2015-0615021I7 Social Assistance received by Indians

Principal Issues: Are the instructions for line 145 from the T1S-D, Information Sheet correct?

Position: Yes

Reasons: CRA’s previously stated position.

Author: Townsend, Ann
Section: 81(1)(1), 56(1)(u), 110(1)(f)

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                                                                                                                                      2015-061502
                                                                                                                                      A. Townsend
March 10, 2016

Dear XXXXXXXXXX:

Re:  Social Assistance Received by Indians from a First Nation

We are responding to your e-mail dated October 26, 2015, asking for our views on whether the T1S-D Information Sheet (Information Sheet) should advise Indians, as that term is defined in section 2 of the Indian Act, not to report social assistance payments received from a band council on line 145 of the T1S-D, Credits and Benefits Return. You are also asking for our views on whether the instructions for line 145 from the General Income Tax and Benefit Guide (Guide) should be amended to include the same instructions to be consistent with the Information Sheet.

The T1S-D, Credits and Benefits Return, is a return for Indians that is used by the CRA to calculate the GST/HST tax credit, various provincial credits, and the Canada child tax benefit. If an Indian does not meet the criteria to use the T1S-D, Credits and Benefits Return, for example, where the Indian has taxable income or had income taxes withheld, he or she is instructed to complete the T1 General Income Tax and Benefit Return.

Paragraph 56(1)(u) of the Income Tax Act (the “Act”) includes in calculating a taxpayer’s income for the year social assistance payments that are made on the basis of a means, needs, or income test, except to the extent that such payments 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 income under paragraph 56(1)(u) of the Act are offset by a corresponding deduction under paragraph 110(1)(f) of the Act, such that there are no accompanying income tax implications related to this income inclusion other than it may affect certain income-tested benefits. In addition, generally, social assistance payments are required to be reported by the payer on information slip T5007, Statement of Benefits, as required by subsection 233(1) of the Income Tax Regulations.

Paragraph 81(1)(a) of the Act and section 87 of the Indian Act provide a tax exemption for the personal property of an Indian situated on a reserve. The courts have determined that income, including social assistance payments, is personal property for purposes of section 87. Therefore, if a social assistance payment is found to be situated on a reserve, it will be tax-exempt.

It is our understanding that social assistance programs are usually administered by a First Nation for all individuals who live on a reserve, including non-Indians. In cases where a First Nation does not administer its own social assistance program, Indigenous and Northern Affairs Canada (INAC) will administer the program and make the social assistance payments directly to the individuals that live on a reserve.

It is our view that social assistance payments received from a First Nation by an Indian who lives on a reserve under a program that is administered by the First Nation are sufficiently connected to a reserve to be exempt from tax and should not be included on line 145 of the T1S-D, Credits and Benefits Return. It is also our view that, generally, social assistance payments received by an Indian under a program that is administered by INAC is not sufficiently connected to a reserve to be exempt from tax and is required to be included in income on line 145. An Indian receiving the social assistance should be able to determine who is administering the social assistance program based on the organization that issues the T5007 slip.

Based on the above, it is our opinion that the instructions advising an Indian who lives on a reserve not to include social assistance on line 145 when the assistance is received from a First Nation is correct. In addition, we agree with your view that the same instructions should be included in the Guide to be consistent with the Information Sheet since Indians also use the Guide.

For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. A severed copy will also be distributed to the commercial tax publishers, following a 90-day waiting period (unless advised otherwise to extend this waiting period), for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be e-mailed to: ITRACCESSG@cra-arc.gc.ca. In such cases, a copy will be sent to you for delivery to the taxpayer.

We trust these comments will be of assistance.

Yours truly,

Roger Filion, CPA, CA
Manager
NPO and Aboriginal Issues Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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