22 June 1999 Internal T.I. 9912437 - PAYMENTS FOR PEOPLE WITH DISABILITIES

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:

Further questions regarding our response of 7-990470 concerning taxation of various types of payments made to disabled individuals or parents of disabled children under the Employability Assistance for People with Disabilities (EAPD) Program and the Family Support (FS) Program. Both programs are administered by the province of Prince Edward Island.

Position:

1) Payment for tuition and training costs under EAPD Program for disabled individual is taxable under 56(1)(n)
2) Payment or reimbursement for medical expenses for disabled child under FS Program is not taxable
3) Payment or reimbursement for child care expenses for disabled child under FS Program is not taxable

Reasons:

1) position taken in similar files
2) no provision to tax such amounts
3) no provision to tax such amounts

		June 22, 1999

	Charlottetown Taxation	HEADQUARTERS
	Services Office	G. Moore
	Client Services Division	952-1506

	Attention: Barb Crosby
	   Assistant Director
		7-991243

Payments Made by the Department of Health and Social Services,
Province of Prince Edward Island

We are writing in reply to your correspondence of May 7, 1999, in which you had several questions regarding our response of March 1, 1999, concerning the income tax treatment of payments made by the Department of Health and Social Services (DHSS) of the province of Prince Edward Island, to, or on behalf of, beneficiaries with respect to the Employability Assistance for People with Disabilities (EAPD) Program and the Family Support (FS) Program.

As we understand it,
XXXXXXXXXX

Students wishing to attend the XXXXXXXXXX Program must bring with them a “Disability Related Support” coverage of $XXXXXXXXXX per month. Students make application to their Regional Health Authority, through their family support worker for this Disability Related Support. The Disability Related Support will be funded through the EAPD Program. Students of the XXXXXXXXXX Program have to apply for this support like other persons with disabilities. Students cannot participate in the XXXXXXXXXX Program unless these funds have been approved through government or families cover the cost themselves. Students who require a one-to-one worker must make additional application to their Family Support Worker and Regional Health Authority for this level of support. With respect to assistance for tuition and training costs under the EAPD Program, you are asking about the taxability of the $XXXXXXXXXX per month Disability Related Support costs for the XXXXXXXXXX Program if these support costs are paid by the province as part of the EAPD program. You are also asking if these amounts would qualify as eligible tuition for purposes of subsection 118.5(1) of the Income Tax Act (the “Act”).

Further to the telephone conversation of June 10, 1999, between XXXXXXXXXX, and Gwen Moore of this Division, it is our understanding that the Disability Related Supports costs funding of $XXXXXXXXXX per month provided by the EAPD Program is used solely for the administration costs of the XXXXXXXXXX Program such as employee salaries and fixed and variable overhead and not for individual counselling medical care, or one-on-one assistance for a particular student enrolled in the Program.

Further to the telephone conversation of June 7, 1999, (Moore/Duval), it was clarified that you are asking whether a payment or reimbursement of medical expenses under the FS Program would be taxable in the hands of the parents or other supporting person of a disabled child if the medical expenses do not meet the definition of medical expenses in the Act since the current FS Program provides for payment or reimbursement of such medical expenses as adult diapers, diapers for children beyond normal toilet training age and non-prescription drugs. It was also clarified during the telephone conversation that you are asking whether a payment or reimbursement of child care expenses under the FS Program would be taxable in the hands of the parents or other supporting person of a disabled child if the child care expenses do not meet the definition of child care expenses in the Act or if the parents or other supporting person of the disabled child do not have earned income for child care expense purposes or are one-parent families.

Our Comments

Assistance for Tuition/Training Costs

As indicated in our memorandum of March 1, 1999, (file # 990470) 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 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 a 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. 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. It will be a question of fact based on a review of all relevant circumstances as to whether a particular individual has received a scholarship or bursary that is to be included in the individual's income under paragraph 56(1)(n) of the Act.

