2016-0675551E5 Tuition and Education Tax Credit

Principal Issues: Are individuals who are taking the XXXXXXXXXX eligible for the tuition tax credit and for 2016 and prior years eligible for the education tax credit?

Position: Question of fact and depends if all the requirements in subsection 118.5(1) and for 2016 and prior years if the requirements in subsection 118.6(2) are met. One criteria that must be met in order for the tuition to qualify for the TTC is that tuition fees that are paid to a university, college or other educational institution in Canada must be at a post-secondary level (for tax years prior to 2017).

Reasons: The University would need to determine whether the XXXXXXXXXX offers courses at the post-secondary level (for tax years prior to 2017).

Author: D'Angelo, Sandro
Section: 118.5(1), 118.6(1), 118.6(2)

XXXXXXXXXX                                                                                                                  2016-067555
                                                                                                                                          S. D’Angelo
March 28, 2018

Dear XXXXXXXXXX:

Re: Eligibility for the Tuition and Education Tax Credits

This is in response to your correspondence of November 10, 2016 and our subsequent telephone conversations (D’Angelo/XXXXXXXXXX) wherein you requested our views as to whether fees paid by individuals in the XXXXXXXXXX at XXXXXXXXXX (the “University”) qualify for the tuition tax credit (“TTC”) in section 118.5 (footnote 1) of the Income Tax Act (“Act”) and whether the XXXXXXXXXX would be considered a “qualifying educational program” or “specified educational program” for purposes of the education tax credit (“ETC”) in subsection 118.6(2) (footnote 2) of the Act. You have also asked whether the University should be issuing a T2202A, Tuition, Education and Textbook Amounts Certificate (“T2202A”) slip.

You have indicated that XXXXXXXXXX can take the following forms:

1.    The University does an initial assessment of the applicant’s skills and provides the training to fill the gap, all the while assessing the individual throughout the XXXXXXXXXX. The XXXXXXXXXX fee is made up of two components – one for the cost of the initial assessment and another fee for the cost of the balance of the XXXXXXXXXX.

2.    The University does an initial and final assessment of the applicants skill at the beginning and at the completion of the XXXXXXXXXX, however the XXXXXXXXXX training and courses are provided by another university. The University charges for the cost of the initial and final assessments.

XXXXXXXXXX

Our Comments

This technical interpretation provides general comments about the provisions of 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 a particular transaction 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 70-6R7, Advance Income Tax Rulings and Technical Interpretations.

Tuition Tax Credit

The CRA’s general view regarding the TTC is contained in Income Tax Folio S1-F2-C2, Tuition Tax Credit (“Tuition Folio”), which is available on the CRA Web site at https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-2-students/income-tax-folio-s1-f2-c2-tuition-tax-credit.html.

Pursuant to paragraph 118.5(1)(a), a student who is enrolled at an educational institution in Canada may be eligible to claim a TTC for eligible tuition fees paid in respect of the year to that educational institution, as long as the total of such fees exceeds $100.

In order for a student to claim the tuition tax credit under sub-paragraph 118.5(1)(a)(i) of the Act, the student must satisfy, among other things, the following two requirements:

1.    The student must have been “enrolled at an educational institution” in Canada that was providing courses at a post-secondary school level; and

2.    The amounts paid by the student would have been paid for courses at the “post-secondary school level”.

With respect to the first requirement, paragraph 2.22 of the Tuition Folio provides the meaning of enrolled at an educational institution for purposes of the tuition tax credit. This paragraph states in part:

“The term “enrolled” is not defined in the Act, but it is to be given its ordinary meaning. In the context of enrolment of a student at an educational institution, a student must be registered with the registrar of the institution such that the student would be liable for any tuition fees required to be paid to the institution with respect to the courses within a program of study.”

With respect to the second requirement, the CRA's interpretive position is stated in paragraph 2.8 of the Tuition Folio. This paragraph states, in part:

“Generally, for a course to be considered to be at the postsecondary school level:

a)    the course should provide credit towards a degree, diploma, or certificate; and

b)    a prerequisite for taking the course should be completion of secondary school.

It is generally assumed that a course is at the postsecondary school level if the education ministry for the province in which the course is given considers it to be at that level. In any case, it is the status of the course and not the status of the individual that is relevant.”

In determining whether a course is at a post-secondary level, the following court cases provide some valuable comments:

In Linda Jacejko v. The Queen, 99 DTC 3514, Rowe, D.J.T.C.C commented that:

“There are no specific regulations in place which assist us in defining courses at the post-secondary level. The evidence here and the material filed in relation to the particular brochures describing the tour and the evidence of the Appellant and Mr. Fritze satisfy me that, certainly, the educational component here was substantial, was at the post-secondary level…”

In Marek D. Tarkowski v. The Queen, 2007 DTC 1555, 2007 TCC 632, Webb, J. noted that:

“Courses at the post-secondary school level would be courses that would be at a higher level than would be taught at a secondary school. It is the status of the course that is being taken that determines whether or not it is a post-secondary level course and not the status of the individual taking the course.”

