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Do members of an advisory board hold an “office” for purposes of Canadian tax law?

On April 26, 2012, Justice J.E. Hershfield of the Tax Court of Canada heard arguments in Nuclear Waste Management Organization v. The Queen in respect of a reassessment under the Canada Pension Plan (the “Plan”).  In written reasons released on June 18, 2012, Justice Hershfield found in favour of the Crown and upheld the assessment under the Plan.

The facts of the matter were not in dispute.  The issue was entirely a matter of statutory interpretation, that being whether individuals appointed to the Advisory Board of the taxpayer were appointed to an “office” within the meaning of subsection 2(1) of the Plan.  If so, the members of the Advisory Council were engaged in pensionable employment as per section 6 of the Plan.  The Advisory Council was appointed in accordance with the Nuclear Fuel Waste Act and was composed of representatives of various interested parties.  The Advisory Council had no decision-making power over the taxpayer and could only make non-binding recommendations.

The taxpayer took the position that because the Advisory Board’s remuneration was paid in part on a per diem basis, and because the number of meetings was not fixed from year to year, the remuneration was neither fixed nor ascertainable, such that it was not contemplated in the definition of “office” contained in the Plan.  Unfortunately for the taxpayer, two recent decisions (M.N.R. v. The Queen in Right of Ontario and M.N.R. v. Real Estate Council of Alberta) unequivocally confirm that compensation that is paid on a per diem basis is “ascertainable”.

The taxpayer’s second ground for appeal was that the definition of “office” should not be read to include volunteers, because it is not contained in the enumerated positions listed.  The definition contained in the Plan reads as follows:

“office” means the position of an individual entitling him to a fixed or ascertainable stipend or remuneration and includes a judicial office, the office of a minister of the Crown, the office of a lieutenant governor, the office of a member of the Senate or House of Commons, a member of a legislative assembly or a member of a legislative or executive council and any other office the incumbent of which is elected by popular vote or is elected or appointed in a representative capacity, and also includes the position of a corporation director, and “officer” means a person holding such an office;

Justice Hershfield noted that the definition contains an exhaustive definition (“means”) and a non-exhaustive definition (“includes”).  After observing that the exhaustive definition clearly captured the members of the Advisory Board, he turned his attention to the effect of the second half of the definition.  Presuming that the definition is not redundant, it could be interpreted to carve out certain members of the public service, who are then brought back into the definition (or not) by specific enumeration.  As the volunteers of the Advisory Board are not enumerated, the taxpayer argued that they were not included in the definition.

This reasoning was not persuasive to Justice Hershfield, who preferred to interpret the enumerated examples as being added for greater certainty to include those individuals who attain their position of office in a unique or unusual fashion.  The additional fact that all of the enumerated offices are examples of positions with real authority (and not merely advisory) was not sufficient to convince Justice Hershfield that an advisory role would be excluded.

It is too early to tell whether this decision will be appealed.  It should be noted that the definition of “office” contained in section 248 of the Income Tax Act is identical to the definition contained in the Plan.  The same definition is also incorporated in paragraph 5(4)(g) of the Employment Insurance Act and its regulations.  It seems safe to assume that Justice Hershfield’s analysis would be equally applicable to a question under either of those statutes.

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Do members of an advisory board hold an “office” for purposes of Canadian tax law?