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: Are payments made under three different grant streams by the Government of XXXXXXXXXX taxable in the hands of the recipients? The three grant programs are (i) Bridge to re-employment, (ii) Bridge to retirement, and (iii) relocation assistance.
Position: (i) Included in income under subparagraph 56(1)(r)(iv).
(ii) Included in income under subparagraph 56(1)(r)(iv).
(iii) Likely not income from a source that is taxable under the Act.
Reasons: (i) The amount appears to be an income replacement benefit similar to a program established under the EI Act.
(ii) The amount appears to be an income replacement benefit similar to a program established under the EI Act.
(iii) Appears to be for personal expenses related to the cost of relocating due to the closure of a XXXXXXXXXX.
XXXXXXXXXX 2017-073599
Eric Wirag, CPA, CMA
July 11, 2018
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
This is in reply to your email of December 7, 2017 regarding payments made under the Government of XXXXXXXXXX (the Program). Specifically, you have asked whether grant amounts paid through three streams of the Program would be taxable in the hands of a particular recipient.
Based on our understanding, the Program is funded under the XXXXXXXXXX. The Program falls under the authority of the XXXXXXXXXX. The Program’s intent is to provide a relief grant to workers who lost their jobs due to the unusual and extraordinary circumstances of the XXXXXXXXXX and the closing of the affected XXXXXXXXXX or XXXXXXXXXX. Program applicants must have been continuously employed for at least one year prior to the date of layoff from one of the specified closed XXXXXXXXXX or XXXXXXXXXX in XXXXXXXXXX.
You have identified three separate grants that are available to applicants: (i) Bridge to re-employment, (ii) Bridge to retirement, and (iii) Relocation assistance. An applicant is only eligible to receive one of the three grants.
Bridge to re-employment
Bridge to re-employment grants are intended to assist workers in their transition to re-employment, and supplements an individual’s Employment Insurance (EI) benefits. The grant is calculated as the XXXXXXXXXX of the workers weekly earnings while employed at the XXXXXXXXXX or XXXXXXXXXX and the amount of the first EI benefit received. The grant is paid every two weeks and is provided until the earliest of (i) re-employment; (ii) exhaustion of EI benefits or (iii) XXXXXXXXXX weeks.
Once the amount of the grant is determined, it will be a static amount that is not impacted by other sources of income or earnings, unless full-time employment is obtained. The grant is not adjusted, reduced or stopped if the worker works part-time or receives additional earnings and has their EI benefits reduced. A grant recipient needs to inform the XXXXXXXXXX of either permanent full-time employment which would cease the recipient’s grant payments, or temporary full-time employment which would pause their grant for a period of up to XXXXXXXXXX weeks.
Payment of the grant will begin when the EI claim begins. If an EI claim is paused relief grant payments will cease. Should an eligible applicant restart the same EI claim, the relief grant will resume until EI benefits end. The length of the relief grant will follow the duration of the applicant’s EI claim. If separation pay, such as severance, delays the EI benefit period, the relief grant will also be delayed. The grant is not intended to impact any EI benefits received.
Bridge to retirement
Bridge to retirement grants are intended to help workers who are willing to retire by providing financial assistance until they reach pension eligibility and receive their pension income. The relief grant amounts to XXXXXXXXXX% of the workers weekly earnings while employed at a specified XXXXXXXXXX.
The grant is provided until earliest of (i) the start of the individual’s employer pension, or (ii) XXXXXXXXXX. The applicant must be eligible to collect a pension within XXXXXXXXXX of either the lay-off or applying for the grant. Workers who were in a contract position, quit or were fired from their position, or are receiving EI benefits, are ineligible for this particular grant.
The Bridge to retirement grant will be a static amount that is paid every two weeks and is not impacted by other sources of income or earnings up to the amount of the relief grant. If other earnings exceed the amount of the grant, the Bridge to retirement benefit will end. This means that an individual can be employed while receiving this grant. Monthly employment income verification is required by each recipient to ensure employment income does not exceed the value of the grant.
Any severance pay received will delay the beginning of the benefits under this portion of the Program by the duration of the severance payments, and the duration of the grant payments will not be extended.
Relocation Assistance
Relocation assistance grants provide a one-time lump sum payment up to XXXXXXXXXX to reimburse expenses related to a move to a new location. The payment is provided to assist a laid-off worker with the costs associated with relocating their household to new employment. The worker must be relocating for either new full-time employment or for self-employment. The individual must move a minimum of 40km for confirmed full-time or self-employment. Eligible relocation costs include items such as transportation expenses for moving household goods and effects, real estate/legal fees, cost of breaking a tenancy lease, and incidental expense such as utility hook-ups and connections. The grant does not cover house-hunting trip expenses, temporary accommodations, car rentals, or meals while relocating.
Application and payment for relocation occur after a move takes place and confirmation of eligible employment and relocation is received. The applicant must provide receipts to claim expenses for relocation assistance, up to the maximum reimbursement amount. If an applicant receives other funding or assistance related to the move, assistance will not be provided under this Program.
Our comments
This technical interpretation provides general comments about the provisions of the Income Tax Act (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 70-6R7, Advance Income Tax Rulings and Technical Interpretations.
Certain financial assistance provided under a program established by a Canadian government or government agency will be included in a taxpayer's income by virtue of subparagraph 56(1)(r)(iv) of the Act, where the program provides income replacement benefits similar to income replacement benefits provided under a program established under the Employment Insurance Act (EI Act). This could include financial assistance in the form of supplemental, or “top-up” payments, as well as bridging benefits.
In our view, payments under the Bridge to re-employment and Bridge to retirement program will be considered similar payments to payments made under Part II of the EI Act. Furthermore, given that the purpose of subparagraph 56(1)(r)(iv) is to ensure that government assistance paid under these types of programs be taxed in the hands of the recipient, it is our view that payments under the Bridge to re-employment and Bridge to retirement programs are to be included in the recipient's income by virtue of subparagraph 56(1)(r)(iv) of the Act.
Paragraph 200(2)(c) of the Income Tax Regulations requires payments made or benefits conferred on an individual, that are taxable under paragraph 56(1)(r) of the Act, be reported on a T4A.
Based on our understanding that the relocation assistance to be paid under the Program is for personal expenses, it is our view that such assistance is not income from a source that is taxable under the Act. Please note that the recipients will not be entitled to a moving expense deduction for the amounts in respect of which the assistance is received, as per paragraph 62(1)(d) of the Act.
We trust our comments will be of assistance.
Yours truly,
Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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