Principal Issues: [TaxInterpretations translation]
Are amounts paid by the Quebec government to pension plan members taxable?
Position: No
Reasons: The amounts are not received as, or in full or partial payment of, a retirement or pension benefit or allowance and do not represent substitution for such amounts. The amounts are not derived from a source of income.
2008-027178 XXXXXXXXXX Catherine Ayotte, Notary, M.Fisc May 9, 2008
Dear Sir,
Subject: Support Program for Members of Deficient Pension Plans XXXXXXXXXX (the "Program")
This is in response to your emails of March 14, 2008, April 4, 2008, April 25, 2008 as well as an email from XXXXXXXXXX received on April 18, 2008. These emails concerned the tax implications of the amounts to be paid by the Government of Quebec under the Program.
The objective of the Program is to provide a lump sum payment to compensate for the value of the reduction in members' entitlements caused by pension plan deficits at the date of termination. The Program will start on XXXXXXXXXX and end on XXXXXXXXXX.
To be eligible for the Program, the person must be a member on the termination date, i.e. XXXXXXXXXX, of either of the two pension plans concerned. Those plans are: XXXXXXXXXX.
For all members of those plans, the amount to be paid will be XXXXXXXXXX% of the loss in the value of their entitlements, as determined at the date of termination. If the non-retired members at the date of termination agree by a majority at a meeting to transfer their share of the subsidy to the retirees, the full amount of government assistance will then be granted to the retirees and beneficiaries of the two deficit plans XXXXXXXXXX.
The compensation will be made in the name of the beneficiary eligible under the Program. In the event that the beneficiary dies before XXXXXXXXXX, the compensation may be paid to the estate. Beneficiaries will receive an amount from the Program in a single payment to be made no later than XXXXXXXXXX.
Our Opinion
We are of the view that the amounts to be received by the beneficiaries under the Program will not be taxable for purposes of the Income Tax Act. Consequently, the person paying the amounts to the beneficiaries under the Program will not be required to make any deductions at source or issue any information slips.
These opinions are not advance decisions and, as stated in paragraph 22 of Information Circular 70-6R5 of 17 May 2002, are not binding.
Best regards,
Louise J. Roy
Interim Manager
Financial Sector and Exempt Entities Section
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate.