29 December 2023 Internal T.I. 2023-0998801I7 - Payments to Low-Income Seniors Benefit recipients

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: Whether a non-legislated "affordability supplement" payment for each of the 2023 and 2024 benefit years, to be made in 2024 to recipients of the New Brunswick Low-Income Seniors Benefit, would be included in the recipients' income.

Position: Likely not.

Reasons: Although the affordability supplement appears to be a social assistance payment contemplated in paragraph 56(1)(u), it would meet one of the reporting exceptions in paragraphs 233(2)(f) or (g) of the Income Tax Regulations. When this is the case, it is the practice of the Canada Revenue Agency not to require the excluded amount(s) to be included in the recipient’s income.

									December 29, 2023

Legislative Policy Directorate 				HEADQUARTERS
Provincial Legislative Affairs Section			Income Tax Rulings Directorate
									Randa El-Kadi

Attention:  Cornelis Rystenbil				2023-099880

Re: Government of New Brunswick Low Income Seniors’ Affordability Supplement

This is in reply to your email of November 21, 2023 requesting our guidance on the tax treatment of an affordability payment that the Government of New Brunswick (GNB) intends to provide to recipients of the Low-Income Seniors’ Benefit (LISB).

It is our understanding that the existing LISB is a refund of a deemed overpayment of tax under section 52 of the New Brunswick Income Tax Act, which provides $400 annually to eligible seniors. It is also our understanding that the amount of the LISB has remained unchanged since 2010, and that the GNB intends to amend the act to permanently increase the LISB to $600 and to allow for the amount to be indexed annually starting with 2025. However, due to timing considerations, it is expected that the legislative amendment will not come into effect until the 2025 benefit year (April 1, 2025 to March 31, 2026 fiscal year).

In the interim, the GNB will issue a non-legislated $200 Low Income Seniors’ Affordability Supplement (LISAS) for each of the 2023 and 2024 benefit years. The LISAS will be given to individuals who apply for and receive the LISB. As such, $200 will be paid in January 2024 to 2023-LISB recipients, and another $200 between April and December 2024 to 2024-LISB recipients. We are advised that the purpose of the LISAS is to provide financial relief to eligible low-income seniors faced with higher costs of living.

Our comments

Paragraph 56(1)(u) of the federal Income Tax Act (Act) requires that social assistance payments received in the year and made on the basis of a means, needs, or income test are to be included in a taxpayer’s income unless such amounts are required to be included in the taxpayer’s income or the income of the taxpayer’s spouse or common-law partner under a different provision of the Act. Amounts included in a taxpayer’s income under paragraph 56(1)(u) of the Act are offset by a matching deduction under paragraph 110(1)(f) of the Act, so that there are no income tax implications related to this income inclusion other than it may affect certain income-tested benefits.

The first requirement in paragraph 56(1)(u) of the Act is that the amount must be “social assistance”. The term “social assistance” is not defined in the Act but generally means aid provided by governments or government agencies, although it can also be provided by other organizations (such as a charity), on the basis of need. In the present case, it is our view that the LISAS, as a non-legislated payment, is fundamentally different from the LISB in that it cannot be considered as a top up to the LISB or be treated for tax purposes in the same manner as the LISB (that is, as a refundable tax credit that is excluded from income). Being provided as a measure of financial relief, the LISAS would likely fall within the general meaning of social assistance.

The second requirement in paragraph 56(1)(u) of the Act is that the payment must be “made on the basis of a means, needs or income test.” We consider each one of these tests to be a financial test and they are described as:

1. An “income” test, which is a test based solely on the income of the applicant.

2. A “means” test, which is similar to an income test, but also takes into account the assets of the applicant.

3. A “needs” test takes into account the income, assets and financial needs of the applicant.

The information provided indicates that the purpose of the LISAS is to provide financial relief to eligible low-income seniors. In other words, eligibility for the LISAS includes an income test. Therefore, the LISAS would likely be considered a social assistance payment that is made on the basis of a means, needs or income test, as contemplated by paragraph 56(1)(u) of the Act.

Subsection 233(1) of the Income Tax Regulations requires payers of a social assistance payment that is described in paragraph 56(1)(u) of the Act to report the payment on Form T5007, Statement of Benefits, unless the payment is specifically excluded from this reporting requirement.

Subsection 233(2) of the Regulations excludes from the reporting requirement, among other things, a payment that is not part of a series of payments. It also excludes a payment made in a particular year as a part of a series of payments, the total of which in the particular year does not exceed $500. For the purpose of this Regulation, we generally consider a series of payments to mean a number of similar payments made in a particular year to an individual under the same program of a government or other organization. It is the Canada Revenue Agency’s policy that where a T5007 is not required to be issued to the recipient of the social assistance payment, the payment is not required to be reported on the recipient’s income tax and benefit return. As a result income-tested benefits are not impacted.

In the present case, it is our view that the GNB will not be required to file a T5007 for individuals who receive the LISAS in 2024, provided that one of the reporting exceptions in subsection 233(2) will be met, as indicated above. Therefore, there would be no requirement for recipients of the LISAS to include the amount(s) in their income.

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure, including information that could reveal the identity of the taxpayer. The taxpayer may ask for a version that has been severed using the Privacy Act criteria, which does not remove taxpayer identity. You can request this by e-mailing us at: ITRACCESSG@cra-arc.gc.ca. A copy will be sent to you for delivery to the taxpayer.

Yours truly,

Eric Wirag, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch