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: What are the organization's reporting requirements under the Act for grants provided to individuals under an off-reserve Aboriginal housing program?
Position: Question of fact but, where amounts are excluded from T5007 reporting by subsection 233(2) of the Regulations, it is the practice of the CRA not to include these amounts in income.
Reasons: The payments do not appear to be a part of a series of payments.
XXXXXXXXXX 2010-035791
October 1, 2010
Dear XXXXXXXXXX :
Re: Treatment of off-reserve Aboriginal housing subsidy
This is in reply to your submission of February 18, 2010 regarding reporting requirements for a housing organization that is funded by the Alberta government (the "Organization") to provide financial assistance to eligible individuals under an off-reserve aboriginal housing program (the "Program"). In particular, the issues are whether financial assistance provided under the Program is considered income to the recipients and whether the Organization is required to issue a T4A slip.
Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments.
Our Comments
Paragraph 56(1)(u) generally requires that social assistance payments made on the basis of a means, needs or income test which are received in the year by the taxpayer must be included in income in the particular year. In certain circumstances, where the taxpayer is married or in a common-law partnership and resided with the spouse or common law partner, the amount is included in the income of the spouse or common-law partner with the higher income.
The first requirement in paragraph 56(1)(u) of the Act is that the amount must be "social assistance". The term "social assistance" is not defined in the Act. Social assistance generally means a system whereby financial assistance is extended to those individuals whose income is inadequate or non-existent owing to disability, unemployment, old age, etc. Such assistance may be provided under the auspices of a private organization, as well as a government. The second requirement in paragraph 56(1)(u) of the Act is that the payment must be "made on the basis of a means, needs or income test".
Under the Program, grants are provided to eligible aboriginal persons according to strict financial eligibility tests that take into account the value of the applicant's assets and their combined household income. In addition to financial criteria, other social criteria are used to evaluate core needs and determine eligibility under the Program.
In general social assistance payments would be included in computing the recipients net income for the year pursuant to paragraph 56(1)(u) of the Act. The particular recipient of such a payment would also be entitled to a corresponding deduction under paragraph 110(1)(f) of the Act in computing taxable income for the particular year. The purpose of this system is to ensure that such payments are not subject to income tax but are taken into account for the purposes of determining the amount of certain family income-tested tax benefits and tax credits.
Subsection 233(1) of the Income Tax Regulations (the "Regulations") requires every person who makes a payment described in paragraph 56(1)(u) of the Act to file an information return in prescribed form in respect of such payment. Social assistance payments are generally reported on a T5007 slip. However, subsection 233(2) of the Regulations lists certain exceptions from these reporting requirements. As described in paragraph 233(2)(g) of the Regulations a payment in the particular year that is not a part of a series of payments do not have to be reported on a T5007. For more information on completing the T5007 information return and which payments do not have to be reported, refer to the publication T5007 Guide - Return of Benefits (T5007).
While it is a question of fact whether the payments under the Program are social assistance payments, it appears that the financial assistance provided by the Organization is a one time grant and would be excluded from the T5007 reporting requirements. It is the practice of the CRA not to require the excluded amounts to be included in a recipient's net income, thereby not affecting the calculation of income-tested benefits.
We trust our comments will be of assistance to you.
Yours truly,
Lita Krantz, CA
Assistant Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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