On March 3, 2017, CRA released technical interpretation 2016-0651661E5 – Payments to Syrian refugees by a church. This technical interpretation was in response to a letter received by CRA from a church inquiring about the income tax treatment of payments made by the church to support a Syrian refugee family (the “family”). Specifically, the church asked whether the said money received by the family was to be included as income in the family’s tax returns, and whether there are any special rules for refugees for income tax purposes.
In terms of background, the inquiring church is a private sponsor that has established a fund to support a particular Syrian refugee family, and has provided support to the family since they arrived in Canada. The monies provided by the church were to assist the family with their living expenses. The family also has received money through the Resettlement Assistance Program provided by the government.
In response to the questions asked, CRA noted that paragraph 56(1)(u) of the ITA requires social assistance payments received in the year and made on the basis of a means, needs, or income test are to be included in a taxpayer’s income, unless they are included in the taxpayer’s spouse’s or common-law partner’s income. CRA further noted that income included under paragraph 56(1)(u) will be offset by a matching deduction under paragraph 110(1)(f) of the ITA. As such, there will be no income tax implications, other than potentially affecting certain income-tested benefits. Accordingly, CRA indicated that “if the payments made by the church are assistance made on the basis of “means, needs or income test,” then they are likely social assistance payments for purposes of paragraph 56(1)(u)” of the ITA.
“Social assistance” is not defined under the ITA, but, with reference to paragraph 56(1)(u), CRA indicated that it is generally understood to mean “aid provided by a government or government agency, although it can be provided by other organizations (such as a church), on the basis of need.” With respect to the means, needs, or income test, CRA advised that it considers them to be financial tests and describes them as follows: “1. [a]n “income” test, which is a test based solely on the income of the applicant, 2. [a] “means” test, which is similar to an income test, but also takes into account the assets of the applicant, [and] 3. [a] “needs” test, which takes into account the income, assets and financial needs of the applicant.”
In its response, CRA also noted that subsection 233(1) of the Income Tax Regulations requires organizations providing social assistance to report such assistance on Form T5007- Statement of Benefits, unless expressly exempted.
This technical interpretation is helpful to those organizations providing assistance to refugees in Canada, as well as all organizations, including not-for-profits and charities that provide assistance based on a means, needs or income test.
Further information on the provision of social assistance, the resulting reporting requirements and form T5007 can be found on the CRA website by clicking here, as well as in CRA’s pamphlet T4055 Newcomers to Canada.