulings that cause Canadians to lose faith in the operation of government in general and the tax system in particular. There are so many things wrong with this case that it is difficult to know where to begin!
"...Your department has decided that the price isnt high enough, and arbitrarily decided the tax will be charged based on the going rate at another, commercial location. Since when does the government artificially equalize the price of a good or service in order to charge higher taxes? This smacks of market intervention on the level of the worlds worst dictatorships!"
For further information, visit the web site or contact email@example.com
Next issue of