21 January 2005 Ministerial Correspondence 2004-0107521M4 - Status Indian Post-Secondary Assistance

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: What is the current CRA position with respect to the taxation of post-secondary education assistance received by a status Indian?

Position: General comments provided.

Reasons: Based on the federal government's position that post-secondary education assistance paid to status Indians is provided as a matter of social policy and not pursuant to a treaty right. Notwithstanding the pending obligation to report post-secondary education assistance on T4A slips, the CRA has agreed to delay the reporting of this assistance paid to status Indians until 2006.

Signed on January 21, 2005

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable John McCallum, Minister of National Revenue, has asked me to reply to your correspondence of November 18, 2004, regarding the possible taxation of post-secondary education assistance received by First Nation students.

As a general rule, Canadians who receive post-secondary education assistance are required to include the assistance in the calculation of their income, subject to an exemption of up to $3,000. The Income Tax Act provides post-secondary students with a non-refundable tuition tax credit based on their tuition fees paid for the year. The Act also allows them to claim a non-refundable education tax credit based on an amount of $400 for each month that the student is enrolled as a full-time student in a qualifying educational program with a designated educational institution. As a result of the exemption and the non-refundable tax credits, including the basic personal amount, most Canadian students do not have to pay income tax on the post-secondary education assistance.

A status Indian student may not have to include the assistance in income if it is considered an Indian's personal property situated on a reserve. In making this determination, the Indian Act provides that personal property given to Indians or to a band under a treaty or an agreement between a band and Her Majesty is always deemed to be situated on a reserve.

In the 1978 court case Greyeyes v. the Queen, the Canada Revenue Agency (CRA), accepted as one of the facts prior to trial, that the education assistance had been received under a treaty. For many years, the CRA has not required that post-secondary education assistance paid to status Indians be reported on T4A slips, based on the understanding that these amounts were received under a treaty and tax-exempt. However, this acceptance was in error. While treaty right issues are not the CRA's responsibility, it is the federal government's position that post-secondary education assistance is provided as a matter of social policy and not as a treaty right. The pending obligation to report post-secondary education assistance paid to status Indians on T4A slips results from this treaty right issue.

This reporting requirement for assistance paid to status Indians will be delayed until 2006 to allow the federal government to work with the First Nations to ensure that they are informed as to the relevant data to retain concerning the post-secondary education assistance and that they are aware of the manner to report it on the T4A slips. During that time, the CRA will review whether there are appropriate connecting factors that may exist in certain situations for the post-secondary education assistance to be sufficiently connected to a reserve for the amounts to be tax-exempt when received by status Indians.

The CRA recognizes that the education of First Nation students is a high priority for the First Nations and the Government of Canada. The CRA will ensure that post-secondary education assistance of a status Indian that is connected to a reserve will continue to be tax-exempt. If there is no connection to a reserve, the CRA will ensure that students have access to all of the information about their credit entitlements in order to offset or reduce any tax liability. Since most Canadian students have no income tax to pay, the proposed reporting requirement should not create any barriers for First Nation students to complete their education.

I appreciate the opportunity to respond to your concerns on this important issue.

							Yours sincerely,

							Ed Gauthier
							Deputy Assistant Commissioner
							Tax and Regulatory Affairs
							Policy and Planning Branch

c.c.: Minister's Office
Political Assistant

G. Moore
957-8982
2004-010752
December 22, 2004