Principal Issues: 1. Will the CESB be exempt from tax under section 87 of the Indian Act?
2. Will the CESB be treated like an old age security (OAS) payment?
3. Does the CESB have to be included on line 7 of Form T90?
Position: 1. No 2. Not necessarily 3. No
Reasons: 1. The CESB is not considered to be situated on a reserve as there are insufficient factors connecting this income to a reserve.
2. There are differences between the eligibility requirements of the CESB and the OAS. The CESB has additional eligibility requirements which may be considered as connecting factors. However, these factors are not significant enough to connect the CESB to a reserve and therefore, the CESB will be taxable.
3. It is not exempt from tax under section 87 of the Indian Act.
November 26, 2020
Senior Programs Officer Business and Employment Division Legislation Section Income Tax Rulings Directorate Stakeholder Relations Division Ananthy Mahendran Assessment, Benefit, and Service Branch (905) 721-5204
Attention: Hanna Barysenka 2020-086785
SUBJECT: Taxability of the Canada Emergency Student Benefit
This is in response to your email of October 15, 2020, requesting our comments to your questions on the taxability of the Canada Emergency Student Benefit (CESB) received by a First Nation individual.
Our comments to your questions are as follows:
Q1. Will the CESB be exempt from tax under section 87 of the Indian Act?
No. The CESB is not considered to be situated on a reserve as there are insufficient factors connecting this income to a reserve. It is available to all Canadians who qualify and are paid from general government funds. This benefit is not paid by First Nations or with money specifically set aside for First Nation individuals. Furthermore, similar to a social assistance payment or an old age security payment, the CESB is available to all eligible individuals regardless of whether they are First Nation individuals or whether they earned income in 2019 or in the 12-month period prior to the date of their application. The fact that the recipient is a First Nation individual residing on a reserve is not sufficient to result in the benefit being situated on a reserve, and therefore, it is not exempt from tax under section 87 of the Indian Act.
Q2. Will the CESB be treated like an old age security (OAS) payment?
The OAS payment is a monthly payment available to seniors aged 65 and older who meet the Canadian citizenship and residency requirements. Old age security income has never been considered to be personal property situated on a reserve because it does not have any reserve connection and therefore, it remains taxable. There are differences between the eligibility requirements of the CESB and the OAS. Unlike the OAS, which only has an age and Canadian citizenship and residency requirements, the CESB has other eligibility requirements which may be considered as connecting factors. However, it is our view that these factors are not significant enough to connect the CESB to a reserve and therefore, the CESB will be taxable.
Q3. Does the CESB have to be included on line 7 of Form T90?
No. Form T90, Income exempt from tax under the Indian Act, is mainly used to calculate a First Nation individual’s total exempt working income (line 4) and net exempt income (line 17) for purposes of the Canada workers benefit. Line 7 of Form T90 E(20) refers to the federal, provincial, or territorial government COVID-19 payments received in the year. The instruction for what amounts to be entered on line 7 of Form T90 E(20) further clarifies that only the exempt portion of the COVID-19 payments received from the federal, provincial, or territorial government be entered on line 7. The CESB is not exempt from tax under section 87 of the Indian Act and therefore, should not be included on line 7 of Form T90.
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. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure, including information that could reveal the identity of the taxpayer. The taxpayer may ask for a version that has been severed using the Privacy Act criteria, which does not remove taxpayer identity. You can request this by e-mailing us at: ITRACCESSG@cra-arc.gc.ca. A copy will be sent to you for delivery to the taxpayer.
We trust these comments will be of assistance.
Yours truly,
R. Filion, CPA, CA
Manager
Non-Profit Organizations and Aboriginal Issues Section
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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