14 April 2015 External T.I. 2014-0559421E5 - Social assistance payments under the XXXXXXXXXX program

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.

Principal Issues: Whether in a given situation, payments made to a care provider under the XXXXXXXXXX program in XXXXXXXXXX would be excluded from the care provider's income under 81(1)(h).

Position: Yes, provided all the conditions under paragraph 81(1)(h) are met, and assuming that the social assistance funds received from the province to pay the care provider are clearly traceable to the XXXXXXXXXX program (e.g., not co-mingled with other personal funds of the Administrator).

Reasons: Previous positions.

XXXXXXXXXX
2014-055942
Randa El-Kadi

April 14, 2015

Dear XXXXXXXXXX:

Re: Payments made by a "Funds Administrator" to an individual providing a support home

This is in response to your letter of November 5, 2014, regarding whether amounts paid to an individual providing a support home for an unrelated adult with a XXXXXXXXXX disability are excluded from that individual's income pursuant to paragraph 81(1)(h) of the Income Tax Act (the "Act") in a given situation.

According to your letter, and based on a telephone conversation with you (XXXXXXXXXX/El-Kadi) on January 8, 2015, you indicate that you have an agreement with the XXXXXXXXXX which allows you to act as the Funds Administrator for your adult son who has a XXXXXXXXXX disability. You receive funds in connection with XXXXXXXXXX under the XXXXXXXXXX program for the purpose of obtaining a support home where your son can reside and receive supports. You use these funds to pay an unrelated individual who lives in a housing unit together with your son and provides him support with all aspects of daily living. As the Funds Administrator, you indicate that you have an employer-employee relationship with that individual.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

General eligibility requirements under paragraph 81(1)(h)

Paragraph 81(1)(h) of the Act excludes from income social assistance payments that an individual (the "caregiver") receives for the benefit of another individual, when all of the following conditions are met:

1. The payment is a social assistance payment ordinarily made on the basis of a means, needs, or income test.
2. The payment is made under a program provided for by a federal, provincial or territorial law.
3. The payment is received directly or indirectly by the caregiver for the benefit of another individual (the "cared-for individual").
4. The cared-for individual is not the caregiver's spouse or common-law partner or related to the caregiver or the caregiver's spouse or common-law partner.
5. No family allowance under the Family Allowances Act or any similar allowance provided for by provincial or territorial law is payable in respect of the cared-for individual for the period for which the social assistance payment is made.
6. The cared-for individual resides in the caregiver's principal place of residence, or the caregiver's principal place of residence is maintained for use as the cared-for individual's residence, during the period for which the payment is made.

The term "social assistance" is not defined in the Act. Generally, social assistance means aid provided by a government or government agency on the basis of need. It does not matter if the payments are made directly by a government or government agency or if they are received indirectly through another organization. The social assistance payments may also be made to the cared-for individual, who then pays the caregiver.

The question as to whether payments received by a caregiver are social assistance payments that meet all the conditions listed above depends on the specific facts of a given situation.

Payments received under the XXXXXXXXXX program

It is our understanding from the Government of XXXXXXXXXX website that an individual's eligibility for the XXXXXXXXXX Program funding is based on the evidence of a XXXXXXXXXX disability prior to the individual's eighteenth birthday, XXXXXXXXXX. It is also our understanding that payments received under the XXXXXXXXXX program are authorized under the XXXXXXXXXX.

It appears that XXXXXXXXXX program funds that are used to pay a caregiver are social assistance payments. Although funding under the XXXXXXXXXX program seems to be solely based on a XXXXXXXXXX assessment, it is generally implicit that individuals who are eligible under this program would not be capable of financially supporting themselves or living independently. Consequently, we are of the opinion that the requirement under paragraph 81(1)(h) of the Act for the social assistance to be ordinarily based on a means, needs or income test is satisfied by an implicit test applicable to adults with severe XXXXXXXXXX disabilities that began in childhood.

Provided that all of the requirements under paragraph 81(1)(h) are met, we are of the view that payments received by a caregiver under the XXXXXXXXXX program would qualify for the exemption under paragraph 81(1)(h) of the Act, even when received indirectly through a Funds Administrator.

It is of note, however, that where a caregiver receives payments indirectly, for example as employment income from the cared-for individual or from the Funds Administrator, it is important that these payments retain their source as social assistance payments. This would be achieved by ensuring that funds received under the XXXXXXXXXX program are kept in a separate account; that is, they are not co-mingled with other personal funds of the Funds Administrator.

We trust that these comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate