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.
taxation of training benefits being received by Metis. funding is (1) section 63 of EI Act and (2) Consolidated Revenue Fund. All funding rec'd from Human Resources Development Canada
tax as (1) 56(1)(a)(iv), applicable withholdings (not taxed to extent payments relate to the cost of a course or program designed to facilitate the re-entry into the labour force of a claimant under the EI Act) or (2) appears to be bursary 56(1)(n), no withholding but T4-T4A summary and supplementaries needed
E9702975, 963349, 943311
XXXXXXXXXX Sandra Short
January 23, 1998
Re. Taxability of payments made to Metis citizens receiving employment training
This is in reply to your correspondence of October 10, 1997, concerning the taxation of benefits paid to or for the benefit of Metis clients. We acknowledge receipt of additional information from XXXXXXXXXX and from Chris Campbell of Human Resources Development Canada (HRDC).
The Metis Provincial Council of British Columbia (the "Council") receives funding from HRDC to provide employment training to Metis clients in British Columbia. The funding is provided under the terms of a Regional Bilateral Agreement (RBA) with HRDC. The money is used by the Council to provide tuition, books, tutors, living allowances, supplies and other materials relating to training.
You have advised (XXXXXXXXXX/Short, January 14, 1998) that two streams of funding are received from HRDC:
funding received under the authority of section 63 of the Employment Insurance Act and Core funding received from the federal government's Consolidated Revenue Fund (CRF) under the authority of the Aboriginal Labour Market Program
Those applying for training assistance cannot be funded under section 63 of the EI Act unless HRDC confirms that the claimants are currently eligible to receive employment insurance. Under the terms of the RBA, the Council undertook to provide the following programs:
Program to provide wage subsidies to employers to encourage them to hire unemployed Metis.
Program to help unemployed Metis to start businesses or become self-employed.
Program to provide unemployed Metis with employment opportunities through which they can gain work experience to improve their long term employment prospects.
Program to help unemployed Metis to obtain skills ranging from basic to advanced skills.
The four programs above are based upon programs previously administered by HRDC and known as the Targeted Wage Subsidy Employment Benefit, the Self-employment Employment Benefit, the Job Creation Partnerships Employment Benefit and the Purchase of Training Benefit, respectively, as established under Part II of the Employment Insurance Act. The programs are required to be similar in design and consistent with the purpose and guidelines of Part II of the EI Act.
Your specific enquiry appears to relate to program four only, the Purchase of Training Benefit, which, when administered by HRDC, was known as the Training Purchases Program. Accordingly, our comments are limited to program four only. We assume, for the purposes of our reply, that program four is, in material aspects, similar to the Training Purchases Program. Our understanding of the Training Purchases Program and its tax implications follows.
Training Purchases Program:
The following individuals are eligible to participate
those for whom a benefit program has been established (entitled to regular EI benefits)
those who have had an insurance benefit end in the three years before applying for assistance and
those who have received maternity or parental leave benefits in a period that began no more than five years before applying for assistance.
The program administrator (formerly HRDC), purchases courses on behalf of individuals who face serious difficulties finding employment. The courses provide skills ranging from basic to advanced skills and do not relate to a specific identified employment of the participant. Individuals who are entitled to receive regular EI benefits at the time of acceptance into this program continue to receive regular benefits while taking the courses, and for the duration of their regular benefits entitlement period. Additional financial assistance may also be received for additional expenses incurred as a result of the training (child care, transportation). Individuals who are not entitled to receive regular EI benefits at the time of acceptance into the training purchases program may also receive financial assistance to compensate for additional expenses incurred as a result of the training.
Subparagraph 56(1)(a)(iv) of the Act requires the inclusion into income of any benefit received under the Employment Insurance Act unless the payment relates "to the cost of a course or program designed to facilitate the re-entry into the labour force of a claimant under that Act." Thus, to the extent that payments funded under the EI Act stream of funding relate to the cost of a course or program which is designed to facilitate an applicant's re-entry into the labour force, these payments are not taxable and source deductions are not required. All other EI benefits are taxed in the usual manner under subparagraph 56(1)(a)(iv) and, per paragraph 153(1)(d.1) of the Act, withholdings are required
It appears that amounts paid from the CRF stream of funding are not made under the EI Act and, therefore, benefits paid from this funding stream must be examined on a case by case basis. Without knowing all the circumstances under which training funds are approved or the purpose of individual payments, we can only advise that benefits purchased with CRF funds may be taxable as bursaries. An explanation follows.
Paragraph 56(1)(n) of the Act requires the inclusion into income of certain scholarships, bursaries and fellowships, with a $500 exemption. A bursary is defined in Webster's Third New International Dictionary as "a sum or varying amount given or granted to a needy student." In our view, 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 the means or needs of the student. This can include the value of ancillary assistance such as travel assistance, lodging, books or equipment, dependant care and so on. Income tax is not required to be withheld from such amounts although a T4-T4A Summary and related T4A Supplementaries are required to be prepared. It will be a question of fact to be determined based on a review of all surrounding circumstances as to whether a particular individual has received a scholarship or bursary that is to be included into the individual's income under paragraph 56(1)(n).
A bursary usually applies to education at the post-secondary school level or higher but there are circumstances where bursaries can be awarded for education below the post-secondary school level. Scholarships and bursaries ordinarily assist the student in proceeding towards a degree, diploma, or other certificate of graduation. They may apply to academic disciplines or to trades (such as plumbing or carpentry). Normally, a student is not expected to do specific work for the payer in exchange for a scholarship or bursary.
Should you require assistance with the other programs being administered by the Council, please contact us and forward all necessary documentation. We trust that these comments will be of assistance.
Roberta Albert, CA
Business and Publications Division
Income Tax Rulings and
Policy and Legislation Branch
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