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 amounts received pursuant to the XXXXXXXXXX Class Action Settlement are required to be included in the computation of income of a recipient for the purpose of calculating income-tested benefits.
Position: Likely not.
Reasons: Amounts received pursuant to the XXXXXXXXXX Class Action Settlement appear to be received as damages for personal injury. Amounts received as damages for personal injury will not be income from a source and, as such, will not be included in the computation of income and will not be taxable under the Income Tax Act. Therefore, the receipt of such amounts will not impact the calculation of the income-tested benefits of the recipient.
XXXXXXXXXX 2026-109298
Chris Brennan, CPA
May 20, 2026
Dear XXXXXXXXXX:
Re: XXXXXXXXXX Class Action Settlement
This letter is in response to your email of March 17, 2026, which requested our views on whether amounts received by Class Members of the XXXXXXXXXX Class Action Settlement are included in their income under the Income Tax Act (Act) and whether those amounts will impact the calculation of the recipients’ income-tested benefits.
Our Comments
This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.
Based on the information provided, including the Settlement Agreement between XXXXXXXXXX, it is our understanding that payments made to Class Members, pursuant to the XXXXXXXXXX, are intended to compensate Class Members for historical systemic harm, including denial of supports, forced institutionalization, and Charter based discrimination. Therefore, having regard to the nature and purpose of the payments, it is reasonable to conclude that these payments are compensation for damages for personal injury.
It is our view that amounts received as compensation for damages for personal injury do not constitute income from a source and, accordingly, are not included in income nor are they taxable under the Act. Therefore, the payments received, pursuant to the XXXXXXXXXX, will not be included in the income of the recipients and will not be taxable to the recipients. Consequently, these payments will not affect the calculation of the recipients’ income-tested benefits.
Yours truly,
Eric Wirag, CPA, CMA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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