21 July 2010 External T.I. 2010-0372351E5 - Universal Child Care Benefit Income

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: 1. What is meant by the term "income" used in subsection 56(6) in order to determine which spouse should report the Universal Child Care Benefit? 2. In the circumstance where the Child Care Expense Deduction is claimed by the spouse with the higher income, and in so doing, this results in he or she having the lower net income, who must claim the Universal Child Care Benefit?

Position: 1. In the context of subsection 56(6), "income" is the same as "net income" used in the CRA's publications and forms. 2. Child care expenses are a deduction in the determination of net income. In accordance with subsection 56(6), if the higher income spouse is otherwise eligible and claims the Child Care Expense Deduction, and in so doing, the result is that he or she will have the lower net income, then he or she should report the Universal Child Care Benefit.

Reasons: Consistent with the calculation of income and the relevant provisions of the Act.

XXXXXXXXXX
				2010-037235
				T. Posadovsky, CMA
				(613) 952-8283
July 21, 2010

Dear XXXXXXXXXX :

Re: Universal Child Care Benefits and the Child Care Expense Deduction.

I am replying to your email of June 24, 2010 concerning the meaning of "income" as used in subsection 56(6) in order to determine which spouse should report the Universal Child Care Benefit (the "UCCB"). You also provided a situation where, because the spouse with the lower income was in full-time attendance at University, the spouse with the higher income claimed the Child Care Expense Deduction (the "CCED"). After deducting the child care expenses, the spouse with the higher net income became the lower-income spouse. You ask whether the UCCB inclusion is determined before or after considering the CCED.

The situation outlined in your letter appears to involve completed transactions. The Directorate does not provide written interpretations involving completed transactions since, as explained in paragraph 22 of Information Circular IC-70-6R5, Advance Income Tax Rulings, such requests should be addressed to the appropriate Canada Revenue Agency ("CRA") Tax Services Office. IC-70-6R5 and other CRA publications can be accessed on our website at www.cra-arc.gc.ca. We are, however, prepared to offer the following comments:

Comments

Under the provisions of the Universal Child Care Benefit Act, families receive $100 per month ($1,200 per year) after June 2006 for each child under the age of six years. The purpose of the UCCB is to offset the cost of a family's child care choices. The amounts received are taxable and are required to be included in the income of the lower income spouse or common-law partner under subsection 56(6) of the Income Tax Act (the "Act").

According to the 2009 5000-G, T1 General Income Tax and Benefit Guide, under the heading "Line 117 - Universal Child Care Benefit (UCCB)" on page 15: "If you had a spouse or common-law partner on December 31, 2009, the one with the lower net income must report the UCCB." It is our view that in the context of subsection 56(6), "income... for the taxation year" is in reference to "net income" on line 236 of the T1 Income Tax Return.

To address your second question, it is a question of fact which spouse has the lower net income reported on line 236 of the T1 return. In your case, the spouse with the higher income was eligible to claim child care expenses because the spouse with the lower income was in full-time attendance at University. In so doing, the spouse with the higher net income before the CCED became the spouse with the lower net income. As child care expenses are a deduction in the calculation of net income, it would be appropriate that the UCCB be included in the income of the spouse with the lower net income after the CCED is applied.

We trust that these comments will be of assistance.

Yours truly,

Randy Hewlett
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch