Treatment of the Ontario Trillium Benefit under the Bankruptcy and Insolvency Act

Date:

Issue

The Office of the Superintendent of Bankruptcy (OSB) has been asked for its position regarding treatment, under the Bankruptcy and Insolvency Act (BIA), of the Ontario Trillium Benefit. As of that benefit will combine three existing refundable tax credits: the Ontario Energy and Property Tax Credit (OEPTC), the Northern Ontario Energy Credit (NOEC) and the Ontario Sales Tax Credit (OSTC). The OSB has been asked whether the Ontario Trillium Benefit is to be considered as income for the purpose of calculating surplus income obligations or is to be considered as property of the bankrupt, thereby forming part of the estate of the bankrupt.

This position paper replaces the position paper on the OSTC. It applies to all three refundable tax credits that will be combined to form the Ontario Trillium Benefit.

Position

The OSB’s position is that, subject to court interpretation to the contrary, the Ontario Trillium Benefit (and its OEPTC, NOEC and OSTC constituent refundable tax credits) is exempt from seizure. Therefore, the benefit must be remitted to the bankrupt. Nevertheless, it is captured by the definition of “total income” in section 68 of the BIA and therefore must be accounted for in the surplus income calculation.

Background

The Ontario Trillium Benefit provides relief to low- to middle-income Ontarians to help pay for energy costs and provide relief for sales tax and property tax.

Analysis

The Ontario Taxation Act, 2007 provides that the Ontario Trillium Benefit payment is exempt from seizure.Footnote 1Therefore, the BIA dictates that it is not property of the bankrupt divisible among the creditors.Footnote 2

The Ontario Trillium Benefit, however, is "deemed to be an overpayment on account of the individual’s liability for tax under" the Ontario Taxation Act (subsection 103.2(3)).Footnote 3In spite of this overpayment of tax on the individual’s income and its subsequent reimbursement in the form of the Ontario Trillium Benefit, the funds retain their character as income. Subsection 68(2) of the BIA provides that a bankrupt’s revenues of whatever nature (regardless of whether they are exempt from seizure) are captured by the definition of "total income." Therefore, while the bankrupt is entitled to retain the Ontario Trillium Benefit, it is also accounted for by the trustee in the surplus income calculation under section 68 of the BIA.

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