16 December 1997 Ministerial Letter 9720528 - WCB-WHETHER T5007 T/B ISSUED, $ OFFSET

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:

whether an amount "offset" from a settlement amount already paid to an injured worker under paragraph 17(5)(d) of Alberta's Workers' Compensation Act is taxable under para 56(1)(v) of the ITA as an amount received under a compensation law (i.e. does the Workers Compensation Board (the Board) have to issue a T5007 slip for these amounts). The Board is required to pay pension and other benefits to the injured worker but is, instead, setting these amounts off from an earlier lump sum payment made to the worker. The inclusion of these amount into income has an impact on the client's GST and other credits.

Position:

At this time, yes. However, litigation is ongoing between the injured worker and the Board to determine if, in law, the Board has the authority to set off future pension or other benefits from an amount which it has already paid under 17(5)(d), which provision requires the Board to pay any excess (cost of the accident to the Board less legal costs and other amounts/payments) to the worker, legal rep. or dependants, as the case may be. Will re-examine Department's position if Board is proven to be not authorized to provide for payment of pension and other benefits in this manner

Reasons:

961054, 951439, Alberta's Workers Compensation Act.

MINISTER/DEPUTY MINISTER'S OFFICE 97-0949D
ADM'S OFFICE
RETURN TO 15TH FLOOR, ALBION TOWER

December 16, 1997

XXXXXXXXXX

Dear XXXXXXXXXX:

Mr. Rob Wright, Deputy Minister of National Revenue, has asked me to reply to your letter of May 21, 1997, in which you make representations on behalf of your client, XXXXXXXXXX. I have been asked to address your comments.

XXXXXXXXXX

The outstanding issue continues to be whether the Board should issue T5007 slips for benefits it is required to pay to XXXXXXXXXX but which are being offset from a payment of $XXXXXXXXXX previously made to him. As you know, the Board must issue T5007 slips to recipients of workers' compensation benefits each year. XXXXXXXXXX is required to include all workers' compensation benefits received by him in a year as income and he may then claim an offsetting deduction. While the benefits are effectively non-taxable, the inclusion of these amounts into income each year may impact his ability to receive the Goods and Services Tax Credit, Child Tax Benefit or other credits.

It remains the Department's opinion that the Board should continue to issue T5007 slips for the amount of these benefits, including pension disability benefits, to which XXXXXXXXXX is entitled each year, even though these payments are being offset from the $XXXXXXXXXX amount rather than being issued directly to your client. However, we recognize that there is litigation pending or ongoing on your client's behalf relating to section 17 of Alberta's Workers' Compensation Act. This litigation may determine the extent to which the Board may be subrogated as well as the Board's right to offset future pension or benefit amounts from an amount previously paid under paragraph 17(5)(d). Should this litigation ultimately be resolved in favour of your client, and the Board does not have the right to set off future entitlements against any amount already paid out under paragraph 17(5)(d), the Department will reconsider its position. Until then, the Department will continue to view the amount offset each year as "compensation received under an employees' or workers' compensation law of Canada or a province in respect of an injury, a disability or death" and, therefore, included in XXXXXXXXXX income (with a corresponding deduction).

The Income Tax Act provides for the filing, for a given year, of a "waiver" specifying matters on which a reassessment may be issued at any time thereafter. XXXXXXXXXX may wish to consider filing a waiver for appropriate years. The Department would then be allowed to reassess beyond the three-year time limit set out in the Income Tax Act. To be valid, a waiver must be filed in prescribed form (T2029) within three years from the day of mailing of a notice of assessment or of a notification that no tax is payable for a taxation year. This means that a waiver included in an income tax return when it is filed is not a valid waiver. In addition, your client may wish to exercise his right to object to an assessment for a taxation year within 90 days from the day of mailing of the notice of assessment for the year or within a year after his filing-due date, whichever is later.

I hope that these comments are of assistance to you.

			Yours sincerely,

		Denis Lefebvre
		Assitant Deputy Minister
		Policy and Legislation Branch

c.c. Judy Jances

Information Returns Section
Tower C, Place Vanier

Sandra Short
November 4, 1997
957-2136

Finalized 97-11-20 - DJ/pp