23 December 1998 External T.I. 9832995 - BURSARIES & SOCIAL ASSISTANCE

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 Alberta Skills Development Program

Position: Taxable as social assistance under paragraph 56(1)(u).

Reasons: Type of training being offered is life skills, literacy, basic adult education, not of a type ordinarily funded by a “bursary”.

					5-983299
XXXXXXXXXX 				Karen Power, CA
(613) 957-8953
Attention:  XXXXXXXXXX 

December 23, 1998

Dear XXXXXXXXXX:

Re: Alberta Skills Development Program

We are writing in reply to your correspondence of December 15, 1998, which was forwarded to the Income Tax Rulings and Interpretations Directorate for reply by XXXXXXXXXX.

You have requested our comments concerning the taxation of payments made under the Alberta Skills Development Program. In particular, you would like us to consider a recent opinion we provided XXXXXXXXXX concerning the taxation of the Saskatchewan Provincial Training Allowance. It is our understanding, based on a letter dated June 25, 1998, which we received from XXXXXXXXXX, that the Saskatchewan program was modeled on the Alberta Skills Development Program. The nature of training under this program is basic adult education as well as life skills, literacy training and similar initiatives.

Our Comments

The issue at hand is whether the payments made under the Alberta Skills Development Program are paid as bursaries pursuant to paragraph 56(1)(n) of the Income Tax Act (the “Act”) or as social assistance pursuant to paragraph 56(1)(u) of the Act.

In order to determine whether paragraph 56(1)(n) or (u) of the Act applies in a particular situation, one must look to the meaning of the terms "social assistance" and "bursary" as they are ordinarily defined and understood, since these terms are not defined in the Act. "Social assistance" or "social security" is defined in the Oxford English Dictionary (2nd Ed.) as a system whereby the state provides financial assistance for those citizens whose income is inadequate or non-existent owing to disability, unemployment, old age, etc.. A "bursary", on the other hand, is defined in Webster's Third New International Dictionary as "a sum of varying amount given or granted to a needy student". From these definitions it can be seen that a particular payment may have the quality of both social assistance and a bursary if it is paid to a student in financial need as part of the government's social safety net.

In our view, the type and caliber of training and learning being provided under the Saskatchewan program is not of a type ordinarily funded by a bursary, if, in fact, the training provided under the Alberta Skills Development Program is substantially the same as the training provided by the Saskatchewan Provincial Training Allowance (“PTA”). In our view, such payments are more in the nature of social assistance payments than bursaries. Accordingly, form T5007 should be issued to recipients of this allowance.

Please note, that the above comments do not apply to training provided to employment insurance clients. As stated in our September 14, 1998, response to XXXXXXXXXX, financial assistance received under Part II of the Employment Insurance Act, as well as similar financial assistance received from a government or government agency under the terms of an agreement with the Canada Employment Insurance Commission, is taxable under paragraph 56(1)(r) of the Act.

We trust our comments will be of assistance to you.

Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

cc. Marilyn Viger, Director, Federal and Provincial Affairs Division, Policy and Intergovernmental Affairs Directorate, Policy and Legislation Branch