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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: what/whether information returns are required for payments made by Canada Council under the Canadian Composers Program
Position: uncertain
Reasons: depends on nature of payment
2002-012569
XXXXXXXXXX Denise Dalphy, LL.B.
(613) 941-1722
July 4, 2002
Dear XXXXXXXXXX:
Re: Commission of Canadian Composers Program
We are writing in reply to your letter dated February 26, 2002 wherein you enquired whether the Canada Council for the Arts (the "Council") is required to issue information return in respect of payments that it makes under the Commission of Canadian Composers Program (the "CCCP").
Our understanding of the facts is as follows:
1. An artist, group of artists or an organization (the "Commissioner") requests a composer (the "Composer") to compose a piece of music and commits to a premiere performance of the composition, or in the case of an opera or musical theatre work, to its workshop/production development. Commissions for functional music by dance companies and other groups are also eligible.
2. The Composer must be a Canadian citizen or permanent resident of Canada. The Commissioner does not have to be Canadian.
3. A Commissioner (not the Composer) then applies to the Council for funding, and supports the application with material describing, inter alia, the artist and the work to be commissioned.
4. The Council provides amounts up to $10,000 for non-classical music. For classical music, the amount is determined with reference to guidelines published by the Canadian League of Composers, which can lead to payments in excess of $10,000 (as much as $529 per minute for orchestral or chorus works and a negotiated amount in respect of compositions over 20 minutes in duration). For classical opera/musical theatre compositions, up to $20,000 is available for the fees of the Composer and librettist.
5. Once approved, payments are made by the Council to the Commissioner. The Commissioner then pays that amount to the composer. Applications by Commissioners under the CCCP include a declaration that the full amount of any payment by the Council is to be paid to the Composer. In the event of an application to fund part of the cost of a commission, the Commissioner provides assurances to the Council that the shortfall will in fact be paid from other sources.
6. The CCCP contemplates that the Commissioner may acquire the copyright to the composition.
7. You are of the view that neither an agency nor a bare trustee relationship exists between a Commissioner and a Composer.
8. The contracts for the commissioning of a composition are between the Commissioner and the Composer, not the Council. These contracts include a license granted by the Composer to the Commissioner permitting it to be played in public, or alternatively, providing for a transfer and assignment of the copyright in the music to the Commissioner. The Council is not privy to these arrangements.
Written confirmation of the consequences inherent in particular transactions are given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5. Where the particular transactions are partially completed or completed, the enquiry should be addressed to the relevant Tax Services Office. Notwithstanding the foregoing, we are providing the following comments.
Interpretation Bulletin IT-257R ("IT-257R"), Canada Council Grants states:
"2. Depending on the nature of the assistance, the status of the recipient, and the arrangements or circumstances under which the assistance is provided, the amount received may be included in the recipient's income as:
(a) income from business (see 3 below);
(b) income from an office or employment (see 4 below);
(c) a scholarship, fellowship, bursary, prize or research grants (see 7 and 8 below), including a grant for the production of an artistic work (see 5 and 6 below)."
Since we do not have copies of any relevant contracts, we cannot comment on whether an employer-employee relationship exists between either the Council and a Composer or a Commissioner and a Composer, whether either the Council or the Commissioner is paying the Composer fees for services, or whether an agency or trustee relationship exists between a Commissioner and a Composer. However, as described in paragraph 2 of IT-257R, if the income is neither income from business nor income from property, as paragraph 5 of IT-257R provides, paragraph 56(1)(n) of the Income Tax Act (the "Act") will apply to the Composer.
We do not agree that an amount cannot fall within the ambit of paragraph 56(1)(n) of the Act unless it is respect of "polite learning". Our view is supported by new paragraph 56(3)(c) of the Act and former subparagraph 56(1)(n)(ii) of the Act which specifically refer to "a scholarship, fellowship, bursary or prize that is to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work".
Finally, the withholding obligations will, of course, depend on the characterization of the relationship between the Council and the Commissioner, the Commissioner and the Composer, or the Council and the Composer and upon who is the legal payer of such a grant.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.
Yours truly,
Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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