14 March 1995 External T.I. 9428745 - TUITION- XXXXXXXXXX

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 Department.

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

Principal Issues:

whether a public educational institution may issue a letter of tuition certification in respect of
XXXXXXXXXX

Position TAKEN:

not in a position to determine. The provincial ministry of education determines what qualifies as post secondary level. Human resources development (old Min. of employment and immigration) determines who may be certified under 118.5(1)(a)(ii). General comments given re. meaning of "tuition", deductibility of training costs to employers, possible taxable benefits where employer pays employee's tuition.

Reasons FOR POSITION TAKEN:

not within Department's jurisdiction to determine whether course is at a post secondary level nor whether an institution can be certified under 118.5(1)(a)(ii)

		942874
XXXXXXXXXX		Sandra Short

Attention: XXXXXXXXXX

March 14, 1995

Dear Sirs:

Re: Tuition Tax Credit: XXXXXXXXXX

This is in reply to your letter of November 8, 1994 wherein you ask whether a letter of tuition certification may be issued to students enrolled in
XXXXXXXXXX

The following facts have been submitted or stated in our telephone conversation of February 22, 1995 (XXXXXXXXXX/Short):

XXXXXXXXXX

You have asked whether it is practical for the Institute to issue a letter of tuition certification to each student for $250 and whether a student or employer could deduct the administration portion of the course fee (that portion of the total cost above the $250.00 actual tuition).

Our Comments:

The tuition tax credit is available only for tuition fees paid to a university, college or other educational institution for courses that are at the post-secondary level except for certain courses at an educational institution certified by the Minister of Employment and Immigration (now 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. It is our understanding that XXXXXXXXXX is a public educational institution. We have been advised by Human Resources Development that they will not certify a public institution. Should you wish additional information in this regard, please contact them at the address published in paragraph 2 of Interpretation Bulletin IT-516R.

We are not in a position to determine whether the course referred to above is considered to be at a post-secondary level and therefore cannot comment on whether tuition paid in respect of the course may qualify for the tuition tax credit. The Ministry of Education in each province is responsible for defining what constitutes a post-secondary level course. In general, to be considered "post-secondary" , the course should provide a credit towards a degree, diploma or certificate and the prerequisite to taking the course would be completion of secondary school.

Interpretation Bulletin IT-357R2 "Expenses of Training" discusses the deductibility of costs of training but not including tuition fees paid to certain educational institutions for which a tax credit is allowed. If a review of your situation indicates that the course is not at a post-secondary level and hence not eligible for the tuition tax credit, you may wish to review the comments in this Interpretation Bulletin, a copy of which is enclosed for you. Costs of training are generally considered to be either capital or personal in nature and therefore not deductible for income tax purposes; however, training expenses which are neither capital nor personal in nature are deductible provided that they are reasonable in the circumstances. While we cannot provide you with a definitive statement in respect of all course participants, the comments in the Interpretation Bulletin IT-357R2 will provide you with some guidance as to the deductibility of the course cost to employers and self-employed individuals. However, the Income Tax Act generally does not provide for an employee to deduct any training expenses including tuition fees, whether or not such fees qualify for the tuition tax credit. An exception to this general rule is available to taxpayers employed in connection with the selling of property or negotiating of contracts for his or her employer and who is remunerated in whole or part by commissions or other similar amounts (see paragraph 8 of Interpretation Bulletin IT-357R2 for additional details).

We have assumed for the purposes of the remainder of our reply that the course is at a post-secondary level. We would caution you that this in no way implies that it is our view that the course is or qualifies as being at a post-secondary level.

Form T2202A is ordinarily completed by the educational institution in receipt of tuition fees. Subsection 118.5(1) of the Act requires that tuition fees be "paid in respect of the year to the educational institution...". Where a student pays an amount which is "tuition" within the meaning of that word directly to the Association and the Association purchases or has already paid an amount clearly identifiable as "tuition" in respect of the course to be provided by the Institution, it is our view, if the facts support such a finding, that the role of the Association may be considered that of an intermediary and thus the fees may be considered to have been paid to the educational institution by the student.

Since the phrase "fees for the individual's tuition" is not defined in the Income Tax Act, its ordinary meaning must be used in determining whether an amount can be regarded as being tuition. In this regard, it is the Department's view that this phrase can be defined as "fees for instruction". Hence, any portion of the course fee which is not related to instruction does not qualify for the tuition tax credit (paragraph 27 of Interpretation Bulletin IT-516R may provide further assistance in this regard). Where a student is required to pay $350 to the Association, for example, the whole $350 may not qualify as a tuition fee as at least $100 (that portion payable to the Association to cover costs) is not in respect of instruction nor is it paid to the educational institution. We do not have sufficient information to determine whether the $250 fee paid to the educational institution qualifies as fees for tuition. The Institute should be in a position to provide clarification in this regard.

An employer may normally deduct expenses incurred in respect of an employee's training or education, regardless of whether it is the employer or the employee who benefits from the training and regardless of whether the course qualifies for tuition tax credit purposes, provided that such expenses are reasonable in the circumstances.

As discussed in paragraph 7 of Interpretation Bulletin IT-516R, where a student's tuition is paid by his or her employer and that payment is not required to be included in the student's income (see the comments in the next paragraph), the student is precluded from claiming a tuition tax credit. Thus, the Institute should not issue a tuition certificate in any case where the student's employer is paying the course cost on behalf of the student if that payment is not required to be included in the employee's income. If a student is subsequently refunded for part or all of the tuition fees covered in a certificate, the student should be requested to return the certificate to the Institute and, in the case of a partial refund, a new one should be provided covering the actual tuition fees paid by the student.

Where an employer chooses to pay a tuition expense on behalf of an employee, the issue arises whether the payment results in a taxable benefit to the employee. Our general position as expressed in paragraphs 18 to 22 of Interpretation Bulletin IT-470R "Employees' Fringe Benefits" is that the payment of an employee's tuition fees will be considered a taxable benefit except where the course is taken at the employer's initiative and is primarily for the benefit of the employer. Training at a university or other educational institution may be of primary benefit to the employer where the course is to enhance the skills and knowledge required by that employer for that particular occupation for which the employee is engaged.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch

Encl.