15 February 1999 External T.I. 9830275 - GROUP OR FOSTER HOMES

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: Are certain payments received for providing care for a needy person subject to tax?

Position: Insufficient information and completed or ongoing transaction.

Reasons: General information concerning the possible application of paragraph 81(1)(h) of the Act.

XXXXXXXXXX 983027
J. E. Grisé
February 15, 1999

Dear XXXXXXXXXX:

Re: Group or Foster Homes

This is in reply to your letter of November 4, 1998 requesting a ruling or guides with respect to stipends received by an individual for the care of a needy person in a group or foster home setting.

The ruling you have requested seems to be in respect of completed or ongoing transactions. As set out in Information Circular 70-6R3, Advance Income Tax Rulings (the circular), an advance income tax ruling can only be issued in respect of a definite transaction or transactions which a taxpayer is contemplating. Paragraph 22 of the circular states that requests for written opinions on completed transactions are normally considered by our tax services offices. However, we are prepared to offer the following general comments which may be of assistance to you.

Paragraph 81(1)(h) of the Income Tax Act (the Act) provides an exemption from inclusion in computing the income of a taxpayer in respect of certain social assistance payments received by an individual. A social assistance payment will not be included in the income of an individual for income tax purposes, if all of the following conditions are met:

• The payments must be ordinarily made on the basis of a means, needs or income test.
• The payments must be made under a program provided for by federal or provincial law.
• The payments must be received directly or indirectly by the individual for the benefit of another individual (the “cared-for individual”).
• The cared-for individual cannot be the individual’s spouse or related to the individual or the individual’s spouse.
• No family allowance under the Family Allowances Act or any similar allowance provided for by provincial law can be payable in respect of the cared-for individual for the period for which the social assistance payment is made.
• The cared-for individual must live in the individual’s principal place of residence, or the individual’s principal place of residence must be maintained for use as the cared-for individual’s residence during the period for which the payments are made.

The above exemption can apply whether the payments received are business or employment income to the recipient.

An employer is required pursuant to paragraph 153(1)(a) of the Act to withhold tax on the payment of salary or wages or other remuneration. Should an employer wish to be relieved from the obligation to withhold source deductions, we suggest that they request individual waivers from their Tax Services Office under the provisions of subsection 153(1.1) of the Act, in situations where there is a known reduction in tax available to particular individuals.

A salary or wage that is not to be included in computing an individual’s income pursuant to paragraph 81(1)(h) of the Act is remuneration in respect of insurable employment under the Employment Insurance Act. Consequently, both employer and employee employment insurance premiums must be deducted and remitted to our Department. However, such payments are not “contributory salary and wages” as defined in the Canada Pension Plan and as a result, employer and employee Canada Pension Plan contributions are not required.

We hope our comments are helpful.

Yours truly,

J.F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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