5 November 1999 Internal T.I. 9926837 - EXEMPTION UNDER THE INCOME TAX ACT

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: Tax treatment under paragraph 81(1)(h) of the Act of payments under a specific program.

Position: Exempt if all conditions in paragraph 81(1)(h) of the Act are met.

Reasons: Question of Fact.

		November 5, 1999

	Client Services Section	HEADQUARTERS
	Thunder Bay Tax Services Office	Wm. P. Guglich
(613) 957-2102
	Attention: D.A. Kannegiesser
		992683

Exemption under paragraph 81(1)(h) of the Act

This is in reply to your memorandum dated September 30, 1999, requesting our opinion as to whether the payments to caregivers by XXXXXXXXXX could qualify for exemption under paragraph 81(1)(h) of the Act. You submitted various documents including a letter dated June 22, 1993, from Client Assistance.

Our Comments

The Department has revised its position concerning the exemption from income under paragraph 81(1)(h) of the Act that applies to certain social assistance payments received by an individual for the care of foster children or handicapped adults and therefore, some of the comments in the June 22, 1993, letter may no longer apply. The Department's revised position is described in a memorandum, dated February 2, 1999, from Marie-Josèe Martel, Director, Programs Division. This memorandum was sent to all Tax Services Offices.

Basically, paragraph 81(1)(h) of the Income Tax Act (the "Act") exempts from inclusion in income of an individual certain social assistance payments received by the individual, if all of the following conditions are met:

1. The payments must be ordinarily made on the basis of a means, needs, or income test.

2. The payments must be made under a program provided for by federal or provincial law.

3. The payments must be received directly or indirectly by the individual for the benefit of another individual (hereinafter referred to as the "cared-for individual").

4. The cared-for individual cannot be the individual's spouse or related to the individual or the individual's spouse.

5. 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.

6. 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.

Where these conditions are met, social assistance payments are not required to be included in computing the income of the individual by virtue of paragraph 81(1)(h) of the Act.

We are unable to comment as to whether all the condition have been met, on the basis of the documentation submitted. It may be necessary for you to contact the XXXXXXXXXX for further information to establish whether all the conditions are met. In addition, a separate determination must be made for each cared-for individual.

We trust our comments will be of assistance.

John Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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