11 September 1997 External T.I. 9638655 - BC FOREST WORKER TRANSITION PROGRAM

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:

gov't assistance under BC's Forest Worker Transition Program

Position:

income support taxable as business income or bursary depending on the participant's job plan, training grants taxed as bursaries and relocation assistance excluded from income except to the extent that it reduces a claim for that individual's moving expenses

Reasons:

def'n of bursary is broad enough to include income support payments. Program's purpose is to re-train participants or to assist them in starting a business

	                                	963865
XXXXXXXXXX		                                 A. Humenuk

Attention: XXXXXXXXXX

September 11, 1997

Dear Sirs:

Re: Forest Worker Transition Payments

We are replying to your letter of October 30, 1996, concerning the tax treatment of various payments made by Forest Renewal BC, a British Columbia Crown Corporation, under the Forest Worker Transition Program of British Columbia.

The purpose of the Forest Worker Transition Program (the "Program") is to assist eligible forest workers in obtaining new employment, either within or outside the forestry industry. For the purpose of the Program, an eligible forest worker is an unemployed individual who was previously employed in the forest industry in British Columbia. Upon approval of a job plan outlining the actions the participant will undertake in order to secure new employment, Forest Renewal BC will assist the participant with training grants, relocation assistance and income support payments, as well as non-monetary help such as counselling, assessment and assistance in searching for jobs. The amount of monetary assistance to be provided to a participant under this program is determined by the participant's job plan, as approved by the program director, and is not an entitlement.

You have asked us to confirm your understanding of the provisions of the Income Tax Act (the "Act") which apply in respect of monetary assistance provided under the Program. Since the tax treatment of the assistance depends, in part, on the purpose of the payment as outlined in the participant's job plan, the taxation of any assistance provided to a particular participant must be determined on a case by case basis. If the tax treatment of assistance provided to a particular participant is unclear, the local tax services office should be contacted with the details of the circumstances under which the assistance is being provided. We are nevertheless providing the following general comments which may be of assistance in determining the tax treatment of amounts received under the Program.

Income Support

It is our understanding that the income support which may be provided under the Program is in addition to any Employment Insurance benefits which are otherwise payable to a participant. While we agree with your analysis that benefits received under the Employment Insurance Act are taxable to the participant under subparagraph 56(1)(a)(iv) of the Act, it is our view that any additional income support received under the Program will likely be included in income as either a bursary or as business income, depending on the purpose of the payment as outlined in the job plan. If the income assistance is provided in respect of a period during which the individual is starting a business, the assistance will form part of the participant's business income. If it is given during a period in which the participant is attending school, it will constitute a bursary, as explained below. This would be the case whether the participant is entitled to social assistance or Employment Insurance benefits.

Training Grant

While we agree with your analysis that the amount of any training grant must be included in the participant's income to the extent provided by paragraph 56(1)(n) of the Act, we note that a bursary is not restricted to an amount received in respect of tuition and books. The definition of a "bursary" is broad enough to encompass almost any form of financial assistance paid to a student to enable the student to pursue his or her education, including a payment based on means or needs of the student. A social assistance payment, on the other hand, is made on the basis of a means, needs or income test and is not dependant on the recipient engaging in any particular type of activity, such as attending school. This is not to say that a social assistance payment received by an individual who is in financial need will be taxed as a bursary, solely because the individual is also a student. However, it is our view that any income support received under the Program for the purpose of enabling the participant to further his or her education will constitute a bursary, to be included in income under paragraph 56(1)(n) of the Act. However, the participant may be eligible for the tuition and education tax credit.

Relocation Assistance

In our view, any deduction for moving expenses in respect of the relocation would have to be reduced by the amount of the assistance received under the Program. However, in the event that the assistance is paid in respect of expenses which do not qualify as moving expenses under subsection 62(3) of the Act or the amount of the assistance is in excess of the amount the participant could otherwise claim under section 62 of the Act, the excess need not be included in income.

Summary

In closing, it is our view that all amounts received under the Program in respect of training would be required to be included in income to the extent provided by paragraph 56(1)(n) of the Act. Amounts received as income support while the participant is developing a self-employment opportunity would be required to be included in computing the income of that business under section 9 of the Act. The amount of any relocation assistance received under the Program would not be required to be included in income, but would reduce the amount of any claim for moving expenses in respect of the relocation of the participant.

We trust these comments will be of assistance.

Yours truly,

C. Chouinard
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch