1 February 2011 Internal T.I. 2010-0382681I7 - Taxability of Stipend

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 a stipend paid to individuals as a "training allowance" while participating in a government sponsored program to improve employability skills and provide work placements opportunities is taxable.

Position: Yes.

Reasons:	Similar to other payments which are taxable under 56(1).

							February 1, 2011
	

	Benny Mah					Income Tax Rulings Directorate
	Surrey Tax Centre				Andrea Boyle, CGA
	Canada Revenue Agency
	9755 King George Blvd.
	Surrey BC  V3T 5E1

							2010-038268

Taxable Benefit - Stipend

I am replying to your memorandum dated September 30, 2010, in which you asked for our views on whether a particular stipend is taxable. The facts are as follows:

• The stipend is received under the Targeted Initiative for Older Workers (TIOW). This initiative is intended to help older workers (generally 55-64 years old) in vulnerable communities remain active and productive participants in the labour market.
• TIOW is a federal initiative and funding is provided on a cost-shared basis with participating provinces and territories.
• The federal portion of the funding is paid out of the Consolidated Revenue Fund; training benefits received by participants are not funded by the Employment Insurance Act.
• The TIOW is somewhat unique in that the "training allowances" paid to participants do not affect the eligibility of the individual to continue to collect E.I. payments.
• Provinces and territories have significant flexibility in identifying vulnerable communities for programming, and in designing and delivering projects. Projects can include activities such as skills assessment, counselling, skills upgrading and work experience for new jobs.
• The specific individual participated in a program which was cost-shared between the federal and XXXXXXXXXX governments. The XXXXXXXXXX Advanced Education administers the TIOW in XXXXXXXXXX and delivers it through XXXXXXXXXX ("the College").
• The form that the initiative takes at the College is a 15-week course through the XXXXXXXXXX .
• XXXXXXXXXX
• The College receives the funding to run the program and is responsible for issuing the stipend payments and T4As to the participants. Payments are made on a bi-weekly basis; stipend payment amounts are based on minimum wage and are not based on a financial assessment of a participant's means, needs, or income. XXXXXXXXXX has not issued T2202 or T220As for the course.
• Most, but not all, of the participants in the XXXXXXXXXX program participate in a work placement which takes place during the 15-week period of the course; in some instances a participant may opt to spent additional classroom time to improve specific job skills.

Our comments

Amounts received in the year by the taxpayer as earnings supplements provided under a project sponsored by a government or government agency in Canada to encourage individuals to obtain or keep employment are included in income under 56(1)(r)(i) as government financial assistance. Generally, the purpose of an earnings supplement is to increase, for temporary periods, the income that an individual receives from a job in order to encourage them to accept a job.

Based on the information provided, it is our view that the stipend amounts paid while an individual is participating in this program would be taxable as government financial assistance under subparagraph 56(1)(r)(i).

Paragraph 200(2)(c) of the Income Tax Regulations requires that payments which are taxable under paragraph 56(1)(r) be reported on a T4A by the payer. Under 153(1)(s), income tax must be withheld from amounts taxable under this paragraph.

We trust that these comments will be of assistance.

Yours truly,

Guy Goulet CA, M.Fisc.
Acting Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch