22 June 2018 Ministerial Correspondence 2018-0759891M4 - Artists grants

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: Taxpayer's comments regarding a CBC article that discusses the tax treatment of amounts received by an artist.

Position: General comments provided. CRA cannot comment on a specific taxpayer's file without consent.

June 22, 2018

XXXXXXXXXX

Dear XXXXXXXXXX:

The office of the Right Honourable Justin Trudeau, Prime Minister of Canada, sent me a copy of your correspondence about how the Canada Revenue Agency (CRA) determines the tax treatment of grants received by an artist. Thank you for your understanding regarding the delay of this response.

The confidentiality provisions of the Income Tax Act prevent me from discussing information from a specific taxpayer’s file without his or her written authorization.

Under the Act, a grant or other assistance received by an artist may be considered as income from: a business, employment, a scholarship or grant, or other amounts. To determine the income tax implications related to a grant or other assistance an artist received, the CRA must review all the relevant facts and circumstances of the artist.

A business must exist in a tax year for an artist or any other individual to deduct business expenses for that year. Generally, a business is an activity that an individual intends to carry on for a profit and it has evidence to support that intention. To determine if a business exists, the CRA checks if the activity is carried out with the intention of earning business income, in a commercial way, or as a personal endeavor.

The CRA uses a number of factors to help determine if an artist is engaged in a business, such as:

• representation by a dealer or agent;
• qualifications through education and public recognition; and
• revenue from sales, commissions, royalties, fees and grants.

No particular criteria, such as receipt of a grant, is more important than another, and all relevant criteria are considered together, along with all the other information the artist provides.

An artist who receives a grant for the production of a literary, dramatic, musical or artistic work that is not considered business income can also claim expenses if they are incurred as a result of the artist’s work. However, there are specific rules limiting which expenses the artist can claim.

I appreciate your suggestions to exempt from tax certain levels of income for artists and the potential for income averaging. However, your suggestions relate to tax policy, and changing tax policy requires changes to the Act. The CRA administers and enforces the Act, while the Department of Finance Canada is responsible for tax policy and changes to the provisions of the Act. I am therefore sending a copy of our correspondence to the Honourable Bill Morneau, Minister of Finance, for his consideration.

I appreciate the opportunity to respond to your concerns and trust the information I have provided is helpful.

Sincerely,

The Honourable Diane Lebouthillier
Minister of National Revenue

c.c.: The Honourable Bill Morneau‚ P.C.‚ M.P.

Minister of Finance

Bill.Morneau@canada.ca

Eric Wirag
(519) 978-3451
2018-075989