2015-0575631E5 social assistance

Principal Issues: What are the obligations of an organization to issue T5007 slips?

Position: Subsection 233(1) of the Income Tax Regulations requires every person, who makes a payment described in paragraph 56(1)(u) of the Act, to file an information return in prescribed form in respect of such payment with certain noted exceptions.

Reasons: General information provided.

Author: Shea-Farrow, Nancy
Section: 56(1)(u), 110(1)(h), 237(2), Regulation 233

XXXXXXXXXX                                      2015-057563
                                                              N. Shea-Farrow

July 29, 2015

Dear XXXXXXXXXX:

Re: Reporting requirements of an organization for payments

We are writing in response to your email of March 10, 2015, with respect to an organization’s obligations to issue T5007 - Statement of Benefits slips (the “T5007”) for payments or payments in kind by the organization to individuals that the organization assists (clients).

You state in your email that the goal of the organization is to assist XXXXXXXXXX. The organization may purchase items that the client needs such as cookware, cutlery, furniture, food cards or other items that the organization deems necessary to assist the client to be successful XXXXXXXXXX. Additionally, funds may be provided to a client sporadically during the year to assist in paying rent, to purchase clothes for a job interview and for other needs. You also state that if it is necessary to issue a T5007, it will be difficult to do so as a client may not have an address or social insurance number or other identification required to verify the proper name of the client. Specifically, you want to know if the value of the non-monetary items needs to be reported on a T5007 and what is meant by a “series of payments” for reporting purposes.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (“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 70-6R6, Advance Income Tax Rulings and Technical Interpretations. Paragraph 56(1)(u) of the Act requires that social assistance payments received in the year and that are made on the basis of a means, needs, or income test be included in a taxpayer’s income except to the extent that such amounts are otherwise required to be included in the taxpayer’s income or the income of the taxpayer’s spouse or common-law partner. However, amounts included in a taxpayer’s income under paragraph 56(1)(u) are offset by a matching deduction under paragraph 110(1)(f) of the Act, so that there are no income tax implications related to this income inclusion other than it may affect certain income-tested benefits.

The first requirement in paragraph 56(1)(u) of the Act is that the amount must be “social assistance.”  The term “social assistance” is not defined in the Act but generally means aid provided by a government or government agency, although it can be provided by other organizations, on the basis of need. 

A non-monetary item provided to an individual could be a social assistance payment if a payment was made to obtain the item for the benefit of the individual. However, if no payment was made to obtain a non-monetary item given to an individual (for example, donated household goods or furniture), the value of the non-monetary item would likely not be considered a social assistance payment for the purpose of paragraph 56(1)(u) of the Act.

The second requirement in paragraph 56(1)(u) of the Act is that the payment must be “made on the basis of a means, needs or income test.” We consider each one of these tests to be a financial test and they are described as:

1.    An “income” test, which is a test based solely on the income of the applicant.

2.    A “means” test, which is similar to an income test, but also takes into account the assets of the applicant.

3.    A “needs” test takes into account the income, assets and financial needs of the applicant.

When an organization concludes that it has provided social assistance as described in paragraph 56(1)(u) of the Act to an individual, subsection 233(1) of the Income Tax Regulations (the “Regulations”) requires the organization that provided the social assistance to report the payment on a T5007 unless the payment is specifically excluded from this reporting requirement. The exceptions from these reporting requirements are listed in subsection 233(2) of the Regulations. As described in subsection 233(2), a payment that does not have to be reported on a T5007 is a payment that:

(a)   is in respect of medical expenses incurred by or on behalf of the recipient;

(b)   is in respect of child care expenses, as defined in subsection 63(3) of the Act, incurred by or on behalf of the recipient or a person related to the recipient;

(c)   is in respect of funeral expenses in respect of a person related to the recipient;

(d)   is in respect of legal expenses incurred by or on behalf of the recipient or a person related to the recipient;

(e)   is in respect of job training or counselling of the recipient or a person related to the recipient;

(f)   is paid in a particular year as a part of a series of payments, the total of which in the particular year does not exceed $500; or

(g)   is not a part of a series of payments.

The phrase a “series of payments” is not defined in the Act. However, according to the Concise Canadian Oxford Dictionary a “series” is “a number of things of which each is similar to the preceding.” Therefore, in our view, a series of payments, for the purpose of social assistance under paragraph 56(1)(u) of the Act, is a number of similar payments made in a particular year to an individual under the same program of a government or other organization.

Where amounts are excluded from the reporting requirements by subsection 233(2) of the Regulations, it is the practice of the Canada Revenue Agency not to require the excluded amounts to be included in income of the recipient, thereby not affecting the calculation of income-tested benefits. 

Therefore, if an amount is considered social assistance (and does not fall under another provision of the Act), but a financial “means, needs or income” test is not used to determine eligibility when assisting a client, or the amount is excluded from the reporting requirements by subsection 233(2) of the Regulations, the amount does not have to be reported on a T5007 and is not included in the recipient’s income under paragraph 56(1)(u) of the Act. Assistance of the nature that you have described, if it is not social assistance included in income under paragraph 56(1)(u), would likely not be included in income of the client under any other provision of the Act. More information about the T5007 can be found in the T5007 Guide - Return of Benefits (T4115) on the Canada Revenue Agency’s website at www.cra-arc.gc.ca.

We trust our comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Manager - Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

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