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:
1. Are grants received by status Indians taxable?
2. Are the status Indian entitled to the tuition and education amounts?
Position:
1. Perhaps
2. Perhaps
Reasons:
1. If the grant is provided to the status Indian under a treaty or agreement between a band and Her Majesty it shall be deemed to be situated on reserve, and therefore non taxable by virtue of section 90 of the Indian Act.
2. If the educational assistance which is received by a status Indian, and not considered taxable by virtue of paragraph 81(1) of the Act and section 90 of the Indian Act, does not fall into any of the exceptions provided for in subparagraphs 118.5(1)(a)(ii.1) through to (iv), the individual will be entitled to claim the tuition amount. Subparagraph (a)(i) of the definition of qualifying education program as defined in subsection 118.6(1) of the Act serves to deny the education credit if the student receives, from a person with whom the student is dealing at arm’s length, any allowance, benefit, grant or reimbursement, other than an amount received by the student as or on account of a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the student.
5-961160
XXXXXXXXXX Karen Power, CA
(613) 957-8953
Attention: XXXXXXXXXX
July 17, 1998
Dear Sirs/Madam:
Re: Funding received by Status Indians for Schooling
We are writing in reply to your letter of March 8, 1995 and telephone conversations (XXXXXXXXXX/Brooks), concerning the taxation of grants received by status Indians for post-secondary education, and their entitlement to the tuition and education tax credits. We apologize for the delay in replying.
You describe a situation in which funding from the Federal Government, is transferred to XXXXXXXXXX approves grants to students undertaking post-secondary education off the reserve. XXXXXXXXXX provides payments directly to the educational institution for each individual’s tuition fees. You inquire as to whether or not the educational institutions should be issuing T4A information slips with respect to the grants and whether or not the educational institution should further provide form T2202 or form T2202A to the students.
Tax Treatment of Scholarships
The Department’s position respecting the tax treatment of education grants is based on reasoning in the case of Deanna Greyeyes v. Her Majesty the Queen, (78 DTC 6043) (F.C.T.D.). 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.
Section 87 of the Indian Act provides that the personal property of an Indian situated on a reserve is exempt from taxation. Paragraph 90(1)(b) of the Indian Act provides that for purposes of section 87, personal property that was given to Indians under a treaty or agreement between a band and Her Majesty shall be deemed always to be situated on a reserve. As described in Mitchell v. Peguis Indian Band ((1990) 2 SCR 85), in paragraph 90(1)(b) of the Indian Act the words “treaty” and “agreement” take colour from each other and, in our view, an agreement would have to be similar in nature to a treaty.
It is a question of fact whether assistance for education received by a status Indian is received under treaty or agreement between a band and Her Majesty and is exempt or is received under some other program and is taxable.
Issuance of T4A’s
Paragraph 200(2)(a) of the Income Tax Regulations states as follows:
“Every person who makes a payment as or on account of, or who confers a benefit or allocates an amount that is,
a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the recipient thereof (other than a prize prescribed by section 7700)...
shall make an information return in prescribed form in respect of such payment or benefit...”
In the situation you have described, it appears that XXXXXXXXXX is the person “making a payment as or on account of, or who confers a benefit or allocates an amount” to each individual status Indian. Accordingly, it appears that XXXXXXXXXX is responsible for issuing any required information returns (T4A).
We understand that educational institutions will occasionally issue T4A slips when it “allocates an amount”; for example, when organizations make available a certain lump sum amount with intructions to the institution to identify certain students meeting given criteira and to provide these students with scholarships.
In the event that it can be established that the amounts are exempt under section 87 of the Indian Act, the issuance of T4A’s to status Indians in receipt of educational funds will not be required.
Entitlement to Tuition and Education Amounts
Paragraph (a) of subsection 118.5(1) of the Act refers to "the individual's tuition paid in respect of the year... except to the extent...". These exceptions are described in subparagraphs (ii.1) through (iv) of that paragraph and unless the amounts paid are specifically described within these exceptions, the fees paid would be eligible for the credit.
More specifically, subparagraph 118.5(1)(a)(iii.1) states as follows:
“...fees in respect of which the individual is or was entitled to receive a reimbursement or any form of assistance under a program of Her Majesty in right of Canada or a province designed to facilitate the entry or re-entry of workers into the labour force, where the amount of the reimbursement or assistance is not included in computing the individual's income”.
In our view, educational assistance, paid to a status Indian pursuant to a treaty or agreement between a band and Her Majesty and which is exempt from tax by virtue of section 87 of the Indian Act, would not fall within the exception provided for in subparagraph 118.5(1)(a)(iii.1) of the Act. Therefore, provided the educational assistance does not fall within any of the other exceptions, the status Indian would be entitled to claim the tuition credit pursuant to subsection 118.5(1) of the Act.
Subparagraph (a)(i) of the definition of qualifying education program as defined in subsection 118.6(1) of the Act serves to deny the education credit if the student receives, from a person with whom the student is dealing at arm’s length, any allowance, benefit, grant or reimbursement, other than an amount received by the student as or on account of a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the student.
Hence, students receiving educational assistance from XXXXXXXXXX, that fall within this exception would qualify for the education tax credit. Again, it would be a determination of fact as to whether a particular education grant would fit within the description of scholarship, fellowship, bursary, or a prize for achievement in a filed of endeavour ordinarily carried on by the student. We have enclosed a copy of IT-75R3 “Scholarships, Fellowships, Bursaries, Prizes, and Research Grants” which discusses the taxation and nature of such terms.
Subsection 118.6(2) of the Act provides that in order to claim the education amount, enrolment must be proven by filing with the Minister a certificate in prescribed form (forms T2202A or T2202) issued by the designated educational institution indicating the tuition and education amount available. It is the student’s responsibility to determine whether they are eligible to claim the education amount. Page 36 of the General Income Tax Guide provides further guidance on who may claim the education amount. A copy of the General Income Tax Guide has been enclosed for your files.
We trust our comments will be of assistance to you.
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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