2018-0786171E5 Educational Institution

Principal Issues: Whether the Organization meets the requirements of paragraph 118.5(1)(d).

Position: No.

Reasons: They do not appear to provide professional status recognized by a federal or provincial statute, as required.

Author: Wirag, Eric
Section: 118.5(1)(d)

XXXXXXXXXX                                                                                                                                   2018-078617
                                                                                                                                                           Eric Wirag, CPA,CMA
March 14, 2019

Dear XXXXXXXXXX:

Re:  Other educational institution

This is in reply to your email of November 15, 2018, in which you are asking for the XXXXXXXXXX (the Organization) to be recognized as an “other educational institution” for purposes of subsection 118.5(1) of the Income Tax Act (the Act).  We acknowledge the documentation submitted including an approval letter from the Ministry of Economic and Social Development (ESD), dated XXXXXXXXXX, certifying the Organization is approved by the Minister of ESD, under subparagraph 118.5(1)(a)(ii) of the Act, effective XXXXXXXXXX.

We acknowledge that your request is a follow up to our response to you dated October 18, 2018 (file reference number 2016-068113). In that request, you asked for the Organization to be recognized as a “professional educational institution” referred to in paragraph 118.5(1)(d) of the Act.

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 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 70-6R8, Advance Income Tax Rulings and Technical Interpretations.

Pursuant to paragraph 118.5(1)(d), fees paid in respect of an occupational, trade, or professional examination are eligible for the tuition tax credit, with certain exceptions. An occupational, trade, or professional examination is one that satisfies all of the following:

1)    it is an examination required in order for the individual to obtain a professional status recognized under a federal or provincial statute, or to be licensed or certified as a tradesperson;

2)    the status, license or certification referred to in 1) allows the individual to practice the profession or trade in Canada; and

3)    the fees in respect of the examination are paid to an educational institution referred to in paragraph 118.5(1)(a), a professional association, provincial ministry or other similar institution.

With regards to requirement 3), an educational institution referred to in paragraph 118.5(1)(a) is:

i)    a university, college or other educational institution providing courses at a post-secondary school level; or

ii)   certified by the Minister of ESD 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.

Based on the letter dated XXXXXXXXXX from the Ministry of ESD, it appears that the Organization is certified by the Minister 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, as described in subparagraph 118.5(1)(a)(ii).

With regards to the requirements in 1) above, the type of statute being referred to is one that regulates individuals or entities belonging to a profession (for example XXXXXXXXXX) not a statute that governs the incorporation XXXXXXXXXX of an entity.  In our view, professional status is considered to be recognized under a federal or provincial statute if the statute acknowledges the existence, validity, character or claims of the professional status in question. Thus, generally speaking, the statute must recognize:

i)    the profession;

ii)   that the status of the profession is associated with membership in the professional association; and

iii)  that individuals in that profession are competent to perform a specific act or acts.

Although a question of fact, based on the information provided to us, it appears that the professional status obtained through the Organization is not recognized under a federal or provincial statute.  Therefore, although the Organization appears to satisfy subparagraph 118.5(1)(a)(ii), examination fees paid to the Organization would not be eligible for the tuition tax credit since not all of the criteria for purposes of subparagraph 118.5(1)(d) have been met.

We trust that these comments will be of assistance.

Yours truly,

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

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