5 May 1994 Internal T.I. 9405797 - TAXATION OF UIC BENEFITS

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

		May 5, 1994

	Hamilton District Office	Head Office
	Revenue Collections	Rulings Directorate
B. Kerr
	Attention: John Ferguson	957-8953
									940579

Taxation of UIC benefits

This is in response to your memorandum of March 1, 1994, concerning the taxability of UIC benefits received by XXXXXXXXXX a status Indian.

A letter from the taxpayer's former employer, XXXXXXXXXX which is located on the XXXXXXXXXX reserve, confirms that she was employed by them from December 11, 1990 to March 29, 1991. You have asked us to determine whether the UIC benefits should be considered tax-exempt.

Our Comments

As you know, the decision of the Supreme Court of Canada in the Williams case, (92 DTC 6320), required the Department to reconsider its interpretation of the scope of the exemption from income taxation enjoyed under the Indian Act by Indians. Inter alia, the case decided that unemployment insurance benefits received in respect of employment income that was exempt from taxation were also exempt from taxation. A remission order, "Indian Income Tax Remission Order" P.C. 1993-523, was put in place to refund taxes on such benefits back to 1985.

We are unable to determine from your memorandum or the letter from the taxpayer what taxation year the benefits in question relate to nor whether the qualifying income that gave rise to such benefits was itself exempt from income tax. We can only confirm that the employment income that she earned during the period referred to above would be tax exempt.

You would have to determine each of these important facts and then based on these findings decide whether all or any portion of the benefits is exempt using the calculations in the examples referred to under the heading "Unemployment Insurance Benefits" as shown on page 4 of the December 30, 1992, letter which was sent by the Taxation Programs Branch to all District Offices, Taxation Centres and the International Tax Office.

R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch