Revenue Canada Taxation
Head Office
Department of Finance Tax Policy Branch 16th floor Esplanade Laurier, East Tower 140 O'Connor Street Ottawa, Ontario K1A OG5
Attention: Ms. V. Watson
J. A. Szeszycki 957-2130
AUG 17 1987
Dear Sirs:
RE: Relocation Assistance and the Community Futures Program
This is in response to your request for an opinion as to the application of the provisions of the Income Tax Act ("Act") in respect of amounts received by individuals eligible to receive assistance under the Community Futures Program. The particular case being considered involves the closure of XXXX and the resulting closure of the community of XXXX located in XXXX.
Background
The Community Futures Program ("CFP") is the successor to the Canada Mobility Program ("CMP"). Amounts received under the CMP have previously been determined to be non-taxable except to the extent provided for in paragraph 62(1)(g) in respect of moving expenses claimed. Since these amounts had been determined to be non-taxable the presumption had been made that assistance received under the successor program would be treated in the same manner.
The CMP was a program sponsored by Employment and Immigration Canada ("EIC") to provide travel and relocation assistance to eligible individuals. An eligible individual was one who was unemployed, underemployed, or in receipt of a written notice of layoff, and who was willing to move to other parts of Canada where employment opportunities existed. These eligible individuals would apply to, and receive assistance directly from, the EIC. In as much as there was no employer - employee relationship between the payor - payee, the payments could not be considered as employment benefits under paragraph 6(1)(a). There was no provision, in fact, under which such an allowance or grant could be required to be included in income unless the taxpayer claimed moving expenses.
The CFP objectives are almost identical to those of the CMP. Eligibility for assistance, however, is restricted to those individuals who reside in designated "community futures communities" but may also be available, under different program options, to non-employee members of the "community". In addition, the CFP endeavors to involve employers within those communities, as well as municipal/provincial governments, under joint agreements.
Issue:
The question being raised is whether the distribution of financial assistance provided under joint agreements authorized by the CFP are taxable in the hands of individual recipients.
It is our understanding that relocation assistance under the CFP may be available to employee, self-employed and non-employed members of an affected community depending on the circumstances. Insofar as the self-employed and non-employed members of the community are concerned the distribution is structured so that the EIC deals directly with eligible individuals; however, for employed individuals, an agreement is reached between EIC and the employer under which terms the employer will provide exploratory and relocation assistance to its employees. Subject to satisfying the other terms of the agreement the EIC will reimburse the employer, in part, based on a formula set out in the agreement.
It is our further understanding that under the CFP Terms and Conditions the worker receives the assistance from the employer in the form of lump sum payments in respect of 1) travelling expenses for the purpose of attending a job interview(s) or to explore the nearest locality where employment opportunities exist 2) travelling expenses for self and spouse or dependent for the purpose of finding suitable housing in the new locality, and 3) expenses incurred moving the family and household effects to the new locality.
The lump sum payment is provided in advance, subject only to the prior approval by the employer of each trip, and there is no accountability required of the worker in respect of the actual expenses incurred on any of the approved trips.
It is our view, therefore, that in the case of the closure of the XXXX affected employees are receiving a non-accountable allowance in connection with their relocation to other job situations and that such an allowance is taxable under the provisions of paragraph 6(1)(a) of the Act.
Reference has been made to the similarity between the payments described above and those paid by other employers in the course of the town closures which were afforded non-taxable treatment. The significant difference in the other situations is that for various reasons such as payments being made to relocate all citizens of the town the payments received by an employee were not considered as being received by virtue of being an employee. Consequently, those payments were not considered as taxable employee benefits. Our understanding is that the same circumstances do not exist in XXXX case.
Should you require any further clarification please call Jack Szeszycki at 957-2130.
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch