17 March 2006 External T.I. 2006-0174061E5 - Education tax credit

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.

Principal Issues: Before the revisions to the definition of "qualifying education program" in 118.6 for 2004, the post graduate medical students at the University could not claim the education tax credit because the program was taken by a student in connection with or as part of the duties of the office or employment. While this aspect is no longer relevant, a program is now excluded if the student receives, from a person with whom the student is dealing at arm's length, any allowance, benefit, grant or reimbursement for expenses in respect of the program. 90% of the students get free tuition so the question is whether they will have received a benefit, so that the particular post graduate program will not be a qualifying education program. The remaining 10% will have their fee paid by the sponsoring organization.

Position: In general terms, free tuition will only be considered to not be a benefit when the program is available to the public at large. Although it is ultimately a question of fact, it would appear that this is not the case and thus the program would qualify for the education tax credit.

Reasons: As stated in paragraph 16 of IT-515, "free tuition" is not considered to be a benefit if the program is available to the public at large at no cost. This does not seem to be the case for the University.

XXXXXXXXXX 						2006-017406

March 17, 2006

Dear XXXXXXXXXX:

Re: Post-Graduate Medical Program and the Education Tax Credit

This is in reply to your letter dated February 7, 2006, wherein you sought confirmation that post-graduate medical students are eligible for the education tax credit (the credit) pursuant to section 118.6 of the Income Tax Act (the Act) so that the XXXXXXXXXX (the University) may issue tax slips T2202A.

Your question relates specifically to post-graduate medical students at the University, who are enrolled as full-time students who may or may not be employees of the University. As you correctly pointed out in your letter, because of the changes to section 118.6 of the Act effective for 2004, students are no longer precluded from claiming the credit when the particular education program relates to their employment. A program is excluded, however, if the student receives from a person with whom the student is dealing at arm's length, any allowance, benefit, grant or reimbursement for expenses in respect of the program.

It is your view that the post-graduate medical program qualifies as a "qualifying education program" as defined by subsection 118.6(1) of the Act because:

- The program exceeds three consecutive weeks;
- Each student spends at least 15 to 20 hours per week on courses or work in the program; and
- The post-graduate medical program is at the post-secondary level since eligible participants must have a medical program.

You have concluded that since the program is a "qualifying education program," the post graduate students are eligible for the credit as full-time students based on $XXXXXXXXXX times the number of months they are enrolled in the program, which is generally 12 months in the year.

We also note your view that, where no tuition is assessed, it should not preclude the student from claiming the credit. You have referred to our letter: 2005-0127341E5 dated June 6, 2005 and paragraph 16 of IT-515R2 and stated that your conclusion is consistent with the comments made in that letter. Of particular note are the following 2 paragraphs from that letter:

"While there is no requirement for a student to pay tuition fees in order to claim the education tax credit, the credit is not available to a student who receives, from an arm's length person, any allowance, benefit, grant or reimbursement of expenses other than certain benefits described in subparagraphs (a)(i) to (iii) of the definition "qualifying educational program (which in general terms make an exception for recipients of scholarships, certain student loans and government assistance under programs established under the authority of the Department of Human Resources Development Act or similar provincial programs).

As indicated in paragraph 16 of the Bulletin, "free tuition" is not considered to be a benefit if the program is available to the public at large at no cost. However, where a particular program is offered to some students for tuition, and to others free of charge, the students receiving free tuition are considered to be receiving a benefit. For this reason, it would appear that the School's Mature Students would not qualify for the education tax credit and the School should not issue T2202As to them."

Our comments

It is not entirely clear whether the so-called free tuition provided by the University will be considered a "benefit," as explained above, to the post-graduate medical students thereby excluding the program in question from meeting the definition of "qualifying education program." This will ultimately be a question of fact. You indicated, however, that there are certain students (those sponsored by another government or organization) who would not get free tuition from the University (even though ultimately it may be free to those students because their sponsoring organization has paid the fees to the University). In our view, unless the free tuition is available to all members of the public, the free tuition will be considered a benefit for purposes of the definition of "qualifying education program," so that the post-graduate medical students will not be eligible for the credit.

We hope these comments are of assistance.

Yours truly,

John Oulton, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate