14 June 2001 Internal T.I. 2001-0082157 - WITHHOLDING FROM PENSION PAID TO CHARITY

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: Are withholdings required from payments made to a registered charity where the charity is the named beneficiary of an RPP?

Position: Yes, but CCRA will consider a waiver under subsection 153(1.1).

Reasons: The charity is tax-exempt.

			June 14, 2001
	HEADQUARTERS	HEADQUARTERS
	Charities Division	Income Tax Rulings
	 		  Directorate
	Attention:  Jane Waterfall	S.E. Thomson
			957-2747

			2001-008215

Withholding from pension payments made to registered charities

We are responding to your email to Patricia Spice of the Registered Plans Directorate on April 20, 2001, in which you ask if tax must be withheld from a payment to a registered charity where the charity is the named beneficiary of a registered pension plan (an "RPP").

You refer to our letter 992134, in which we state that withholdings are required from lump-sum pension benefits paid to a charity after the death of the pensioner, pursuant to paragraphs 56(1)(a) and 153(1)(b) of the Income Tax Act (the "Act"). You point out that the 2000 federal budget proposed to modify the rules to provide a charitable donation tax credit to the deceased where the charity is the named beneficiary of a deceased annuitant's registered retirement savings plan (an "RRSP") or registered retirement income fund (a "RRIF"). In light of this, you question if there is also some relief from withholding on payments from an RPP.

The proposals of the 2000 federal budget, as set out in Bill C-22, propose to add new subsection 118.1(5.3) of the Act to provide a charitable donation tax credit to the deceased annuitant of an RRSP or RRIF, in certain cases, where a registered charity is the named beneficiary of the RRSP or RRIF.

Note that the tax treatment of an RRSP or RRIF upon death differs from the tax treatment of an RPP upon death. Subsection 146(8.8) of the Act deems the annuitant to have received, immediately before the annuitant's death, a benefit out of the RRSP equal to the fair market value of the all of the property in the plan at the time of death. Subsection 146.3(6) is the corresponding deeming provision for RRIFs. No withholding is required from amounts paid to beneficiaries of an RRSP or RRIF that have been taxed in the hands of the deceased. On the other hand, there is no similar deeming provision for RPPs - rather, amounts received by the beneficiary of an RPP are taxable to the beneficiary under paragraph 56(1)(a). The enactment of subsection 118.1(5.3) provides for a matching of the charitable donation tax credit with the incidence of taxation of the RRSP or RRIF.

However, where the beneficiary of an RPP is a registered charity which is exempt from Part I tax, Assessment and Collections Branch advises that the Canada Customs and Revenue Agency may consider a waiver of the requirement to withhold if the charity makes an application pursuant to subsection 153(1.1) of the Act. The procedure for applying for a "letter of authority" under subsection 153(1.1) is explained in Chapter 4 of the guide T4001 Employers' Guide: Payroll Deductions (Basis Information) 2000-2001.

Roberta Albert, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate

c.c.: Patricia Spice, RPD
Phil Bettencourt, Trusts Accounts Division