25 June 2004 External T.I. 2004-0066721E5 - Assistance for Persons with Disabilities

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.

Principal Issues: Taxation of various types of assistance provided to students with disabilities. Deductions available for certain supports provided.

Position: General information provided.

Reasons: General information requested.

XXXXXXXXXX 								T. Young, CA
		2004-006672

June 25, 2004

Dear XXXXXXXXXX:

Re: Assistance for Persons with Disabilities

We are writing in response to your letter of March 2, 2004, concerning the taxation of government assistance in respect of post-secondary training paid to persons with disabilities. We apologize for the delay in providing our response.

You asked for our views on the taxable status of amounts received as Canada Study Grants ("CSGs"), and assistance provided through Part II of the Employment Insurance Act (the "EI Act") and the Opportunities Fund. You also inquired about deductions that may be available for services such as the cost of American Sign Language interpreting services, tutoring, note-taking, and scribing.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is 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, Advance Income Tax Rulings, dated May 17, 2002. However, we are prepared to provide the following general comments, which may be of assistance to you.

CSGs

We understand that the Canada Study Grant Program for Students with Permanent Disabilities is designed to help students overcome educational barriers that they may have due to their permanent disability by providing grants of up to $8,000 per year. In our view, CSGs are included in income pursuant to paragraph 56(1)(n) of the Act. This provision includes in a taxpayer's income the total of all amounts (other than amounts received by virtue of an office or employment) received in the year as or on account of a scholarship, fellowship or bursary. Subsection 56(3) of the Act exempts from a taxpayer's income up to $3,000 of the amounts included under paragraph 56(1)(n). For more information, refer to interpretation bulletin IT-75R4, Scholarships, Fellowships, Bursaries, Prizes, and Research Grants. We also note that the 2004 Federal Budget proposed an additional grant of up to $2,000 per year to assist students with disabilities. In our view, this grant would also be included in a taxpayer's income under paragraph 56(1)(n) of the Act.

Part II of the EI Act

Financial assistance provided through Part II of the EI Act is generally included in income pursuant to paragraph 56(1)(r) of the Act. In situations where the assistance is paid to an employer who then pays the employee, the amount paid must be included in the employee's income under subsection 5(1) of the Act and the employer must include the amount on the employee's T4 slip. In order to make a specific determination, we would have to review the details of the particular program in question.

Opportunities Fund

The Opportunities Fund is a program that assists persons with disabilities who do not have access to relevant services funded under EI benefits, to prepare for, obtain and maintain employment, or to operate a business. Assistance received through the Opportunities Fund may be taxed in a number of ways depending on the nature of assistance provided. For example, assistance in respect of personal education-related costs is generally included in income pursuant to paragraph 56(1)(n) of the Act. Wage subsidies are generally included in income under paragraph 56(1)(r) of the Act when paid directly to the taxpayer or subsection 5(1) of the Act when paid to the taxpayer's employer. Assistance in respect of a business would likely be taxable pursuant to paragraph 12(1)(x) of the Act, or would reduce the cost of a capital asset or expense to which it may relate. In order to make a specific determination, we would have to review the nature of the assistance received.

American Sign Language Interpreting Services and Other Expenses

Taxpayers may be able to claim the Medical Expense Tax Credit in respect of costs incurred for services such as American Sign Language interpreting services, tutoring, note-taking, and scribing, provided all of the requirements of section 118.2 of the Act are met for the particular type of expense. For more information, refer to the Guide RC4064, Information Concerning People with Disabilities. We also note that the 2004 Federal Budget proposed to replace the attendant care deduction with a broader disability supports deduction, which will not only recognize attendant care, but other disability supports expenses incurred for education or employment purposes, for which the taxpayer has not been reimbursed a non-taxable payment (e.g. insurance payment).

The Canada Revenue Agency publications referred to above may be found on our web site at www.cra.gc.ca. Information concerning the 2004 Federal Budget may be found on the Department of Finance web site at www.fin.gc.ca.

Yours truly,

Randy Hewlett, B. Comm.

for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch