6 March 2001 External T.I. 2001-0070025 - FOREST RENEWAL BC

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Treatment of payments under Forest Renewal BC program.

Position: Business income or bursaries.

Reasons: Section 9 and 56(1)(n)

		2001-007002
XXXXXXXXXX 	B.G. Dodd
		957-8953
March 6, 2001

Dear XXXXXXXXXX:

Mr. W. McCloskey, Assistant Commissioner, Policy and Legislation Branch, has asked us to reply to your letter dated February 4, 2001 concerning the issue of the income tax treatment of amounts received under the Forest Renewal British Columbia ("FRBC") program.

As you are aware, the general conclusions reached by the Canada Customs and Revenue Agency ("CCRA") with respect to income support payments and training grants made under the FRBC program were that such amounts were taxable either as business income under section 9 of the Income Tax Act ("Act") or as bursaries under paragraph 56(1)(n) of the Act and that the amounts were not social assistance payments (which are included in income under paragraph 56(1)(u) but then deductible under paragraph 110(1)(f) of the Act). As we understand it, you are concerned with the CCRA's position because it appears to be predicated upon the notion that the payment of social assistance is not dependent on the individual pursuing any particular activity, a notion with which you disagree, based on your review of guidelines from your local social assistance office. You indicate that the particular reference to social assistance not being dependent on the individual pursuing any particular activity was included in a brief explanation from the CCRA in response to related notices of objection.

We acknowledge that observations along those lines have been made in the course of our prior deliberations on this matter and may be the source of the comments to which you refer. However, such a description of social assistance was not in itself a determining factor in our review but was cited more as a matter of contrast with respect to bursaries, i.e., bursaries, by definition, are paid in connection with the pursuit of education, whereas the payment of social assistance has not typically been dependent on the recipient pursuing any particular type of activity. (It is recognized, however, that this is an area in which social assistance programs are evolving.) Rather, our determination was made following a careful review of all relevant factors, some of the more significant of which were the features of the FRBC program itself and the fact that paragraph 56(1)(u) of the Act refers specifically to a social assistance payment made on the basis of a means, needs, or income test.

In the case of the FRBC program, to be eligible, an individual needs only to have worked 20 weeks in the forest industry, have earned 65% of his earned income in this industry and have two years minimum attachment to the industry and finally be unemployed due to closure or lay-off. The amount of monetary assistance to be provided to a participant under this program is determined by the participant's job plan, as approved by the program director, and is not an entitlement. The payments under the FRBC program are thus not made on the basis of a means, needs or income test, and as such, do not fall within paragraph 56(1)(u) of the Act.

On the other hand, it is our view that the term "bursary" is broad enough to encompass almost any form of financial assistance paid to a student to enable the student to pursue his or her education. Moreover, where it might, for example, be said that a particular payment may have the quality of both social assistance and a bursary if it is paid to a student in financial need as part of a government's social safety net, if the primary purpose is to provide financial assistance to students in need in order to further their education, then the amounts paid will be considered bursaries and will be included in income pursuant to paragraph 56(1)(n) of the Act. (We also note the concluding words of paragraph 56(1)(u) which expressly provide that where an amount might otherwise be included under that paragraph, it will not be so included if it is to be included in income under some other provision of the Act.)

We hope this will be of assistance.

Yours truly,

Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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