Principal Issues: [TaxInterpretations translation] Is it contrary to tax law for a person who receives a Canada Child Tax Benefit or other tax credit to compensate for the child's basic needs to agree with his or her former spouse that those amounts are to be shared between the parents in proportion to their financial obligation for the child's needs? Is it contrary to tax law for a judge to confirm such an agreement?
Position: These issues are more a matter of family law than tax law. The Income Tax Act contains no restrictions on the "sharing" of the Canada Child Tax Benefit between parents who are either separated or divorced, nor does it contain any provision that would prevent a judge from approving such an agreement.
Reasons: Interpretation of the Income Tax Act.
XXXXXXXXXX 2005-013263
François Bordeleau
July 13, 2005
Dear Madam,
Subject: Request for Technical Interpretation: Canada Child Tax Benefit and other tax credits for basic needs of children
This is in response to your letter dated May 12, 2005 in which you requested our opinion on the above subject. We apologize for the delay in responding to your question.
Facts
Your letter states the following:
- You are currently a respondent in a child custody and maintenance application (the other party being your ex-spouse);
- You and your ex-spouse have agreed that custody of your child will be given to the father alone;
- You negotiated an agreement regarding the support to be paid to your former spouse which provided for the following:
o The child-related expenses will be $XXXXXXXXXX per year;
o Government assistance to be received by your former spouse, the Canada Child Tax Benefit and the Quebec Child Support Payment, would reduce the amount of those expenses and serve to reduce the burden on both parents;
o You agreed to pay XXXXXXXXXX% of the remaining balance of expenses, with your former spouse paying the remainder (XXXXXXXXXX%).
- Your former spouse receives approximately $XXXXXXXXXX per year in government assistance;
- Your former spouse has unilaterally terminated your settlement agreement in order to keep the Canada Child Tax Benefit and the Quebec Child Support Payment for himself.
Furthermore, we have assumed from your letter that the agreement you negotiated with your former spouse is not in writing.
Question
You wish to know whether it is contrary to Canadian tax law for a person receiving the Canada Child Tax Benefit or another tax credit to compensate for the child's basic needs to agree with his or her former spouse that those amounts be shared between the parents in proportion to their financial obligation to the child. If not, you wish to know whether it is contrary to tax law for a judge to confirm such an agreement.
We are enclosing a copy of the Canada Revenue Agency ("CRA") publication entitled "Your Canada Child Tax Benefit" for additional information on this program.
Analysis
The Canada Child Tax Benefit ("CCTB") is an amount paid monthly to eligible families to help them support their children under the age of 18. That amount – treated as an overpayment of income tax - is calculated based on the number of dependants under the age of 18 of an eligible individual, i.e. the parent of the dependant who is primarily responsible for the care and upbringing of the dependant. In addition, in order for the individual to be an "eligible individual", it is necessary for the dependant to reside with the individual during the period for which the CCTB is claimed.
Under sections 122.6 to 122.64 of the Income Tax Act ("ITA"), we have assumed that your former spouse is indeed an "eligible individual" for the Canada Child Tax Benefit and that your child is a "qualified dependant" under those same sections.
The purpose of the Act is to determine an individual's eligibility for the CCTB and to quantify the monthly amount to which the individual is entitled under sections 122.6 to 122.64. However, it is not within the purview of the Act to regulate or restrict the use that an eligible individual may make of the monthly amount received under the CCTB, nor does it encroach on the jurisdiction of a court dealing with issues of spousal separation in Quebec.
Thus, we are of the view that the questions you ask do not fall within the scope of the Act but rather within the area of family law. The Act contains no restrictions on the "sharing" of the Canada Child Tax Benefit between parents who are either separated or divorced, nor does it contain any provision that would prevent a judge from confirming such an agreement. We avoid commenting further on this issue since it is not a matter under the Act or its administration.
Best regards,
Phil Jolie
Director
Business and Partnerships Division
Income Tax Rulings Directorate
Encl.