A hotel is not a lodge, court finds

National Post


Being tapped to plan a company retreat is a dubious honour, given the
budgetary restraints of today's corporate world. But you may rest easier knowing
the cost of employees' accommodations at some of Canada's premier conference
destinations will remain fully tax deductible as a result of a Tax Court of
Canada decision last month.

The case involved Hewlett-Packard Canada's predecessor, Digital Equipment,
and the tax deductibility of weekend trips awarded by Digital to its employees.
Under Digital's "Employee Rewards and Recognition Compensation Program," the
company awarded trips each year to employees who achieved specific goals, such
as sales quotas, profitability targets or good results in customer satisfaction

Several trips were organized each year to accommodate employees from various
divisions who received awards. The weekend trips were mainly at Canadian luxury
resorts in country settings. The locations chosen had to be large enough to
accommodate Digital's sizeable employee groups, with adequate banquet
facilities, and included Deerhurst Resort in Ontario, the Chateau Whistler in
British Columbia, the Delta Lodge at Kananaskis, Alberta, and Le Chateau
Montebello in Quebec.

The all-inclusive weekend vacations for employees and their spouses were
fully paid for by Digital and reported as a taxable benefit to employees.
Digital claimed the cost of such trips as an expense on its corporate tax

An overzealous (or perhaps jealous) Canada Revenue Agency, in a seemingly
relentless pursuit to eradicate any private sector employee perquisites not
available to civil servants, disallowed more than $450,000 of expenses for each
of the three tax years under audit. The CRA took the position the hotels used
are "lodges" and, as a result, their cost was not deductible under the Income
Tax Act, which prohibits the deduction of any expense "for the use or
maintenance of property that is a yacht, a camp, a lodge or a golf course."

CRA maintained "the ordinary meaning of 'lodge' includes a broad range of
accommodation, including a hotel. If, however, 'lodge' is limited to describing
hotels in country settings ... it includes the hotels Digital used."

Digital argued not all hotels are lodges within the common meaning of the
word "lodge" since a lodge "generally describes accommodation that is small,
rustic, unsophisticated and seasonal."

Were the hotels and resorts in question actually lodges? Tax Court Justice
Judith Woods first turned to the Web to find an answer: Deerhurst Resort used
the term "lodge" in a map but only to describe the main building; similarly, the
Delta Lodge at Kananaskis uses "mountain resort" to describe its facilities and
refers to one of its buildings as "the Lodge."

The judge then turned to the Canadian Oxford Dictionary, which defines lodge
as: "a hotel or inn, especially in a resort area ... the main building in a
resort or summer camp ... a house occupied in the hunting or fishing season."
Justice Woods found although the dictionary uses "hotel" to describe "lodge,"
she did not think most Canadians would describe large hotels with a range of
modern amenities as "lodges."

"At one end of the spectrum, 'lodge' clearly applies to small rustic
dwellings used for fishing and hunting. It clearly does not apply to large
modern hotels located in cities. It is not necessary that I consider where the
line should be drawn for purposes of [the Income Tax Act]. In my view the common
meaning of 'lodge' does not include large resort hotels of the type that are at
issue in this [case]."

Justice Woods, in allowing HP's appeals, concluded "if Parliament had wanted
to deny a deduction for using these types of hotels, other words would have
better described this intent."