19 April 2002 External T.I. 2002-0128015 - SOCIAL 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.

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: Whether payments made by "Persons with Developmental Disabilities Regional Board" (PDD") of Alberta will be disqualified from the exemption in paragraph 81(1)(h) of the Income Tax Act if: (i) the criteria for qualifying for PDD payments do not include an explicit economic test or (ii) amounts are received by the individual under the Assured Income for Severely Handicapped ("AISH") program in Alberta.

Position: Questions of fact. However, based on the information provided, the PDD payments likely qualify for the paragraph 81(1)(h) exemption.

Reasons: (i) It appears that eligibility for PDD payments includes an income test.

(ii) Based on the test used to determine eligibility for AISH, i.e., whether an individual is unemployable, we are of the view that AISH payments would not be considered similar to a family allowance payment under the former Family Allowance Act.

XXXXXXXXXX 2002-012801
J. Gibbons, CGA
Attention: XXXXXXXXXX

April 19, 2002

Dear XXXXXXXXXX:

We are replying to your letter dated February 25, 2002, in which you requested further clarification about the income tax treatment of amounts received by caregivers from the Government of Alberta, Persons with Developmental Disabilities Regional Board ("PDD"). Our comments are of a general nature only since we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4.

In our first letter, we stated that paragraph 81(1)(h) of the Income Tax Act (the "Act") exempts from taxation certain social assistance payments received by an individual if all of the conditions set out in that paragraph are met. You seek clarification concerning the conditions that : (i) the payments must be ordinarily made on the basis of a means, needs or income test, and (ii) no family allowance under the Family Allowances Act or any similar allowance provided for by the provincial law can be payable in respect of the cared-for individual for the period for which the social assistance payments are made.

Means, needs or income test

In regard to the requirement that payments be ordinarily made on the basis of a means, needs, or income test, you indicated that the eligibility for individual funding under the PDD program is based on an intellectual and cognitive assessment. As far as you know, it is not based on an economic need as such. However, since the individual is deemed to have an intellectual disability, it is normally assumed that they are not able to compete in the workforce with people who do not have an intellectual disability. You have never applied for individual funding for someone who has any reserve money from any source, so you do not know if that is considered in the granting of funding.

Our Views

In early 1994, the Social Policy Branch of Human Resources Development Canada ("HRDC") prepared an unpublished manuscript titled "Social Assistance in Canada, 1994." It was prepared in the context of a study of social assistance in the 24 member countries of the Organization for Economic Cooperation and Development (OECD). The Notes to this report describe "means, needs or income test" as follows:

There are three main types of financial eligibility tests used in Canadian financial assistance programs. They are:

• the needs test: takes into account assets, income, and needs, as defined in provincial legislation (i.e., social assistance programs);
• the income test: based solely on the income of each applicant; benefit levels set by legislation, but not based on specific needs (e.g., federal Guaranteed Income Supplement for needy seniors); and
• the means test: same as income tested program, but also includes an asset test.

With regard to the above, we reviewed Alberta's Persons with Developmental Disabilities Community Governance Act. As far as we could determine, the legislation establishes a broad framework for the provision of PDD services, but there is no specific rule concerning eligibility requirements. The website for PDD in Calgary indicates that eligibility for individual funding is based on three requirements: general, income and community residence. In our telephone conversation on April 5 (Gibbons/XXXXXXXXXX), you confirmed that the income requirement meant that individuals who had a source of income would not qualify for PDD benefits. In our view, this would likely constitute an income test. However, if on further analysis you determine that there is no means, needs or income test, and if the payments are not employment or business income of the recipient, it is our view that the payments would be non-taxable since there are no other provisions in the Act which would tax these amounts.

Whether family allowance or any similar allowance considered to be received

You wish to know whether, if amounts are received by an individual under the Assured Income for Severely Handicapped ("AISH") program in Alberta, amounts received under the PDD program will be disqualified from exemption under paragraph 81(1)(h) of the Act. Your concern relates to the requirement under this paragraph that no family allowance under the Family Allowances Act or any similar allowance provided for by provincial law can be payable in respect of the cared-for individual for the period in respect of which the social assistance payments are made. We understand that the AISH program provides a payment of $825 to every adult individual in Alberta who does not qualify for Canada Pension disability or Worker's Compensation and who does not have any other income and who through a rigorous assessment is deemed unemployable. Any payments or income to that individual over $200 per month must be reported and subsequently subtracted from the next month's AISH payment.

Our Views

Based on the test used to determine eligibility for AISH, i.e., whether an individual is unemployable, we are of the view that AISH payments would not be considered similar to a family allowance payment under the former Family Allowance Act.

We trust that these comments will be of assistance.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate