Principal Issues: Will post secondary education assistance payments received by a status Indian of a self-governing First Nation be tax exempt to the recipient pursuant to paragraph 81(1)(a) of the Income Tax Act and 90(1)(b) of the Indian Act in circumstances where the student no longer resides in the Yukon?
Position: No
Reasons: The Indian Act entitlement with respect to PSE does apply to self-governing First Nations or its status Indian members, regardless of residence
September 26, 2006
VANCOUVER TSO HEADQUARTERS Central City Callsite Income Tax Rulings Directorate Attention: Kevin Diablo Kimberly Duval, CA (613) 599-6054
2006-020218
Post secondary education assistance received by a status Indian of a self-governing Yukon First Nation
This is in response to your e-mail correspondence of August 23, 2006, requesting our comments as to whether post secondary education ("PSE") assistance received by a status Indian of a self-governing Yukon First Nation would be tax exempt to the recipient where the particular individual no longer resided in the Yukon.
Our Comments
The CRA has had a longstanding position that PSE assistance payments received by a status Indian under an Indian and Northern Affairs Canada (INAC) program are tax exempt pursuant to specific provisions in the Indian Act. Notwithstanding the fact that the Government of Canada is currently conducting a review of Aboriginal policies, including PSE assistance for Aboriginal students, the CRA continues to treat this assistance as tax exempt.
However, Yukon First Nations and its status Indian members who are party to a self-governing agreement with the Crown are no longer subject to, nor entitled to, provisions under the Indian Act. As such, any PSE assistance received by a status Indian who is a member of a self-governing First Nation will be taxable to the recipient, regardless of residence of the individual at the time of receipt.
It should be noted that the recently proposed legislative amendments with respect to the scholarship exemption in subsection 56(3) of the Income Tax Act may be applicable in the circumstances.
We trust that these comments will be of assistance.
For your information 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 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 your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch