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: Taxation of payments made to or on behalf of aboriginal students for tuition and books for post-secondary education under the XXXXXXXXXX .
Position TAKEN:
Payment of tuition and training costs is taxable under 56(1)(n)
Reasons FOR POSITION TAKEN:
Position taken in similar files
XXXXXXXXXX . 990585
G. Moore
March 26, 1999
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
We are writing in response to your letter of February 24, 1999, regarding the income tax treatment of payments made under the XXXXXXXXXX.
As we understand it, the XXXXXXXXXX provides financial assistance to aboriginal students (First Nations, Inuit, and Metis) to enable them to attend post-secondary educational institutions. The purpose of the program is to encourage and assist aboriginal people resident in XXXXXXXXXX to pursue their post-secondary educational opportunities in any discipline of their choice, create the opportunity for mentor roles to help promote greater understanding between aboriginal people and XXXXXXXXXX, and strengthen community development by supporting aboriginal peoples’ post-secondary educational endeavors. To be eligible under the XXXXXXXXXX , applicants must have maintained residence within the XXXXXXXXXX, provide proof of acceptance in a post-secondary educational institution; maintain their course work load attendance leading to a recognized degree, certificate or diploma; possess a suitable attitude, and XXXXXXXXXX.
Further to the telephone conversation of March 19, 1999, (Moore/XXXXXXXXXX) it is our understanding that funding for the XXXXXXXXXX is not provided by any level of government but is provided entirely by XXXXXXXXXX. The financial need of the aboriginal student is not a criteria used in the selection process to determine if a student should receive financial assistance under the program. In addition, there is no requirement that to be eligible for financial assistance under the XXXXXXXXXX, the student or the student’s parent must be an employee of XXXXXXXXXX.
You have asked if XXXXXXXXXX should be supplying T4A slips or T5007 slips to students for monies paid under the XXXXXXXXXX.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature only and are not binding on the Department.
Scholarships and Bursaries
Paragraph 56(1)(n) of the Act requires the inclusion into income of certain scholarships, bursaries and fellowships, with a $500 exemption. A bursary is defined in Webster’s Third International Dictionary as “a sum or varying amount given or granted to a needy student”. In our view, the definition of a bursary is broad enough to encompass almost any form of financial assistance paid to a student to enable a student to pursue his or her education, including a payment based on the means or needs of the student. This can include the value of ancillary assistance such as travel assistance, lodging, books or equipment, dependant care, and so on.
A bursary usually applies to education at the post-secondary school level or higher but there are circumstances where bursaries can be awarded for education below the post-secondary school level. Scholarships and bursaries ordinarily assist the student in proceeding towards a degree, diploma, or other certificate of graduation. They may apply to academic disciplines or to trades (such as plumbing or carpentry). Normally, a student is not expected to do specific work for the payer in exchange for a scholarship or bursary. It will be a question of fact based on a review of all relevant circumstances as to whether a particular individual has received a scholarship or bursary that is to be included in the individual’s income under paragraph 56(1)(n) of the Act. However, based on our understanding of the XXXXXXXXXX, since the primary purpose of the payment of tuition/training costs appears to be to provide financial assistance to aboriginal students in need to further their post-secondary education, the value of the benefit the student receives will be considered to be a scholarship or bursary.
The value of the benefit to be included in the student’s income would be the fair market value of the applicable course or program as is determined by reference to the rates regularly charged to the public for enrolment in the applicable course or program. In addition, if a scholarship or bursary program provides allowances or reimbursements to pay for specific educational costs, such as those for lodging, personal travel, tools, books or equipment, those amounts are generally also included in income under paragraph 56(1)(n) of the Act. Paragraph 56(1)(n) of the Act can also apply to the value of benefits in kind, such as free accommodation or equipment. IT-75R3, Scholarships, Fellowships, Bursaries, Prizes, and Research Grants, (copy enclosed) discusses the taxation of these types of receipts.
A person who pays an amount as a scholarship or bursary is required to report that amount on a T4 - T4A Summary and related T4A Supplementaries. Income tax, Canada Pension Plan contributions, and Employment Insurance deductions are not required to be withheld from such amounts. As the value of the benefit the student receives will be considered to be a scholarship or bursary under the AEPP, under paragraph 56(1)(n) of the Act, a T4 - T4A Summary and related Supplementary should be issued to students who receive financial assistance under the program.
As payments under the XXXXXXXXXX are not considered to be social assistance payments, they are not required to be included in income pursuant to paragraph 56(1)(u) of the Act, and therefore, T5007 Supplementaries should not be issued to students for financial assistance received under that program.
With respect to the issuance of receipts when the tuition fees are paid on behalf of a student, Form T2200 should be issued to students who are enrolled in a qualifying program, whether or not it is actually the student who paid the tuition.
Status Indians
The Department’s position respecting the tax treatment of education grants is based on the Greyeyes case (78 DTC 6043) which held that the scholarship paid to a status Indian by the Department of Indian and Northern Affairs was exempt from tax by virtue of subsection 90(1) and section 87 of the Indian Act.
Section 87 of the Indian Act provides that the personal property of an Indian situated on a reserve is exempt from taxation. Paragraph 90(1)(b) of the Indian Act provides that for purposes of section 87, personal property that was given to Indians under a treaty or agreement between a band and Her Majesty shall be deemed always to be situated on a reserve. As described in Mitchell v. Peguis Indian Band ((1990) 2 SCR 85), in paragraph 90(1)(b) of the Indian Act, the words “treaty” and “agreement” take colour from each other and, in our view, an agreement would have to be similar in nature to a treaty. It is a question of fact whether a scholarship for education received by a status Indian is received under a treaty or agreement between a band and Her Majesty and is exempt or is received under some other program and is taxable. Based on the information provided, a scholarship or bursary received by a status Indian from XXXXXXXXXX would not be considered to be received under a treaty or agreement between an Indian band and Her Majesty and accordingly, would not be exempt from taxation.
We trust our reply will be of assistance to you.
Yours truly,
R. Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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