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: Is financial assistance provided for under the New Brunswick Skills Loans and Grants program taxable?
Position: Yes.
Reasons: These payments are taxable under paragraph 56(1)(r) which was introduced in Bill C-28 and received royal assent on June 18, 1998. Paragraph 56(1)(r) of the Act subjects to tax various training-related amounts. Specifically, this paragraph includes in a taxpayer’s income financial assistance received under part II of the Employment Insurance Act, as well as similar financial assistance received from a government or government agency under the terms of an agreement with the Canada Employment Insurance Commission
5-980844
XXXXXXXXXX Karen Power, CA
(613) 957-8953
September 2, 1998
Dear XXXXXXXXXX:
Re: New Brunswick Skills Loans and Grants Program
We are writing in reply to your letter of March 2, 1998, which was forwarded to us for reply by XXXXXXXXXX, concerning the tax treatment of assistance for training provided under New Brunswick’s Skills Loans and Grants program.
Specifically, you are concerned with the Department’s recent interpretation letter which was sent to you on November 14, 1997 concerning the taxation of grants awarded under the Skills Loans and Grants program. You seek further clarification on how Revenue Canada has determined that financial assistance for training provided to Employment Insurance (EI) clients under the New Brunswick Skills Loans and Grants program are considered taxable to the recipients. You have also expressed concerns that similar funding provided through the Federal government or other provincial governments may not be subject to tax, leading to inconsistent tax treatment. Furthermore, you believe that the Department’s recent interpretation will result in undue hardship for recipients of the assistance provided under the New Brunswick Skills Loans and Grants program.
We have re-examined the treatment of payments under the Skills Loans and Grants program and are now of the view that such payments would be taxable under paragraph 56(1)(r) of the Income Tax Act (the “Act”). This paragraph was included in Bill C-28, which received Royal Assent on June 18th, 1998. This amendment is retroactive to June 30, 1996, the date of coming into force of the EI Act. However, Revenue Canada has made an administrative decision to apply the amendment beginning with the 1997 tax year.
Paragraph 56(1)(r) of the Act subjects to tax various training-related amounts. Specifically, this paragraph includes in a taxpayer’s income financial assistance received under Part II of the Employment Insurance Act, as well as similar financial assistance received from a government or government agency under the terms of an agreement with the Canada Employment Insurance Commission. As a result, recipients of financial assistance under Part II EI programs will be taxed regardless of whether the payments have been made directly by the federal government or by a province under a devolution agreement.
Recipients of financial assistance under the Skills Loans and Grants program may be eligible for the tax credit for tuition fees, provided that the other requirements of section 118.5 of the Act are met.
The education tax credit would only be available to recipients of repayable loans, bursaries and scholarships. Under the definition of “qualifying educational program” contained in subsection 118.6(1) of the Act, a program will not qualify for the education tax credit if the student receives any allowance, benefit, grant, or reimbursement for expenses in respect of the program.
XXXXXXXXXX
We trust our comments will be of assistance to you.
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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