Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Herb Dhaliwal, Minister of National Revenue, has asked me to reply to your letter of April 8, 1999, concerning the tax treatment of Canada Pension Plan (CPP) disability benefits received by XXXXXXXXXX.
In your letter, you indicate that XXXXXXXXXX applied for and was awarded CPP disability benefits effective XXXXXXXXXX, but her benefits were terminated in XXXXXXXXXX. Subsequently, XXXXXXXXXX was given the opportunity to reinstate her CPP Record of Earnings and she was advised on March 24, 1999, that her CPP disability benefits would be reinstated to the effective date. You refer to a letter of June 29, 1994, with guidelines from Mr. Denis Lefebvre, former Assistant Deputy Minister, Policy and Legislation Branch, indicating that the receipt of CPP payments by a status Indian will usually be exempt from income tax when received as a result of employment income that was exempt from tax.
The Indian Act Exemption for Employment Income Guidelines set out the Department’s position for CPP payments and other employment-related income that is received after 1991. I wish to confirm that the Department’s position in the Guidelines regarding CPP payments and other related income remains the same. In the case where the employment income from which the CPP payments flow was partially exempt and partially taxable, the CPP payments will be prorated between exempt and taxable categories based on contributions.
You have indicated that XXXXXXXXXX CPP disability benefits are exempt from tax pursuant to subsection 87(1) of the Indian Act and due to the fact that her employer was located on a reserve. In order to determine if XXXXXXXXXX CPP disability payments are exempt from tax, it is necessary for the Department to review her situation to determine if her employment income, on which her CPP payments are based, was also exempt from tax in prior years. In this regard, I invite you to contact Mr. Steve Crout, Assistant Director, Client Services Division, Northern British Columbia and Yukon Taxation Services Office, by telephoning 0-250-561-7888 collect or by writing to 280 Victoria Street, Prince George, British Columbia, V2L 5N8. Mr. Crout is aware of our correspondence and will be pleased to assist you.
I appreciate the opportunity to address your concerns.
Yours sincerely,
Bill McCloskey Assistant Deputy Minister Policy and Legislation Branch
c.c. Mr. Steve Crout
Assistant Director, Client Services Division
Northern B.C. and Yukon Taxation Services Office
Gwen Moore
952-1506
June 9, 1999