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 the rental assistance payments received by tenants would be included in their income under paragraph 56(1)(u)?
Position: Likely included in the recipients income under paragraph 56(1)(u) with an offsetting deduction from taxable income, pursuant to paragraph 110(1)(f). The payments most likely need to be reported on Form T5007.
Reasons: The rental assistance payments appear to be a social assistance made on the basis of a means, needs or income test and would be required to be included in the recipients income under paragraph 56(1)(u). Where the rental assistance payments are part of a series of payments throughout the year or exceed a total of $500 for the year; XXXXXXXXXX would be required to issue a T5007 under subsection 233(1) of the Regulations.
XXXXXXXXXX 2024-100631
C. Underhill, CPA, CGA April 18, 2024
Dear XXXXXXXXXX:
Re: Rent supplement payments
We are writing in response to your correspondence received on February 1, 2024, asking whether there are any reporting requirements under the Income Tax Act (the Act) for rent supplement and rent assistance payments paid to individuals through certain funding programs at XXXXXXXXXX. More specifically, you are asking about payments made under the XXXXXXXXXX Program and the XXXXXXXXXX Program.
You advised us that XXXXXXXXXX is a charitable organization that provides supportive housing for individuals and families experiencing homelessness, which helps those who need a supportive independent living environment in order to transition into permanent housing.
You explain that the purpose of the XXXXXXXXXX program is to ensure that all existing program participants are able to receive time-limited rental support in a very competitive rental market. Individual participants will receive a rent supplement of up to $800 per month for one year.
The purpose of the XXXXXXXXXX program is to rapidly rehouse eligible families from the emergency housing program in XXXXXXXXXX that is often at capacity. Rental assistance will vary per household depending on need and household composition with a baseline of $1,000 per month for a family of three up to a maximum of $1,300 for larger families.
You also explain that a participant in either program, must declare all income, and if applicable their spouse’s income, and inform both a XXXXXXXXXX staff member if their income changes while they are a participant under either program. For both of these programs, participants also receive either social assistance or disability benefits in addition to the payments under these programs. The rental assistance amount provided would be calculated taking into account their shelter portion of their social assistance/disability benefits and the approved market rental.
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 70-6R12, Advance Income Tax Rulings and Technical Interpretations.
Paragraph 56(1)(u) of the 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. It would appear that the payments made under the two programs 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 states that the eligibility criteria for each of the two programs would include an income test. Therefore, the assistance under both programs would likely be considered a social assistance payment made on the basis of a means, needs or income test, and would be included in the income of the recipient pursuant to paragraph 56(1)(u) of the Act. As noted above, this amount would be offset by a matching deduction under paragraph 110(1)(f) of the Act.
When an organization concludes that it has made social assistance payments as described in paragraph 56(1)(u) of the Act to an individual, subsection 233(1) of the Income Tax Regulations (the Regulations) requires the organization that provided the social assistance to report the payment on Form T5007, unless the payment is specifically excluded from this reporting requirement.
Subsection 233(2) of the Regulations excludes from the reporting requirement, among other things, payments that are not part of a series of payments, or that are paid in a year as part of a series of payments but total less than $500 for the year. 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.
As the payments under each program appear to be made as a series of payments, XXXXXXXXXX would be required to report the payments on Form T5007 under subsection 233(1) of the Regulations, unless the total of those payments made in the year did not exceed $500.
We trust that these comments will be of assistance to you.
Yours truly,
Eric Wirag, CPA, CMA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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