28 May 1993 Internal T.I. 9311877 F - Status Indian

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.

Calgary District Office Business and General DivisionA. Stubel, Director 

Attention:  Felicia Tjong

Client Assistance Division

Funding Received by Status Indian for Schooling

XXXXXXXXXX

This is in reply to your round trip memorandum concerning a request from the above-noted client for confirmation by the Department of the taxability of funding he received from an Indian Band for post- secondary education. We also acknowledge the telephone conversations (Tjong/Kerr) which further clarified the facts of this situation.

Our understanding of the situation under review is that a client, XXXXXXXXXX, received funding from an Indian Band for his post-secondary education. He was told by the Band that the amount was not taxable. XXXXXXXXXX

The Band receives the money from the Federal Government (Department of Indian and Northern Affairs). To qualify for such funding, a person must be a status Indian attending a post-secondary educational institution. The funding is to cover living expenses and tuition.

XXXXXXXXXX

Our Comments:

Based on our understanding of the facts, it appears that the funding received by XXXXXXXXXX should be considered to be a "scholarship or bursary" as discussed in Interpretation Bulletin IT-75R2 and the special release thereto. In addition, based on the reasoning in the case of Deanna Greyeyes v. Her Majesty the Queen, (78 DTC 6043) (F.C.T.D.), the scholarship may be exempt from taxation by virtue of paragraph 81(1)(a) of the Income Tax Act if it is paid to an Indian under a treaty or agreement between a band and Her Majesty so that it may be considered personal property of an Indian situated on a reserve within the meaning of section 87 of the Indian Act.

The facts of the Greyeyes case are similar to the facts in XXXXXXXXXX's situation, in that, Deanna Greyeyes was a status Indian enrolled as a student at the University of Calgary, who while attending the University of Calgary received from the Department of Indian Affairs and Northern Development the sum of $2,339.50 to assist her in her post-secondary education. At all relevant times she was neither living on nor attending classes on a reserve. However, the scholarship was received by Deanna Greyeyes pursuant to an agreement and treaty between her Band and Her Majesty specifically pursuant to an agreement to assist band members in their education in compliance with the obligations of the Federal Government under Treaty No. 6. The court held that the scholarship, by virtue of subsection 90(1) of the Indian Act, was the personal property of an Indian situated on a reserve within the meaning of section 87 of the Indian Act, and since section 87 of the Indian Act, by its own terms, prevailed over any contrary intention expressed in the Income Tax Act, the scholarship was exempt from taxation. The judge concluded that taxing the scholarship, resulted in her being subject to taxation in respect of the scholarship and therefore in violation of the third provision of section 87 of the Indian Act. Specifically, Mahoney, J had this to say at page 6045:

     "I will, for convenience, hereafter refer to the $2,339.50 payment as "the scholarship". In light of the agreed fact, the scholarship was the personal property of an Indian situated on a reserve within the meaning of section 87 of the Indian Act; it is deemed to be such by virtue of subsection 90(1). Nothing turns on the fact that the plaintiff did not reside on a reserve or apply the scholarship to classes conducted thereon. It is the property, not the Indian that is required to be situated on a reserve.

     ...section 87 appear, on a plain reading, to make three independent provisions vis a vis the personal property of an Indian situated on a reserve, that is, in this case, the scholarship. Firstly, "the following property is exempt from taxation, namely": the scholarship. Secondly, "no Indian... is subject to taxation in respect of the ownership, occupation, possession or use of" the scholarship. Thirdly, "no Indian... is otherwise subject to taxation in respect of" the scholarship."

It is a question of fact whether a scholarship for education received by a status Indian, XXXXXXXXXX, in this case, is received under a treaty or agreement between a band and Her Majesty and is exempt or is received under some other program and is taxable. A review of documentation including agreements relating to both the receipt by the band of the funding from the Department of Indian and Northern Affairs and the payment by the band to XXXXXXXXXX would be required to resolve this issue.

As discussed (Tjong/Kerr), the comments in the December 30, 1992 memo from Taxation Programs Branch regarding Training Allowances may have application in certain circumstances. In addition, it should be noted that the December 30, 1992 memo does not provide any comments on scholarships received by status Indians.

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch