There’s no such thing as free parking.
Take Toronto-based Catholic high school and elementary teachers, for example, who this week learned that they will soon have to pay for their own parking at school lots. Full-time teachers and administrators will be charged $10 per day to park their vehicles on school property as a result of new fees approved by board trustees at a special budgetary meeting.
But, even if you’re among the lucky workers who still get free parking at your place of employment, it’s often not truly free as the taxman generally considers free parking to be a taxable employment benefit
Over the years, there have been a variety of tax cases in which taxpayers have challenged the taxability of employer-provided parking, many of which are based on the employee arguing that their free parking was primarily of benefit to their employer and thus should not be taxable. The most recent decision, out earlier this week from the Federal Court of Appeal, involved a Calgary-based flight attendant of Jazz Aviation LP.
The taxpayer had been a flight attendant with Jazz for more than 25 years and lived in a residential community in northwest Calgary. It took him about 25 minutes to drive from his home to the Calgary International Airport, which is located in the northeast quadrant of the city. While at the airport, he made use of the free parking pass that Jazz provided to him, which allowed its employees to park at the “Green Lot” at the airport. That lot, which had over 2,500 spaces, never filled completely and was accessible 24 hours a day, seven days a week. Anyone who worked at the airport could obtain a parking pass, regardless of whether an employer paid for it.
The CRA reassessed the taxpayer’s 2011 taxation year to include the fair market value of the annual employee parking pass — $504 — in his income. The taxpayer objected and the dispute went to the Tax Court back in 2017. The CRA argued that the taxpayer’s income must include the value of benefits of “any kind whatever” received or enjoyed “in respect of, in the course of, or by virtue of his employment.” The lower court judge agreed and found the value of the parking pass to be a taxable benefit. The taxpayer then appealed to the Federal Court of Appeal.
The taxpayer’s main argument upon appeal was that, based on prior jurisprudence, where something is provided to an employee primarily for the employer’s benefit, it is not a “benefit” received or enjoyed by the employee within the meaning of the Tax Act. The taxpayer and the CRA, however, disagree on who was the “primary beneficiary” of the parking pass, and on how that should be determined.
The taxpayer argued that there were a number of factors that demonstrate the parking pass primarily benefitted his employer. Firstly, he pointed to the airport’s remote location vis-a-vis his home and his unusual hours of employment. For example, Jazz required him to report for work outside of “ordinary” working hours, starting as early as 5:00 a.m. and ending as late as 1:00 a.m. During these hours, public transit was not available. The taxpayer was also required to work mandatory overtime without advance notice, to report to work on short notice, and to adhere to modified shift schedules. The taxpayer argued that these requirements were “particular to work in the airline industry” and testified that he and other flight attendants were subject to a “three strikes” policy, by which they could potentially be terminated if they were late to work three or more times.
Secondly, the taxpayer cited his employer’s stated belief that providing a parking pass to flight attendants “enhanced their reliability and flexibility.” He claimed that Jazz provided its flight attendants with parking passes because it “(minimized) the risk to Jazz … of suffering losses resulting from late or absent employees.”
The evidence, however, showed that Jazz paid for employee parking passes as required by its collective agreement with the Canadian Flight Attendant Union, and it had done so since 1993. Jazz did not require its flight attendants to own a car or to commute to work by car. Rather, Jazz “(left) it up to flight attendants to decide how they (were) going to be punctual.” In addition, the evidence did not demonstrate that flight attendants who commuted to work by car and parked at the airport were more reliable than those who used other means of transportation. Jazz “received the same level of service from its flight attendants, no matter how they chose to commute to work.”
The CRA maintained the taxpayer’s costs of commuting, including those related to parking, were personal, and the taxpayer benefitted when his employer “relieved him of the cost of parking.” Indeed, when the taxpayer was asked during cross-examination whether he would have paid for parking anyway if Jazz didn’t provide him with a free parking pass, he responded, somewhat elusively, that he would “explore all options available to (him).”
The Federal Court of Appeal agreed with the CRA that parking, like all costs of commuting to work, is ordinarily a personal expense. As the judge wrote, “it remains personal even if an employee must, as a practical matter, pay for parking as a result of the location of his or her work or the impracticability of using public transit. Therefore, save in exceptional circumstances … parking paid for by an employer represents an economic benefit to the employee.”
In the court’s view, the fundamental issue to be decided was whether an employer has conferred something of economic value on an employee, notwithstanding that the receipt of such value “can be mutual, and often is.” While the court agreed with the taxpayer that Jazz indeed had a business purpose in paying for parking, namely incentivizing flight attendants to use a reliable method of transport to get to the airport, and that Jazz did benefit, that doesn’t negate the fact that the taxpayer received some economic value from the provision of the free parking pass. In other words, the taxpayer’s parking costs remained personal, regardless of whether his employer benefitted in subsidizing them and therefore the value of the free parking must be included in the flight attendant’s income as a taxable employment benefit.