2015-0584221E5 T4A requirement- elementary scholarships

Principal Issues: Whether a school is required to issue T4A slips for scholarships paid out to elementary and secondary level students.

Position: Yes.

Reasons: Subsection 200(2) of the Income Tax Regulations.

Author: El-Kadi, Randa
Section: Regulations 200(2)

XXXXXXXXXX

                                    2015-058422
                                    Randa El-Kadi

September 8, 2015

Dear XXXXXXXXXX:

Re:   Issuing T4A slips for elementary and secondary scholarship payments

This is in response to your correspondence of April 17, 2015, regarding the requirement for a private school (the “School”) to issue T4A Slips, Statement of Pension, Retirement, Annuity, and Other Income, to report scholarships paid to, or on behalf of, your elementary and high school students.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

The requirement for scholarship reporting

Pursuant to paragraph 200(2)(a) of the Income Tax Regulations, every payer of a scholarship, fellowship, bursary or certain prizes must issue an information return in prescribed form to report the payment. The “prescribed form” in this case consists of the T4A Slip and the related T4A Summary.

The requirement to issue a T4A Slip is reflected in paragraph 3.106 of Income Tax Folio S1-F2-C3: Scholarships, Research Grants and Other Education Assistance, which is available on the Canada Revenue Agency (“CRA”) website, as follows:

“3.106 Under subsection 200(2) of the Regulations, every payer of a research grant, scholarship, fellowship, bursary or prize (other than a prescribed prize) must report the amount on a T4A Slip, Statement of Pension, Retirement, Annuity and Other Income.”

Paragraph 3.107 of Income Tax Folio S1-F2-C3 further explains that the payer must report scholarship payments even if the recipient may be entitled to exclude all or part of these payments from his or her income:
“3.107 The payer of a research grant, scholarship, fellowship, bursary or prize (other than a prescribed prize) must report the amount on a T4A Slip, even though the recipient may be entitled to exclude all or a portion of the amount from income because of the scholarship exemption. It is the responsibility of the recipient to determine the amount of any exemption available under subsection 56(3).”

As you note, a full scholarship exemption is available under subparagraph 56(3)(a)(ii) of the Act to exempt amounts that would otherwise be included in an individual’s income under subparagraph 56(1)(n)(i) of the Act, when these amounts are received in connection with the taxpayer’s enrollment in an elementary or secondary school educational program. However, there is currently no legislative provision or administrative position that waives the T4A reporting requirement when a scholarship or bursary is not required to be included in the recipient’s income (that is, when a full scholarship exemption is available).

You indicated in your letter that parents have received letters from the CRA requesting additional information about the scholarships their children received. You explained that the School has been issuing letters for parents to use in their reply to the CRA explaining the reason why the scholarships are not included in the child’s income, and that these letters were sufficient to address the CRA’s request for additional information.

We have shared the issues you raised above with the Trust Accounts Programs Division within the CRA. Officials from that area saw merit in the School taking a proactive approach by issuing, where applicable, the letters mentioned above for parents to keep in their records in case they need to submit them to the CRA at a later date. 

We trust that these comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

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