No such thing as free parking

National Post

2007-07-14


Have you earned a "free" parking space at work? Unless you meet certain
exceptions, that space may be considered a taxable benefit.

That was the outcome of a recent case decided by the Tax Court of Canada
involving 16 Telus employees in Edmonton and Calgary. The employees were given
parking passes and each was assessed a taxable benefit equal to the fair market
value of the space, which ranged from $1,500 to $2,800 per year, depending on
where the parking facility was located and whether the employee had a reserved
spot.

Traditionally, the Canada Revenue Agency's position is that employer-provided
parking constitutes a taxable benefit. The amount of the benefit is based on the
fair market value of the parking, less any amount paid to use the space.

When a car is required for business purposes, to visit customers or
suppliers, the CRA is somewhat lenient and will not generally assess a taxable
benefit for parking. The CRA has stated that as long as an employee is required
to use her vehicle on the job three or more days in a five-day work week, she
would meet the definition of "regularly required" and thus no taxable benefit
would arise.

The entitlement to a parking space at Telus, however, is not based on whether
employees need to use their vehicles during the day, but on a "pay band."

Telus has seven pay bands and, with some exceptions, only employees in the
highest pay bands are entitled to parking passes.

The employees argued that having parking at work allowed them to arrive early
or work late and, as a result, it was Telus that gained the benefit of having
them work beyond normal business hours, "thereby becoming the primary recipient
of the advantage derived from the use of those employee parking passes."

The judge had to decide, for each employee, whether Telus reaped the benefits
of free parking or the employee.

The written judgment, spanning some 67 pages, included detailed testimony
from the employees as well as expert evidence from Douglas Connor, a scheduler with more than 30 years experience
with the Edmonton Transit System. Mr. Connor went through, in meticulous detail,
routes and timing of public transportation options that could have been taken by
each of the Edmonton Telus employees in lieu of driving to work.

The judge found that 14 of the 16 employees did enjoy a taxable benefit as a
result of the parking passes issued to them. As for the two employees who won,
the judge found that one of them used his vehicle 70% of the time for business,
while the other never drove to work and thus never enjoyed his free space.

Despite this judgment, it is unlikely we have seen the end of parking-benefit
cases. Each case is fact-specific and the CRA will continue to challenge
taxpayers on the benefits of free parking.

Jamie Golombek, CA, CPA, CFP, CLU,
TEP is vice-president, taxation and estate planning, at AIM Trimark Investments
in Toronto.

Jamie.Golombek@aimtrimark.com