Based on our understanding of the EAPD Program and the XXXXXXXXXX Program, since the primary purpose of the $XXXXXXXXXX per month Disability Related Support payments appears to be to provide financial assistance to students in need to further their education, in our view, the value of the benefit the student receives will be considered to be a bursary. Accordingly, the value of the benefit ($XXXXXXXXXX per month) would be required to be included in the student's income.

You are also asking if the Disability Related Support payments of $XXXXXXXXXX per month per student that is funded by the EAPD Program would qualify as tuition fees for purposes of subsection 118.5(1) of the Act. The current version of IT-516, Tuition Tax Credit, identifies certain types of fees that relate to a particular program as being eligible tuition fees. Eligible tuition fees include admission fees, charges for library or lab use or facilities, exemption fees, exam fees, application fees, confirmation fees, charges for certificates, diplomas and degrees, membership or seminar fees that are specifically related to an academic program and its administration, mandatory computer service fees and academic fees. Eligible tuition fees do not include any fees for medical care, student activities, whether social or athletic, transportation and parking, board and lodging, goods of enduring value, initiation fees or entrance fees to professional organizations and administrative penalties incurred when a student withdraws from a program or institution. Based on the documentation provided to us on the XXXXXXXXXX, it appears that the Disability Related Support payments of $XXXXXXXXXX per month are eligible tuition fees as they are related to the general administration of the academic program.

Payment or Reimbursement of Medical Expenses

Under the FS Program, parents or a supporting person of a disabled child may receive a payment or reimbursement of medical expenses in respect of the child such as adult diapers, diapers for children beyond normal toilet training age and non-prescription drugs. Since such items do not meet the definition of medical expenses for purposes of the Act, you are asking if the payment or reimbursement of such items would be taxable in the hands of the parents or other supporting person of a disabled child. In the case of payment or reimbursement for diapers and non-prescription drugs, in our view, this would not be taxable in the hands of the parents or supporting person of a disabled child. Other payments for medical expenses under the FS Program that do not meet the definition of medical expenses, for purposes of subsection 118.2(2) of the Act, may likely also not be taxable; however, we cannot provide definitive comments without knowing the exact nature of the payments since there may be a taxing provision in the Act that may be applicable to that type of payment.

Payment or Reimbursement of Child Care Expenses

Under the FS Program, child care expenses are paid or reimbursed in respect of a minor disabled child. As indicated in our response of March 1, 1999, from our review of the information provided to us, in our view, the amounts paid to qualifying parents of a disabled child in respect of child care expenses under the FS Program are not taxable. Payments for other child care expenses under the FS Program that do not meet the definition of “child care expense”, as defined in the subsection 63(3) of the Act, would likely not be taxable; however, we cannot provide definitive comments without knowing the exact nature of the payment since there may be a taxing provision in the Act that may be applicable to that type of payment.

You are also asking about respite care paid under the FS Program for a disabled child between 14 and 18 years of age. Under the definition of “eligible child” in subsection 63(3) of the Act, an eligible child, for purposes of the child care expense deduction, includes a child who is, at any time during the year, under 16 years old, or dependent on the taxpayer or the taxpayer’s spouse and has a mental or physical infirmity. If child care expenses are made in respect of a child who does not meet the definition of “eligible child”, as defined in subsection in subsection 63(3) of the Act, then such child care expenses are not deductible. In any event, as indicated in our memorandum of March 1, 1999, if payments or reimbursements are made under the FS Program for child care in respect of a disabled child, in our view, such payments or reimbursements would likely not be taxable and the parents of the child or supporting person of the child would not be entitled to claim those child care expenses for income tax purposes.

You are also asking about respite care provided to individuals with no earned income for child care expenses purposes or to one-income families. As indicated above, if payments or reimbursements are made under the FS Program for child care in respect of a disabled child regardless of whether the payments or reimbursements are in respect of respite care provided to individuals with no earned income for child care expenses purposes or to one-income families, in our view, such payments or reimbursements would likely not be taxable and the parents of the child or supporting person of the child would not be entitled to claim a deduction for those child care expenses, assuming that they are allowable child care expenses for income tax purposes.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at 613 954-2898. The severed copy will be sent to you for delivery to the client.

R. Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch