58160
G. Thornley
(613) 957-210119(1)
Dear Sirs:
Re: Taxation of Unemployment Insurance (U.I.) Benefits
This is in reply to your letter of May 31, 1989, concerning the taxation of U.I. benefits received by status Indians employed under an Employment and Immigration Canada agreement with respect to 24(1) (the Project).
In support of your position that such benefits should not be taxable when received by status Indians situated on a reserve you have referred to the December 15, 1988 Federal Court, Trial Division case of Glenn Williams, 89 DTC 5032. In the Williams case the court held that the U.I. benefits received in circumstances similar to those under project 5031HK8 were not taxable in his hands because he was a status Indian and, according to Cullen, J., under the provisions the Income Tax Act the benefits were statutorily exempt from tax.
Our Comments
Despite the decision in the Williams case, the Department's view of the taxability of U.I. payments to status Indians is still contained in paragraph 6(h)(vi) of Interpretation Bulletin IT-62 .
There it states in essence that U.I. benefits are sourced at the payer's principal place of business and not on the reserve. Additionally, although we appreciate the fact that the duties performed in connection with the Project were carried out on the reserve, it should be noted that subsection 25(3) of the U.I. Act specifically deems payments under such projects not to be remuneration from employment.
Having stated the foregoing we are unable to comment further as it is our understanding that the Department has now appealed the Williams decision to the Federal Court of Appeal. Until the appeals process has been exhausted the Department will continue to assess U.I. benefits to status Indians in accordance with present practices.
We trust our comments will be of some assistance to you in the interim.
Yours truly,
for Director Small Business and General Division Specialty rulings directorate Legislative and Intergovernmental Affairs Branch