21 August 2014 Internal T.I. 2014-0542121I7 - Payments from the province of 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.

Principal Issues: Will payments made by the province of BC to parents affected by a possible teachers strike be taxable to recipients, and will the payments impact the recipients' ability to claim the child care expense deduction?

Position: It is a question of fact, general comments provided

Reasons: It is likely that the payments are not income from a source, and therefore will not be taxable. The payments could impact the child care expense deduction if they are tied to child care expenses.

XXXXXXXXXX
2014-054212
Eric Wirag, CPA, CMA
(613) 957-2090

August 21, 2014

Dear XXXXXXXXXX,

We are replying to your email of August 5, 2014, in which you asked if proposed Temporary Parental Educational Support payments (the "Payments") made by the province of British Columbia (BC) to qualifying parents would be taxable to the recipients. In addition, you have asked if the Payments would impact the recipients' ability to claim child care expenses for purposes of subsection 63(1) of the Income Tax Act (the "Act").

You have stated that the Payment will be provided to parents of children in kindergarten through grade seven in the public school system in the event that a labour dispute with teachers is not resolved. The Payment will be $40 per day per eligible child to help offset the cost of tutoring, child care or supervision. Parents will be required to apply to the BC Government, and a one-time cheque will be issued. You have also stated that eligibility for the Payment will not be based on an income or means test.

Our comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings. Generally, an amount is taxable under the Act if it constitutes income from a source, such as employment, business and property, or if a specific provision of the Act applies to the type of payment. Based on the limited information provided, the Payment to be received by parents does not appear to be income from a source for purposes of the Act, and likely will not be taxable in the hands of the recipients.

Under paragraph 63(1)(d) of the Act, no deduction may be claimed for child care expenses for which any taxpayer is or was entitled to a reimbursement or any other form of assistance unless the reimbursement or assistance is included in a taxpayer's income and is not deductible in computing that taxpayer's taxable income. If the Payments provided are a reimbursement of, or specific assistance for child care expenses, it is likely that paragraph 63(1)(d) would apply and the Payments would reduce the child care expense deduction otherwise available. If the Payments are made based on a child's grade level, with no requirement for a child care expense to be incurred by the recipients, the Payments will likely not be "a reimbursement or any other form of assistance" in respect of child care expenses, and the available child care expense deduction would not be reduced.

We trust our comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch