Tax man doesn't play Monopoly

National Post


Unless you're an avid Monopoly player, it's becoming rare to find a free parking spot.

Even the coveted "free" parking space provided by your employer is now at risk, given the tax man's recent crackdown on employer-provided parking. The Canada Revenue Agency wants to ensure employees are paying their fair share of tax on this non-cash employment benefit.

The CRA's official position is that employer-provided parking is generally considered a taxable benefit to the employee, the amount of which is based on the fair market value (FMV) of the parking, less any payment the employee makes to pay for the space.

If an employer can't determine the FMV of the space, however, no benefit is deemed to arise. This can happen, for example, if a business operates from a shopping centre or industrial park where parking is available to both employees and non-employees, or where an employer provides what's known as "scramble parking," in that there are fewer spaces than there are employees who require parking.

But what is the true FMV of parking in an employer's lot?

That was the question addressed in Tax Court last month in a case involving approximately 100 employees of Branksome Hall, a tony private girls' school in Toronto's Rosedale neighbourhood.

The Branksome employees were reassessed for their 2003 and 2004 taxation years to include $92 per month in their income, which the CRA determined to be the FMV of the free parking provided by the school.

Three expert witnesses, one for the employees and two for the CRA, each gave independent evidence about the fair market rental rate for the parking at the school. Each expert used the "direct comparison" approach in their valuations, which values the benefit by reference to parking costs at other similar lots.

The employees' expert witness compared parking rates at various lots at other schools, hospitals and health-care facilities, and concluded the FMV of a parking space was $40 per month.

One of the CRA's experts used comparables that included other neighbourhood commercial lots, as well as lots at universities and private colleges. The other expert used neighbourhood lots, but discounted the rates by 50% to take into account the school's more remote location. They came up with a FMV of between $75 and $80 monthly.

After analysis, the judge concluded that the appropriate monthly taxable benefit rate should be $75 for 2003 and $77 for 2004.

The judge also concluded that since parking was not available to the employees during holidays and in the summer, the taxable benefit should be based on only nine months' worth of parking.