Principal Issues: 1. If the CRB received by an individual is exempt from tax under section 87 of the Indian Act, should it be included in the individual’s income determined under Part I of the Income Tax Act (the Act)?
2. If an individual was in receipt of the CRB in 2020 or 2021 and their entire income for 2020 or 2021 is exempt from tax under section 87 of the Indian Act, will the individual be subject to the repayment in that year?
3. If an individual was in receipt of the CRB in 2020 or 2021 and has both exempt income and other income that is not exempt from tax in that year, will the individual be subject to the repayment in that year?
Position: 1. No
2. No
3. It depends on the facts.
Reasons: 1. Paragraph 81(1)(a) of the Income Tax Act excludes income exempt under section 87 of the Indian Act
2. The definition of “income” in subsection 8(3) of the Canada Recovery Benefits Act (the CRBA) ties into Part I of the Income tax Act which excludes income exempt under section 87 of the Indian Act and does not have a specific provision to include the section 87 exempt income for the purpose of calculating the income for repayment in subsection 8(2) of the CRBA.
3. If the individual has other income that is not exempt from tax that exceeds the stated amount of $38,000, they will be subject to the repayment of the CRB regardless of whether or not they have exempt income. On the other hand, if the individual’s other income that is not exempt from tax is less than or equal to $38,000 for 2020 or 2021, the individual will not be subject to the repayment of the CRB in that year.
DATE December 21, 2020
TO Senior Programs Officer FROM Business and Employment Division
Legislation Section Income Tax Rulings Directorate
Stakeholder Relations Division Ananthy Mahendran
Assessment, Benefit, and Service Branch (905) 721-5204
Attention: Marc Grignon FILE 2020-086649
SUBJECT: Repayment of the Canada Recovery Benefit
This is in response to your email of October 13, 2020, wherein you requested our answers to your questions on the repayment of the Canada Recovery Benefit (CRB).
Our answers to your questions are as follows:
Question 1
If the CRB received by an individual is exempt from tax under section 87 of the Indian Act, should it be included in the individual’s income determined under Part I of the Income Tax Act (the Act)?
Our Answer
No. The exempt CRB should not be included in the individual’s income pursuant to paragraph 81(1)(a) of the Act. Paragraph 81(1)(a) of the Act provides that amounts which are exempt from income tax by any other enactment of the Parliament of Canada (includes the Indian Act) shall not be included in computing the income of a taxpayer for a taxation year. Accordingly, the exempt income of an Indian under the Indian Act is not included in computing the income of a taxpayer under Part I of the Act.
However, it should be noted that if the CRB received by an individual is not exempt from tax under section 87 of the Indian Act, it will be included in the individual’s income in accordance with subparagraph 56(1)(r)(iv) of the Act.
Question 2
If an individual was in receipt of the CRB in 2020 or 2021 and their entire income for 2020 or 2021 is exempt from tax under section 87 of the Indian Act, will the individual be subject to the repayment in that year?
Our Answer
No. An individual whose entire income in 2020 or 2021 is exempt from tax under section 87 of the Indian Act will not be subject to the CRB repayment in that year even if their income is greater than $38,000 for that year.
An individual’s “income” as defined in subsection 8(3) of the Canada Recovery Benefits Act (the CRBA) is determined under part I of the Income Tax Act. Paragraph 81(1)(a) of the Act excludes income exempt under section 87 of the Indian Act when computing the income of a taxpayer for a taxation year under Part I of the Act. The CRBA does not have a specific provision to include the section 87 exempt income for the purpose of calculating the income for repayment in subsection 8(2) of the CRBA. Pursuant to subsection 8(3) of the CRBA, an individual’s income exempt under section 87 of the Indian Act is not included in the calculation of income, and therefore, the individual is not subject to the CRB repayment specified in subsection 8(2) of the CRBA.
Question 3
If an individual was in receipt of the CRB in 2020 or 2021 and has both exempt income and other income that is not exempt from tax in that year, will the individual be subject to the repayment in that year?
Our Answer
It depends on the facts of a particular situation. Pursuant to subsection 8(2) of the CRBA, an individual is required to repay an amount equal to 50 cents for every dollar of income earned in that year above $38,000 of income, up to the total amount of the CRB received by them in that year. Accordingly, if the individual has other income that is not exempt from tax that exceeds the stated amount of $38,000, they will be subject to the repayment of the CRB regardless of whether or not they have exempt income. On the other hand, if the individual’s other income that is not exempt from tax is less than or equal to $38,000 for 2020 or 2021, the individual will not be subject to the repayment in that year.
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 Indigenous Issues Section
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
c.c.: Bernard Trop,
Assistant Director
Corporate Governance
Indigenous Affairs Section
Federal, Indigenous and Quebec Affairs Division
Shirley Greening
A/Senior Programs Officer
Pre-Match - Matching Development Section HQ
Matching and Non-Resident Withholding Division
Individual Compliance Directorate
Collections and Verification Branch