15 October 1997 External T.I. 9722515 - PROVINCIAL TRAINING ALLOWANCE

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 payments to students under the Saskatchewan Provincial Training Allowance program are taxable as social assistance or bursary.

Position:

General comments on meaning of "social assistance" and "bursary" and reporting requirements for each.

Reasons:

Advance ruling situation, can't confirm.

972251
XXXXXXXXXX P. Spice

Attention: XXXXXXXXXX

October 15, 1997

Re: Provincial Training Allowance

This is in reply to your letter of August 11, 1997, to the Winnipeg Tax Centre, and further to our telephone conversation (Spice/XXXXXXXXXX) and your fax of September 23, 1997. You ask whether the payments under the above-noted new program (the "PTA") will be viewed as social assistance payments, included in income under paragraph 56(1)(u) of the Income Tax Act (the "Act"), deducted in computing taxable income in accordance with paragraph 110(1)(f) of the Act, and reported on a T5007 supplementary slip. The alternative tax treatment would be to classify the payments as bursaries, included in income pursuant to paragraph 56(1)(n) of the Act and reported on a T4A supplementary slip. For further information concerning the taxation and reporting of bursaries, please refer to the enclosed Interpretation Bulletin IT-75R3, in particular paragraphs 1, 5, 9 and 39.

Your question relates to proposed payments to be made under the PTA and we are unable to confirm the tax consequences to the recipients except in the context of an advance income tax ruling request. We will provide, however, the following general comments.

Since the terms "social assistance" and "bursary" are not defined in the Act, one must look to the meaning of these terms as they are ordinarily defined and understood, in order to determine whether paragraph 56(1)(n) or (u) of the Act applies in a particular situation.

"Social assistance" or "social security" is defined in the Oxford English Dictionary (2nd Ed.) as a system whereby the state provides financial assistance for those citizens whose income is inadequate or non-existent owing to disability, unemployment, old age, etc.. A "bursary", on the other hand, is defined in Webster's Third New International Dictionary as "a sum of varying amount given or granted to a needy student". From these definitions it can be seen that a particular payment may have the quality of both social assistance and a bursary if it is paid to a student in financial need as part of the government's social safety net.

In our view the definition of "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. A social assistance payment, however, is made on a means, needs or income test, and is not dependent on the recipient engaging in any particular type of activity such as schooling. This is not to say that social assistance payments paid to an individual who is in financial need because he or she is a student will necessarily be taxed as a bursary.

To conclude, if the primary purpose of the PTA is to provide financial assistance to students in need in order to further their education, then the amounts paid will be considered bursaries and will be included in income pursuant to paragraph 56(1)(n) of the Act.

Although the foregoing comments are not binding on the Department, we trust they will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch