[OFFICIAL ENGLISH TRANSLATION]
Date: 20020918
Docket: 2001-3819(IT)I
BETWEEN:
DANIEL MICHAUD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre, J.T.C.C.
[1] This is an appeal
under the informal procedure from an assessment made by the Minister of
National Revenue ("Minister") under the Income Tax Act ("Act")
whereby an amount of $3,114 was added to the appellant's net income for the
1999 taxation year in accordance with subparagraph 56(1)(r)(iii) of
the Act.
[2] That amount of
$3,114 consists of amounts paid to the appellant by the Ministère de l'Emploi
et de la Solidarité sociale du Québec during the period from February to July
1999 under an occupational training program funded by both the Fonds de
formation de l'industrie de la construction du Québec (which is administered by
the Commission de la construction du Québec) and the Fonds de développement du
marché du travail established by Emploi-Québec.
[3] Specifically, the
appellant took a 22‑week "Industrial Automation Technology"
course at the Institut de chimie et pétrochimie of the Collège Maisonneuve in
Montréal during the aforementioned period.
[4] During that
period, the appellant received employment insurance benefits since the course
he took was given under an agreement negotiated between the Government of
Canada and the Government of Quebec to implement "Québec's active employment
measures funded by the Employment Insurance Account" (see Canada-Québec
Labour Market Agreement in Principle, signed April 21, 1997,
Exhibit I‑5, article 1.1).
[5] Furthermore, the
tuition fees payable in order to register for the course taken by the appellant
were paid in full by the Fonds de formation de l'industrie de la construction
du Québec. However, since the appellant was an employment insurance
claimant, he was also eligible for the "Soutien individuel à la
formation" ("SIFO") [Individual Training Support] provided for
in article 13 of the Modalités d'application des mesures actives
d'Emploi‑Québec financées par le Fonds de développement du marché du
travail ("Modalités") (Exhibit I‑6). The
purposes of this measure (SIFO) is to help people acquire the skills needed to
enter or re‑enter the job market through adequate training
(article 13.1, Exhibit I‑6). Since the tuition fees were paid
by the Commission de la construction du Québec and the appellant was entitled
to employment insurance benefits, the financial assistance from Emploi-Québec
was limited to the additional expenses associated with the appellant's
participation in this active measure, which expenses were paid under
articles 13.8 and 4.1 and paragraph 7.3.2.2(a) of Exhibit I‑6.
Those provisions are cited in paragraphs 13 to 15 of these Reasons for
Judgment.
[6] Thus, for
additional expenses, Emploi-Québec paid the appellant an allowance of $135 a
week for a period of 22 weeks, that is, an amount of $2,970, in addition
to an amount of $144 covering transportation expenses between the appellant's
place of residence in Val D'Or and the place where the course was given in
Montréal. The appellant thus received a total amount of $3,114 to cover his
additional expenses associated with his taking an occupational course, in
accordance with the terms of paragraph 7.3.2.2(a) of Exhibit I‑6.
[7] According to the
testimony of Lynn Hastings, an advisor at the Ministère de l'Emploi et de
la Solidarité sociale du Québec, those amounts were paid out of the employment
insurance account, which finances a portion of the costs generated by the Fonds
de développement du marché du travail. Emploi‑Québec issued a T4A slip to
the appellant establishing a taxable amount received in respect of financial
support of $3,114.
[8] The appellant
disputes the taxation of that amount. In his view, the amount of $3,114
constitutes reimbursement for expenses he had to incur in order to take the
course in Montréal. He considers that the sum does not constitute an amount
received in respect of financial support for a program contemplated in
paragraph 56(1)(r) of the Act, but rather that it is
tax-exempt by the application of subparagraph 56(1)(a)(iv) of the Act.
[9] Subparagraph 56(1)(a)(iv)
and paragraph 56(1)(r) read as follows:
ARTICLE
56: Amounts to be included in income for year.
(1) Without
restricting the generality of section 3, there shall be included in
computing the income of a taxpayer for a taxation year,
456(1)(a)3
(a) Pension benefits, unemployment
insurance benefits, etc. – any amount received by the
taxpayer in the year as, on account or in lieu of payment of, or in
satisfaction of,
. . .
(iv) a benefit under the Unemployment Insurance Act, other
than a payment relating to a course or program designed to facilitate the re‑entry
into the labour force of a claimant under that Act, or a benefit under
Part I, VIII or VIII.1 of the Employment Insurance Act,
456(1)(r)3
(r) Financial assistance – amounts received in
the year by the taxpayer as
(i) earnings supplements provided under a project sponsored by a
government or government agency in Canada to encourage individuals to obtain or
keep employment,
(ii) financial assistance under a program established by the Canada
Employment Insurance Commission under Part II of the Employment
Insurance Act, or
(iii) financial assistance under a program that is
(A) established by a government or government agency in Canada or by
an organization,
(B) similar to a program established under Part II of that Act,
and
(C) the subject of an agreement between the government, government
agency or organization and the Canada Employment Insurance Commission because
of section 63 of that Act;
[10] According to
Ms. Hastings's testimony, the Canada‑Québec Labour Market
Agreement in Principle (Exhibit I‑5) was entered into under
section 63, which is included in Part II of the Employment
Insurance Act ("EIA").
