JAN 12 1990
Provincial and International Business and GeneralRelations Division DivisionC. Savage J.A. SzeszyckiA/Director 957-2103
B. Fioravanti
Subject: Disabled Persons' Minimum Wage Protection Act 7-4566
We are responding to your memorandum of December 4, 1989, in which you requested our views as to the tax treatment of certain payments to be made under the proposed Disabled Persons Minimum Wage Protection Act, 1989 ("Wage Policy"). Your request follows a meeting held on November 30, 1989, at which Jack Szeszycki of this Division attended, between representatives of Revenue Canada, Taxation, National Health and Welfare and the
Background
24(1)
Generally, individuals that will be entitled Co assistance under the Wage Policy are already receiving some level of social assistance in connection with their disability. Those that are not receiving social assistance benefits are those individuals with disabilities who, for one reason or another, do not meet the means, needs or income criteria for entitlement. It is also our understanding that in the sheltered workshop environment the majority of disabled persons are performing activities that are not considered to be in the nature of work for the purposes of determining whether an employer/employee relationship exists. Their activities can be characterized more as therapy or training. These individual.s are not entitled to benefits under the Wage Policy. There are some individuals in sheltered workshops, however, who are unable to cope with the competitive work environment but who nevertheless perform employment activities. This latter group will be subject to the proposed Wage Policy.
24(1)
The tax treatment accorded the first two components are not at issue. The payment from the employer is employment income under section 5 of the Act and social assistance payments are treated under paragraph 56(l)(u) and subparagraph ll0(l)(f)(iii). The task at hand is to determine the nature of the supplementary payment and its appropriate tax treatment.
Our Comments
In our view, there are but two alternative characterizations of the supplementary payment; 1) as employment income or 2) as an additional social assistance payment.
In order for a payment to be characterized as a social assistance payment the individual in respect of whom the payment is made must' meet the means, needs or income criteria. As noted in the submission and illustrated in the examples provided, those who meet the social assistance criteria and thereby receive some level of assistance viii, in all likelihood, receive a combined wage and social assistance that viii exceed the MinE. Those whose social assistance is reduced (due to the level of wages earned) may require a small supplementary payment.
Those who viii receive the largest amounts of supplementary payments under the Wage Policy are those who upon application of the means, needs or income test, were found not to be entitled to social assistance. We would, therefore, find it difficult to view' the supplementary payment as a form of social assistance, subject to treatment under' paragraph 56(l) (in) and subparagraph ll0(l)(f)(iii) of the Act, when its largest recipients are those individuals not qualifying for social assistance.
We conclude, therefore, that the Supplementary payment is additional income from employment in the form of a top-up payment made primarily in order to satisfy provincial minimum wage requirements.
DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch
cc. L.P. Mancino, Source Deductions Division