9 July 2002 Ministerial Correspondence 2002-0142774 - EDUCATION 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: Educational Funding - Indian

Position: General Comments

Reasons: General Comments

July 9, 2002

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Elinor Caplan, Minister of National Revenue, has asked me to reply to your letter addressed to the office of the Honourable Robert D. Nault, Minister of Indian Affairs and Northern Development, concerning the taxation of post-secondary education funding. Mr. Nault's office forwarded a copy of your letter to Minister Caplan on May 16, 2002.

Under paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act, an Indian's personal property situated on a reserve is exempted from tax. Paragraph 90(1)(b) of the Indian Act provides that, for the purposes of section 87, personal property that was given to Indians under a treaty or agreement between a band and Her Majesty shall be deemed always to be situated on a reserve.

With respect to section 87 and 90 of the Indian Act, the long-standing position of the Canada Customs and Revenue Agency (CCRA) regarding the tax treatment of educational funding, including training allowances, is based on the reasoning in the case of Deanna Greyeyes v. Her Majesty the Queen. Ms. Greyeyes was a status Indian enrolled as a student at the University of Calgary, who while attending received payments amounting to $2,339.50 from the Department of Indian Affairs and Northern Development to help her pay for her post-secondary education. At all times she was neither living on nor attending classes on a reserve. Since the education assistance payments were received by Ms. Greyeyes pursuant to an agreement and treaty between her band and Her Majesty, specifically pursuant to an agreement to assist band members in their education in compliance with the obligations of the Federal Government under Treaty No. 6, the court held that the education assistance payments were the personal property of an Indian situated on a reserve and thereby were exempt from taxation.

The CCRA has indicated that the word "agreement" in paragraph 90(1)(b) refers to an agreement similar to a treaty. This view is based on the Supreme Court decision in Mitchell v. Peguis Indian Band, in which the judge ruled that the words "agreement" and "treaty" take their colour from each other. We have concluded that an "agreement" would have to be one that implements a treaty obligation.

If the funding you received was paid pursuant to a treaty or agreement between your band and Her Majesty, the amount would have been exempt from tax under the Act, and Indian and Northern Affairs Canada (INAC) would not have reported a taxable amount as taxable. However, since INAC reported specific amounts in your income, it would appear that the funding was received under some other program and is taxable under the Act.)

The above information reflects the CCRA's long-standing published position regarding the taxation of educational funding received by status Indians. Since the long-standing position has not been changed, consultations with third parties have not been required.

I trust you will find my comments helpful.

							Yours sincerely,

							Bill McCloskey
							Assistant Commissioner
							Policy and Legislation Branch
K. Power
957-8968
2002-014277
June 5, 2002