Although it is a question of fact, it is likely that the XXXXXXXXXX training courses would be considered to be at the post-secondary school level. Further, it is our view that it is unlikely that the initial and final assessment would be considered courses at the post-secondary level.

Education Tax Credit

The CRA's general view regarding the education tax credit is contained in Income Tax Folio S1-F2-C1, Education and Textbook Tax Credits (“Education Folio”), which is available on the CRA Web site at http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s1/f2/s1-f2-c1-eng.html.

For 2016 and prior years, the ETC, as set out in subsection 118.6(2) of the Act, is available for students who are enrolled in qualifying (or specified) educational programs as full-time (or part-time) students at designated educational institutions and are entitled to receive a certificate containing prescribed information from the designated educational institutions as proof of enrolment.

In order for a student to claim the education tax credit, the student must satisfy, among other things, the following three requirements:

1.    The student must be enrolled at a “designated educational institution”.

2.    The student must also be enrolled in either a “qualifying educational program” as a full-time student or a “specified educational program” as a part-time student.

3.    The student must receive a T2202A form from the designated educational institution.

Each of these terms is defined in subsection 118.6(1) of the Act and is explained in more detail in paragraphs 1.9 – 1.25 of the Education Folio.

With respect to the first requirement, a designated educational institution includes a university, college, or other educational institution providing courses at a post-secondary level, or an educational institution in Canada that is certified by the Minister of Human Resources and Skills Development (HRSDC) to be an educational institution providing courses, other than courses designed for university credit, that furnish a person with skills for, or improve a person's skills in, an occupation. Where a student takes a course at a HRSDC-certified institution, the course must be undertaken for the purpose of gaining or improving skills in an occupation in order for the student to qualify for the education credit. In contrast, where courses are taken at a university, college or other educational institution providing courses at a post-secondary level, the education credit is not dependent on the individual's purpose for enrolment. However, the courses taken in these institutions must be at the post-secondary school level, which is not required for courses taken at a HRSDC-certified institution.

With respect to the second requirement, the term “qualifying educational program” requires, in part, that the program run for at least 3 consecutive weeks and must provide that each student taking the program spend at least 10 hours per week on courses or work in the program and in respect of a program at a designated educational institution. If the student receives any benefit in respect of the program from a person with whom the student was dealing at arm's length (other than certain forms of financial assistance, including a scholarship), the program is not a qualifying educational program. The phrase “enrolled...as a full-time student” is not defined in the Act. Paragraphs 1.25 and 1.26 of the Education Folio provide general comments regarding the CRA’s interpretation of this phrase. The CRA generally relies on the institution's determination as to whether the individual is registered as a full-time student.

As indicated in paragraph 1.25 of the Education Folio, the requirement for enrolment as a full-time student at a designated educational institution must ultimately be met on the basis of the facts of each case. Where a student is not considered to be enrolled as a full-time student, the student may be eligible for the part-time education tax credit if the program in which the student is enrolled meets the requirements of a specified educational program and the student spends not less than 12 hours per month on courses in the program.

With respect to the third requirement, a T2202A must be issued by a “designated educational institution” in Canada to certify that a student was, during the particular taxation year for the number of months indicated on the form, enrolled as a full-time student in a “qualifying educational program” or as a part-time student in a “specified educational program” at the designated educational institution.

In order for an entity to be eligible to issue a T2202A form, it must first be a designated educational institution. Based on the information provided, it appears that the University satisfies this requirement. In order to issue a T2202A form, the University must be satisfied that the student was enrolled either in a qualifying or a specified educational program offered by the University.

These are questions of fact that would best be determined by the University.

We trust our comments will be of assistance.

Yours truly,

Lita Krantz, CA CPA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate 

FOOTNOTES

Note to reader:  Because of our system requirements, the footnotes contained in the original document are shown below instead:

1  Clause 118.5(1)(a)(ii)(A) and (B) conditions added by 2017 Budget first bill, for 2017 and later taxation years. Effective for 2017 and later years the eligibility criteria for the TTC for fees for an individual’s tuition paid to a university, college or other post-secondary institution will be extended.  That is, new clause 118.5(1)(a)(ii)(A) will allow for courses taken at a university, college or other post-secondary institution that are not at the post-secondary level, but taken for the purpose of providing the individual with skills (or improving an individual’s skills) in an occupation to be eligible for the TTC.

2  Subsection 118.6(2) has been repealed for 2017 and later taxation years.  As such, beginning in the 2017 tax tear, the ETC has been eliminated and will no longer be available for a student to claim.  The ETC is still available for tax years up to, and including. The 2016 tax year. Unused ETC amounts that were earned and carried forward from years prior to 2017 will remain available to be claimed in future years.

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