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.
XXXXXXXXXX
Dear XXXXXXXXXX
RE: The Canada Council
We are writing in reply to your letter of February 17, 1993, wherein you requested our views as to whether or not the Canada Council (the "Council") is required under the Income Tax Act (the "Act") to issue information returns with respect to certain grants and awards given by the Council.
In a letter dated December 17, 1990 (our file number 901807) which was in response to your letter of August 3, 1990, the Department gave an opinion with respect to the taxability and reporting requirements relating to various prizes and awards granted by the Council. A somewhat similar situation has arisen with respect to grants and awards that do not include the grants and awards discussed in the previous correspondence.
Our understanding of the facts relating to the two categories of awards and grants is as follows:
CATEGORY I
There is one program in this category. It is the Public Lending Rights program. Under the program, the Public Lending Rights Commission ("PLRC"), which operates under the administrative aegis of the Council, provides payments to writers for their contribution to publicly funded libraries in Canada. The Government of Canada each year makes funds available to the PLRC for this program. Writers who wish to participate submit an application to the PLRC together with a list of the titles of works which they believe to qualify. A committee established by the PLRC comprised of persons representing national organizations of writers, librarians and publishers, determines which of the submitted works are eligible to participate in the program. The PLRC then obtains catalogues from a sampling of libraries across Canada, and records the number of libraries from this group which lists each of the eligible works. No consideration is given to the number of copies of the works which are available, or to the actual circulation rate of the works. So long as one of the selected libraries lists the eligible work that is considered to be a listing, and the number of listings found across all of the sampled libraries is multiplied by the base amount payable for each listing. The maximum payment possible for any author in 1991 was $4,200, and the average payment was $762. No consideration is given to works which may be found in other libraries which did not form part of the sample.
The payments are given in order to recognize the contribution of authors to the culture of Canada by making available free and unlimited use of their works by Canadian libraries.
The writers are not employees of the Council or of the libraries. The amount of the award is not based on the number of volumes sold, or the circulation of the volume. Indeed works may appear in many libraries and still not be eligible because they do not appear in the catalogues of the libraries selected in that year's sample.
CATEGORY II
There are 22 grants and awards in this category. These grants and awards are generally made to artists in defined genres to assist in the financing of artistic projects which the artist wishes to carry out in the following year. Typical of these are the Arts Grants "A" and Arts Grants "B".
The Arts Grant "A" and Arts Grant "B" are project grants, awarded to enable the artists to carry out a project which has been submitted to the Council and approved by a jury of peers to whom the Council submits the application. In the absence of these grants, the artists would have to fund the projects out of their own business or employment income.
The grants and awards in this category are given to artists who are not related to the Council and who are proposing to carry out a project independently. The projects include the production of a theatrical performance, a work of visual art, a musical performance, or a series of such productions. None of them involve research as such. That is, the awards and grants do not require the artist to undertake any research to prepare reports or works.
Although the awards are determined by a jury, they are not awarded for any particular achievement of the artist, but are rather funding for the costs associated in producing the performance or work proposed by the artist in his or her application.
It is your view that the grants and awards in this category are received by the artists as business income, in exactly the same way as the grants to artists discussed in paragraph 3 of IT Bulletin IT-257. As business income, the recipients are required to include the amount in the computation of their business income.
The Council at present does issue pursuant to Regulation 200 information returns to recipients of the awards, grants and payments in issue. It is your view that under the Act and Regulations, the Council is not required to issue such information returns for recipients in either category and you have requested that we confirm you views in this regard.
OUR COMMENTS
We are unable to confirm your views in this regard. Whether or not the amounts received by a particular individual would be considered to be business income, employment income, a prize, scholarship or research grant as discussed in paragraph 2 of IT-257, would involve a finding of fact in any particular situation. In this regard it would be incumbent upon the recipients of the grants to make such a determination within the guidelines set out in IT-257. Since the Council would not be in a position to predetermine the income tax status of any individual recipient, it is our opinion that the Council is required to continue its practice of making information returns under Regulation 200 in respect of these grants.