[11] Section 63
reads as follows:
The
Commission may, with the approval of the Minister, enter into an agreement with
a government or government agency in Canada or any other public or private
organization to provide for the payment of contributions for all or a portion
of
(a) any
costs of benefits or measures provided by the government, government agency or
organization that are similar to employment benefits or support measures under
this Part and are consistent with the purpose and guidelines of this Part; and
(b) any
administration costs that the government, government agency or organization
incurs in providing the benefits or measures.
[12] The agreement
signed between the Government of Canada, which was represented inter alia
by the Canada Employment Insurance Commission, and the Government of Quebec
(Exhibit I‑5) concerns the transfer of funds from the Employment
Insurance Account to the Government of Quebec to fund Quebec's active
employment measures.
[13] Pursuant to that
agreement (Exhibit I‑5), Emploi-Québec was put in place in 1998 and
the Modalités (Exhibit I‑6) were developed. Those measures
provide inter alia for individual training support, including income
support to which the appellant was entitled under article 13.8 of the Modalités
(Exhibit I‑6), which reads as follows:
[TRANSLATION]
13.8 Income Support
As
part of their participation in the Individual Training Support Measure,
participants shall receive income support determined in accordance with the
policy stated in section 7.
[14] "Individual
Income Support" is defined in article 4.1 of the Modalités
(Exhibit I‑6) as follows:
[TRANSLATION]
4.1 Individual Income Support
Income
support covers living expenses and additional expenses associated with taking
part in an active measure or with taking steps provided for in the Individual
Integration, Training and Employment Plan.
[15] The income support
policy is set out in article 7 of the Modalités (Exhibit I‑6),
which reads in part as follows:
[TRANSLATION]
7. Income
Support Policy
7.1 General
Principles
. . .
As of
April 1, 1998, and until a more elaborate harmonization policy has been
put in place, Emploi-Québec's decisions in granting income support to persons
who take part in active measures shall be based on a set of principles
consistent with the following objectives:
(a) the pursuit of job entry objectives shall be the first consideration
in decision making;
(b) the person who participates in an active measure must be ensured of
receiving assistance enabling him or her to participate in and complete the
measure which he or she undertook when an action plan was established;
(c) assistance granted for living expenses shall be determined on the
basis of the person, and the financial assistance granted for additional
expenses shall cover only costs directly associated with participation in or
carrying out the steps provided for in an Individual Integration, Training and
Employment Plan;
(d) for active employment insurance claimants, financial assistance may
not be less than the amount of their benefits;
(e) the amount of income support awarded to income security claimants may
not be less than the amounts provided for under the income security plan;
(f) the person responsible for deciding on financial assistance granted
shall have the necessary flexibility so that assistance provided is adapted to
the person's needs;
(g) income support granted to a participant should never exceed the
salary paid in the employment involved in the process undertaken.
. . .
7.3 Policy
for Persons Registered for a Measure Starting April 1
7.3.1 Living Expenses
7.3.1.1 Eligibility
Financial
assistance for living expenses is available to employment insurance and income
security claimants. Persons who are unemployed and have no financial support
are not eligible for financial assistance for living expenses, except for
activities in which that assistance is already available.
7.3.1.2 For Persons Participating
in an Employment Preparation Measure
h Consistent with the decision-making framework existing prior to April
1998, employment insurance claimants shall receive individual income support
for their living expenses determined on the basis of the principle that the
person shall be granted the income support necessary to enable him or her to
take training on a full-time basis and thus to promote the success of the
measure.
. . .
h The measures involved are: Employment Preparation Projects, Individual
Training Support, . . .
. . .
7.3.2 Additional Expenses
7.3.2.1 Eligibility
h Assistance for additional expenses is available to employment insurance
and income security claimants and to persons who are unemployed and who have no
financial support, as defined in section 3.
7.3.2.2 General Aspects
(a) Additional expenses include the expenses directly associated with and
necessary for participation in a measure such as child care expenses, education
expenses, transportation expenses, etc.
(b) All additional expenses payable to participants in active measures
are determined and paid by Emploi-Québec.
(c) Emploi-Québec shall implement a harmonized childcare expense
reimbursement policy with the assistance granted by the Ministère de la
Famille;
(d) For persons taking part in a measure granting entitlement to income
support, the reimbursement of additional expenses other than childcare expenses
shall be determined in accordance with needs established as part of the management
of the Plans.
[16] The appellant was
entitled to payment of additional expenses of $3,114 under these individual
training support measures, as provided for in paragraph 7.3.2.2(a) of the Modalités.
It is clear in my mind that the amounts paid are part of the income support as
defined in article 4.1 of the Modalités.
