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.
Whether certain amounts paid to participants in the Youth Internship Program, a new HRD job training initiative, are taxable and if so under what characterization.
Some participants will continue to receive social assistance and will report the amount as such. Some will continue to qualify for unemployment insurance benefits and will report the amounts as such. Others will be receiving training allowances/bursaries and wages during the course of the program which should be reported as income under paragraph 56(1)(n) and section 5 respectively.
Reasons FOR POSITION TAKEN:
The program description made it clear that those participants coming into the program as existing recipients of social assistance or U.I. benefits and that, given the objectives of the program and its structure, those participants will continue to qualify for those amounts while they are on the program. The others will receive allowances during the training period and actual wages from host employers during the on-the-job phase.
February 13, 1995
Source Deductions Division Head Office
CPP/UI Programs Section Rulings Directorate
P. M. Paquette, Acting Chief J.A. Szeszycki
HRD - Youth Internship Program
This is in reply to your memorandum of December 19, 1994 in which you requested that we review the program being offered by Human Resources Development Canada (HRD), known as the Youth Internship Program (YIP). You have asked us to consider the tax treatment of various payments and allowances being made under the program. We also clarified certain aspects of the program in a telephone conversation with Valerie Wilson of HRD on February 7, 1995.
As we understand the program description, there are two main streams of participants under discussion; the community-based stream (CBS) and the school-based stream (SBS). There is also brief reference to a sectoral stream but projects under that will be considered separately as the need arises.
The SBS includes participants recruited from the ranks of high school and post-secondary student groups while the CBS is a broadly based group of youth taken from the community at large, who are not in school and are either on social assistance or are unemployed (with or without the support of U.I. benefits).
There are two "activities" described within the program; "off-the-job" and "on-the-job" activities, which refer to education/training and actual employment, respectively. The off-the-job activity generally means classroom instruction which takes place in existing educational institutions. Under SBS, it was initially stated that students in the on-the-job phase would receive amounts from their host employers characterized as wages in exchange for services rendered; however, it has since been clarified that, while that arrangement remains true of the post-secondary student participants, the arrangement with respect to high school students is that they will receive school credits instead of wages as is done now in existing co-op arrangements. There are no amounts received by the students in the off-the-job activity period.
Under CBS, which has a wider variety of participants, different circumstances are described. Under this stream, the types of remuneration provided to the participants depends on their status coming into the program. This group is broken down into three categories; (1) unemployment insurance recipients, (2) social assistance recipients and, (3) those who are not described in either (1) or (2).
U.I. recipients participating in the program will be entitled to continue to receive benefits under the U.I. Act while they are participating in the program in either of the two activities. Such benefits will continue to be treated as unemployment insurance benefits required to be included in income by virtue of subparagraph 56(1)(a)(iv) of the Income Tax Act. Social assistance recipients permitted to continue receiving support under the provincial programs will have their incomes treated as before: an inclusion in income under paragraph 56(1)(u) of the Act with an offsetting deduction under paragraph 110(1)(f). In each of these two categories, the program does not call for the employer to provide any remuneration to the participant employee.
For those participants who will not be receiving continued income support in the form of social assistance or unemployment insurance benefits, amounts will be received either as allowances during the off-the-job training period or as employment wages in exchange for services rendered on-the-job. It is our understanding that the allowances received by these participants in the off-the-job phase are not provided under the spending authority of the National Training Act or the U.I. Act but rather from an allocation for this purpose from the Consolidated Revenue Fund. The purpose of the allowances is to provide income support during a period in which they are not earning wages. It would appear from the description of the program that the allowances paid in respect of a period when the participant is receiving classroom instruction would qualify under the Department's definition of a bursary and, consequently, would be given tax treatment under paragraph 56(1)(n) of the Act. During the on-the-job phase the participants will be receiving a wage from their employer in exchange for services rendered, amounts which would be required to be included in income as employment income under subsection 5(1) of the Act.
In addition to amounts received directly by participants, there are other payments being made or costs being incurred in respect of the program. We would like to comment on one category in particular, the "special costs" incurred in connection with the participation of disabled clients or staff members. It is our understanding that certain disabled employees will be provided with special devices or equipment which will better enable them to participate in the training and the employment afterward. The equipment can be either leased or purchased by HRD and where purchased can be given to the participant outright. Where the latter is the case, the value of the purchase could be considered an amount to which the provisions of paragraph 56(1)(n) of the Act would apply. The other costs incurred by HRD, described under the heading "Terms of Funding", in our view, would not affect the program participants directly.
If we can provide any other technical assistance in this matter, please contact the writer.
Business and General Division
Policy and Legislation Branch
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