14 February 2002 Internal T.I. 2002-0116647 - TUITION

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: whether Company providing XXXXXXXXXX preparation course provides courses at the post-secondary level?

Position: yes - the course promotes the acquisition of knowledge for XXXXXXXXXX by providing classroom instruction and exam preparation.

Reasons: 118.5 and 118.6
		February 14, 2002

	IRPPD Validation Section	HEADQUARTERS
	Assessment and Collections Branch	Denise Dalphy, LL.B.
	25 McArthur Road, Tower C, Room 510	(613) 941-1722

	Attention:Ms. Carol Johnston
		2002-011664

XXXXXXXXXX
Tuition and Education Credits

This is in response to your facsimile transmission of January 3, 2002 wherein you enquired whether the above-referenced entity is an educational institution providing courses at a post-secondary level, as this concept is employed in sections 118.5 and 118.6 of the Income Tax Act (the "Act").

Facts

Our understanding of the relevant facts is as follows:

XXXXXXXXXX.

The Law

The relevant sections of the Act are as follows:

"118.5 (1) [Tuition credit] For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted,

(a) where the individual was during the year a student enrolled at an educational institution in Canada that is

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

(ii) certified by the Minister of Human Resources Development 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,

an amount equal to the product obtained when the appropriate percentage for the year is multiplied by the amount of any fees for the individual's tuition paid in respect of the year to the educational institution if the total of those fees exceeds $100, except to the extent that those fees

(ii.1) are paid to an educational institution described in subparagraph (i) in respect of courses that are not at the post-secondary school level,..."

"118.6 (1) [Education credit] Definitions - For the purposes of sections 63 and 64 and this subdivision,

"designated educational institution" means

(a) an educational institution in Canada that is

(i) a university, college or other educational institution designated by the Lieutenant Governor in Council of a province as a specified educational institution under the Canada Student Loans Act, designated by an appropriate authority under the Canada Student Financial Assistance Act, or designated by the Minister of Higher Education and Science of the Province of Quebec for the purposes of An Act respecting financial assistance for students of the Province of Quebec, or

(ii) certified by the Minister of Human Resources Development 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,..."

""qualifying educational program" means a program of not less than 3 consecutive weeks duration that provides that each student taking the program spend not less than 10 hours per week on courses or work in the program and, in respect of a program at an institution described in the definition "designated educational institution" (other than an institution described in subparagraph (a)(ii) thereof), that is a program at a post-secondary school level but, in relation to any particular student,..."

Our Comments

In our opinion:

1. The Company is an "educational institution providing courses at the post-secondary school level" within the meaning of subparagraph 118.5(1)(a)(i) of the Act;

2. The XXXXXXXXXX Preparation Course is a course that is "at the post-secondary school level" within the meaning of subparagraph 118.5(1)(a)(ii.1) of the Act;

3. Amounts paid for the XXXXXXXXXX Preparation Course can be considered "tuition" as this word is used in the midamble of paragraph 118.5(1)(a) of the Act;

4. Although the Company is an "educational institution" within the meaning of paragraph (a) of the definition of "designated educational institution" in subsection 118.6(1) of the Act (see Appendix A attached), there is no evidence that the Company satisfies any criterion in subparagraph (i) thereof;

5. Although the Company appears to provide courses that improve a person's skills in an occupation, certification of this by the Minister of Human Resources Development would be required in order for the Company to qualify under subparagraph (a)(ii) of the definition of "qualifying educational institution";

6. Although the issue is not completely free from doubt, we have no evidence that would demonstrate that students enrolled in the XXXXXXXXXX Preparation Course are full-time students within the meaning of B in the formula in is subsection 118.6(2) of the Act; and

7. The XXXXXXXXXX Preparation Course would satisfy the definition of "specified educational program" in subsection 118.6(1) of the Act provided it is a "designated educational institution" (see 4. above).

Discussion

In E9404865 we issued the following opinion on fees paid to the Medical Council of Canada:

"It is our opinion that examination fees paid to the Medical Council of Canada or to the Education Commission for Foreign Medical Graduates would not qualify as "tuition" fees for the purposes of the Income Tax Act. Examination fees may only qualify as "tuition" fees if the examinations form an integral part of a course of study. The word "tuition" is not defined in the Income Tax Act and must, therefore, be accorded its ordinary meaning. Webster's Seventh New Collegiate Dictionary defines "tuition" as "the act or profession of teaching", "instruction" and "the price of or payment for instruction"."