PRESCRIBED PRIZES
The second paragraph of your letter states, in part, that; "The grants and awards in issue ... do not include the grants and awards subject to our previous correspondence". As a result of our review of your current letter in conjunction with the awards and prizes discussed previously, we have undertaken a review of the grants discussed in our letter of December 17, 1990. The following paragraphs will illustrate our concerns.
With respect to Category II grants and particularly Arts Grants "B", it our understanding that Artists make formal application to the Council for funding of their projects. Of the successful Arts Grants "B" applicants, a certain number are nominated for various awards and prizes made from bequests made to and administered by, the Council. These awards and prizes are made by a jury of the artists' peers within the particular artistic discipline. The awards and prizes when paid from a particular bequest, replace the Council grant that would otherwise be payable to the successful Arts Grants "B" applicants. The recipients of these awards and prizes are required to carry out their projects in accordance with the terms set out in their Arts Grants "B" applications.
We would assume that Arts Grants "A" are managed in a similar manner.
In view of the description of the grants referred to in Category II above, we have reviewed the status of the awards and prizes considered in the context of our letter of December 17, 1990. In this regard, we noted that a number of the awards and prizes are Category II grants that would not be prescribed prizes. They are The Jacqueline Lemieux Prize, The Duke and Duchess of York Prize in Photography, The Joseph S. Stauffer Prizes, the Sylva Gelber Foundation Awards, all Arts Grants "B", and perhaps The Victor Martyn Lynch-Staunton Awards which is an Arts Grant "A".
In addition to the above, we noted that: the Virginia P. Moore Prize and the Petro-Canada Award for Media Arts were also selected from Council grant recipients; the Sir Ernest MacMillan Memorial Prize in Choral Conducting and the Jean-Marie Beaudet Award recipients were selected from the competitors for Arts Awards grants in choral and orchestral conducting; and, the Jules Leger Prize (which is administered on behalf of the Council by the Canada Music Council) is awarded to individuals who apply to the Canada Music Council for consideration.
In order to clarify the status of Arts Grants "A" as well as those other grants that do not appear be either Arts Grants "A or "B", it would be appreciated if you could provide us with the following information and explanations.
1. With respect to the methodology of selecting successful Arts Grants "B" applicants for the jury awarded prizes would you please confirm that this methodology applies equally to successful Arts Grants "A" applicants. If our understanding is incorrect, would you please elaborate and correct any misunderstanding we may have. It would helpful if you could provide us with a copy of an Arts Grants "A" application.
2. Although the Virginia P. Moore Prize, the Petro-Canada Award, the Sir Ernest MacMillan Memorial Prize, the Jean-Marie Beaudet Award and the Jules Leger Prize (the "Other Awards") do not appear to be included in Category II grants, we noted that both the Moore Prize and the Petro-Canada award winner are selected by committee or jury from candidates who have received Council grants. The MacMillan prize and the Beaudet award are made to candidates who are competitors for Arts Grants awards; the Leger prize is awarded to persons who make application to the Music Council, an agency that administers this award on behalf of the Council. Would the methodology in selecting successful Arts Grants "B" award recipients, apply equally to these Other Awards winners. If not, would you please elaborate and explain any difference in methodology. In this regard, copies of application forms, if applicable, along with any other relevant documentation and explanations that will illustrate the various selection processes would be helpful.
Depending on the information provided in response to these questions, it is conceivable that the Arts Grants "A" and the Other Awards discussed above, may no longer be considered to be prescribed prizes.
In conclusion, it is our opinion that the Arts Grants "B" awards as discussed above, do not qualify as prescribed prizes as defined in Regulation 7700 and that our previous opinion in this regard was in error. Any change in status of any of the awards discussed in our December 17, 1990 letter will take effect for the 1993 and subsequent taxation years.
We would appreciate receiving your comments with respect to the foregoing at your earliest convenience.
Yours truly,
B.W. Dath Director Business and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. Client Assistance Directorate Returns Processing Division Technical Publications Division
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