20 September 1994 Internal T.I. 9419756 - STUDENT WORK AND SERVICE PROGRAM (SWASP)

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.

Principal Issues:

Income tax treatment of weekly stipends and completion bonus under Student Work and Service Program

Position TAKEN:

Taxable as income from a source

Reasons FOR POSITION TAKEN:

Participants must enter into agreement to provide services for which the stipend and completion bonus are payment.

		September 20 1994

Source Deductions Division Business and General
A. Bissonnette Division
Director P.D. Fuoco

Attention: Pierre Paquette
CPP/UI Programs

941975

Student Work and Service Program (SWASP)

This is in reply to your memorandum dated July 27, 1994 and related attachments concerning the income tax treatment of payments and benefits under the subject program. We also refer to our meeting of September 12, 1994, with Pierre Paquette and Allan MacDonald of your division and Human Resources Development Canada officials.

Our understanding of the relevant facts is as follows:

• SWASP is a program established by Human Resources Development Canada (HRD) and the Government of Newfoundland and Labrador under the Strategic Initiatives Program administered by HRD.
• Under the "Program Description", Swasp is described as a program that is"...designed to assist individuals who plan to attend or return to a post-secondary institution within the next year and who have had difficulty in obtaining employment to offset their educational and training costs". One of the program components will provide financial assistance by means of a tuition credit and a small stipend to individuals who devote time to community service organizations.
• Participants involved in non-paid community service placements (normally of 8 weeks duration for 35 hours per week) will receive a stipend of $50 per week to "offset the cost of participation". In addition, such participants will be eligible for a tuition credit of up to $1,200 after satisfactory completion of their placement. The tuition credit will be redeemable at any recognized post-secondary institution in Canada, will normally be redeemed within 12 months of issue, are non-transferable and are not redeemable for cash.
• Under the terms and conditions of SWASP community service placements:

-Community service organizations eligible to be sponsors for student placements are restricted to the following:

-non-profit or charitable organization
-local development association
-municipal council/local service district committee
-non-profit community based group or organization

-The sponsor agrees to:

-provide a meaningful community placement as presented in the activity description; and to provide appropriate supervision and support;
-provide 280 hours of work, normally over a period of 8 weeks, with scheduled start and finish dates;
-maintain records of the student's placement and any other necessary records; to administer the weekly $50 stipends; to verify the student's participation and distribute the tuition credit;

-participate in a program evaluation if requested.

-Individuals who are eligible to be participants in SWASP include students who plan to attend, or plan to return to a recognized post-secondary institution within 12 months of the completion of the community service placement and who have been unable to obtain full time employment.

-The student agrees to complete the community service requirement of 280 hours, normally over an 8 week period and to perform the assigned duties to the best of his or her ability.

-Upon completion of the required conditions of the placement, the student shall receive the benefit of the tuition credit.

-It is specifically stipulated that "no other person or organization may receive, be assigned, or collect, any percentage or portion of any benefits accrued under this contract".

• An individual must make an application to participate in SWASP and in signing the application declares that he or she has read and agrees to abide by the terms and conditions of the program.
• A sponsoring organization must also complete an application and declare agreement to abide by the terms and conditions of the program.

Our Comments

Based on the information and documentation provided, it is our opinion that an individual participating in the program has entered into a contract to provide services and receives payment in the form of the $50 per week stipend and tuition credit in payment for such services. Accordingly, such payment is to be included in computing the participant's income from a source for income tax purposes. As discussed in our meeting, the tuition credit would only be taxable if and when the participant uses the credit and not merely upon entitlement to the credit.

It is our understanding that you will respond to HRD's enquiries concerning withholding and reporting requirements.

We trust the foregoing is the information you require.

B.W. Dath
Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch