15 July 1998 Ministerial Letter 9808118 - INTEREST ON RETROACTIVE WCB PAYMENT

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: interest on workers compensation payment

Position: exempt from income

Reasons: consistent with previous position on similar issue

July 15, 1998

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of March 13, 1998, concerning the tax treatment of the retroactive benefits plus interest paid by the Workers’ Compensation Board of British Columbia to Ms. Marlene Grigg. You also included a copy of a February 6, 1998, memorandum from the Income Tax Rulings and Interpretations Directorate to the Tax Services Office in Penticton on this issue.

As noted in that memorandum, the Department has reviewed the taxation of the benefits and interest payable by the Board as a result of the decision by the Supreme Court of British Columbia in the Grigg case. The Workers’ Compensation Act of British Columbia previously terminated survivor benefits paid to widows when they remarried or commenced a common-law relationship. The legislation was amended to restore benefits to those widows who had remarried or started a common-law relationship after April 17, 1985. The amendment also provided for a lump sum payment to compensate for the benefits, including interest, that would have been paid from the date the benefits were terminated.

The issue in the Grigg case concerned widows who remarried prior to April 17, 1985, and, as a result, did not have their benefits reinstated. The Supreme Court of British Columbia found in favour of Grigg, and the Board reinstated benefits as of April 17, 1985, to those affected. Also, these individuals were entitled to the lump sum amount for the retroactive benefits that included interest.

Compensation received under an employees’ or workers’ compensation law of a province in respect of an injury, a disability or death of an individual is included in income but an offsetting deduction is available so that such compensation is not subject to tax. The Department’s position has been that pre-judgement interest on certain retroactive workers’ compensation payments does not have to be included in calculating income; however, the position did not apply to amounts received in Ms. Grigg’s situation.

Based on your input and the comments received from others, departmental officials re-examined the issue of taxation of interest paid to all B.C. widows on retroactive benefits from the Workers’ Compensation Board. I am pleased to advise you that the Department has now concluded that these amounts come within the definition of exempt interest. Consequently, the interest portion of these payments will not have to be included in calculating the recipient’s income.

I trust you will find my comments helpful.

		Yours sincerely,

		Herb Dhaliwal, P.C., M. P.,

C.C. Minister’s Office
Political Assistant

David Duff
May 29 1998
957-2058
980811