Friedland v. Her Majesty, a 1999 decision of the Tax Court of Canada (Informal Procedure) concerns the income tax treatment to be afforded to amounts paid by a South African lawyer who wished to (and did) become a member of the Bar in British Columbia. A person who does not hold a Canadian law degree must usually, among other things, be accredited (their legal training and professional experience are evaluated) by the National Committee on Accreditation (the "NCA"), a standing committee of the Federation of Law Societies of Canada, in order to be eligible for admission a provincial Bar. The NCA also decides whether a candidate must take further studies in order to bring his or her qualifications to the equivalent of an approved LL.B./J.D, and whether (and what) examinations must be passed by the candidate. The taxpayer was advised that he would have to take exams in several subjects.

The taxpayer studied the required material through the correspondence program, completed the courses within a year, and wrote and passed the exams over a four-month period (no details were provided in the judgment with respect to the correspondence program). The taxpayer claimed that the $8,250 that he paid to the NCA in 1996 qualified for tuition tax credits under the Act. The taxpayer itemized the payments as follows: $500 to the NCA in order to have his qualifications assessed, course fees of $4,000, and the remainder for books and materials.

The taxpayer did not receive any credit from any Canadian Law School for his studies.

A letter from the NCA stated:

"The National Committee does not provide official income tax receipts as we are not a teaching institution and the applicants prepare for exams on a self-study approach (this is similar to correspondence course study). All of the Committee's examinations are prepared and marked by qualified law professors most of whom currently work in Canadian common law faculties."

The Court concluded that the amounts paid by Mr. Friedland were similar in nature to amounts paid to take the Law School Admission Test ("LSAT") or to sit examinations run by the Medical Council of Canada. The Court found that the amounts were payments for "the process of assessment, evaluation, recommendation relating to required courses, suggested study materials, setting and marking the examinations", and were not amounts paid as "tuition". The Court conducted an extensive analysis of the meaning of "educational institution" (see Appendix A) and concluded that NCA was not "a university, college or other educational institution providing courses at a post-secondary level".

Although we agree with the decision in Friedland and with technical interpretation E9404865, it is our view that the situation discussed in this letter is quite different, XXXXXXXXXX.

We hope this opinion will be of assistance.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Canada Customs and Revenue Agency's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version, or they may request a copy severed using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

Attach.

									Appendix A

In Friedland, the Court considered the meaning of the following words used in section 118.5 of the Act:

educational institution

"The Oxford English Dictionary defines "education" as:

3. the systematic instruction, schooling or training given to the young in preparation for the work of life; by extension similar instruction or training obtained in adult age. Also, the whole course of scholastic instruction which a person has received. Often with limiting words denoting the nature or the predominant subject of the instruction or kind of life for which it prepares, as classical, legal, medical, technical, commercial, art education.

and "institution" as:

7. an establishment, organization, or association, instituted for the promotion of some object, esp. one of public or general utility, religious, charitable, educational, etc., e.g. a church, school, college, hospital, asylum, reformatory, mission or the like; [...] The name is often popularly applied to the building of the appropriated to the work of a benevolent or educational institution."

education

The Court also cited the interpretation of the word "education" in the case, Seafarers Training Institute v. Williamsburg (Township) (1982), 138 D.L.R. (3d) 407 (Ont. Div. Ct.):

""...The word "education" should then be given the kind of broad interpretation which it has in common parlance. If a place has students, physical facilities, teachers or instructors, a curriculum designed to further the advancement in life of those in attendance so that they might better pursue their vocation or life's work, it should be held to be an institution (seminary) for educational purposes.""

"educational institution"

Black's Law Dictionary, which defines "educational institution" as follows:

A school, seminary, college, university, or other educational establishment, not necessarily a chartered institution. As used in zoning ordinance, the term may include not only buildings, but also all grounds necessary for the accomplishment of the full scope of educational instruction, including those things essential to mental, moral, and physical development.

"The Dictionary of Canadian Law, which defines "educational institution" as:

1. An institution of learning that offers courses at a post-secondary level. 2. A technical or vocational school, a university, college or other school of higher education. See DESIGNATED; SPECIFIED."