[17] It also seems to
me that the amounts received by the appellant meet each of the requirements set
out in subparagraph 56(1)(r)(iii) of the Act. They are
amounts received as financial assistance under a program that is
(1) established by a government (Quebec); (2) is similar to a program
established under Part II of the EIA (to maintain a sustainable
employment insurance system through the establishment of, among other things,
employment benefits and support measures for participants, as stated in
sections 56 and 57 of the EIA); and (3) is the subject of an
agreement between the government (Quebec) and the Canada Employment Insurance
Commission (Exhibit I‑5) because of section 63 (Part II)
of the EIA.
[18] Although the
appellant contends that, in his view, the amount was a reimbursement for
expenses incurred to enable him to take an occupational training course, those
expenses were reimbursed under active measures adopted by Emploi-Québec and
funded by the Employment Insurance Act. Furthermore, they are specifically
included in the definition of "Individual Income Support" in
article 4.1 of the Modalités (Exhibit I‑6).
[19] In view of the
specific terms used in paragraph 56(1)(r) of the Act, the
amounts received are taxable in my view. Furthermore, I note that the appellant
received $135 a week to cover his additional expenses other than transportation
expenses. However, he submitted no supporting documentation except for the rent
expense of $100 a week (Exhibit I‑4). The appellant testified that
the difference corresponded to an additional amount that Emploi-Québec had
granted him for surplus expenses, which he purportedly had to incur during the
period in issue. No supporting documentation was filed to establish that
surplus. Ms. Hastings testified that it is not Emploi-Québec's policy to
pay additional amounts without supporting documents. Furthermore, a letter sent
to the appellant by an Emploi-Québec officer on March 12, 1999, (Exhibit A‑4)
states:
[TRANSLATION]
March 12, 1999
Mr. Daniel Michaud
414 Rachel Est
MONTRÉAL, Quebec
H2J 2G7
Subject : Living Expenses
Dear Sir,
In
response to your request, we are providing you with additional information on
living expenses.
You
are currently taking part in an individual training service and have been
granted amounts of additional assistance.
You
will continue to receive your employment insurance benefits during your
training. In addition, our service (Emploi-Québec) is paying you a gross amount
of $135 a week, $100 net, for living expenses. That amount is considered as
covering normal expenses for the person's welfare, such as food, housing and
other expenses. You are also granted $72 at the start and end of training to
cover transportation expenses.
These
amounts are not training allowances but in fact amounts to cover living
expenses.
I hope the above is to your satisfaction.
Sincerely,
René Jacob
Employment
Assistance Officer
[20] It seems clear to
me from reading this letter that the appellant received a net amount of $100 a
week to cover additional expenses. It therefore appears that the tax-payable
component was included in the $135 amount paid per week.
[21] The appellant
also contended that the federal budget of December 10, 2001, made it
possible to deduct the taxable amounts under subparagraphs 56(1)(r)(ii)
and (iii) for the 1997 and subsequent taxation years under
paragraph 110(1)(g) of the Act, as amended. I note that the
deduction applies solely where the financial assistance received is financial
assistance for the payment of tuition fees and does not apply to the other
types of assistance that the student may receive in the context of his or her
training (see Explanatory Notes following paragraph 110(1)(g), as
amended by the budget of December 10, 2001, Exhibit A‑7). The
amounts received in dispute in this case did not cover tuition fees, which were
nevertheless paid by the Fonds de formation de l'industrie de la construction
du Québec (see Exhibit A‑1). Nor did the evidence show that the
appellant had included the amount of those tuition fees in his income for the
1999 taxation year, which is another condition that must be met under the new
paragraph 110(1)(g) in order to be entitled to that deduction.
Lastly, I share the view of the respondent's agent that the appellant may not
claim a tuition credit under section 118.5 of the Act since he paid
nothing in that respect.
[22] Lastly, the
appellant contended that the amounts received should be tax-exempt under subparagraph 56(1)(a)(iv)
of the Act. Since June 30, 1996, only regular employment insurance
benefits (following a job loss) have been taxable under that subparagraph.
However, every sum received as financial assistance under Part II of the EIA
or similar programs is now taxable under paragraph 56(1)(r).
The exemption of payments in respect of a course or program designed to
facilitate a claimant's re-entry into the labour force applies solely to
amounts received under the old Unemployment Insurance Act.
[23] The EIA
came into effect on June 30, 1996, and subparagraphs 56(1)(r)(ii)
and (iii) became effective on July 1 of that year. To the extent that all
conditions are met, paragraph 56(1)(r) takes precedence with
respect to amounts received as financial support under Part II of the EIA,
and this is the case here.
[24] In closing, the
appellant cited paragraph 56(1)(n) of the Act in an attempt
to reduce the taxable amount of the exemption provided for scholarships and
bursaries. That paragraph clearly does not apply in the instant case since the
appellant benefited from active reemployment measures, which are specifically
addressed by paragraph 56(1)(r). Rather, paragraph 56(1)(n)
concerns amounts specifically granted as a scholarship, fellowship or bursary
or a prize for achievement in a field of endeavour ordinarily carried on by the
taxpayer, which is not the case here.
[25] As a result of
the foregoing, the appeal is dismissed.
Signed at Ottawa, Canada, this 18th day
of September 2002.
J.T.C.C.
Translation certified true
on this 19th day of December
2003.
Sophie Debbané, Revisor
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