14 May 1999 External T.I. 9827875 - 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 Department.

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

Principal Issues: Two educational institutions (“Institution A” and “Institution B”) jointly deliver XXXXXXXXXX courses with each institution carrying out certain functions. Each institution determines the quantum of the registration fee required for its particular functions. It is our understanding that the courses are not at a post secondary level for the purposes of subparagraph 118.5(1)(a)(ii.1) of the Act as they are available to a student as long as the student is at least 18 years of age. Institution A, which collects the registration fee and remits the relevant portion to Institution B is described in subparagraphs 118.5(1)(a)(i) and (ii) (i.e., certified by the Minister of Human Resources Development) of the Act, while Institution B is described in subparagraph 118.5(1)(a)(ii) of the Act.

Institution A promotes the courses, purchases the course material (including books), hires instructors from a list provided by Institution B, provides examination supervisors, and provides the facilities where the examinations are written and the courses are taught. Institution B prepares and marks the examinations, prepares the instructors, and develops the courses. We have been asked whether a receipt for income tax purposes (i.e, the tuition tax credit) can be issued with respect to these costs. We have also been asked whether the cost of a license charged to a student by Institution B can be included on the receipt.

Position: The receipt should not include the cost of the course material and books, or the cost of the license. The fact that a portion of the fees to be charged in respect of courses are determined by reference to the costs of developing courses and preparing instructors, would not, in an by itself, prevent the fees from being regarded as being tuition.

Reasons: It is the Department’s general position that “tuition” refers to instruction. Also, see paragraphs 26 to 28 of IT-516R2. It is also noted that the circumstances of this situation (including the point that only one institution would issue a tuition receipt for income tax purposes in respect of tuition fees relating to both institutions) were discussed with Diane Waterfield of the Assessing and Collections Directorate who did not feel that there were any problems. Ms. Waterfield also confirmed that XXXXXXXXXX has been certified. XXXXXXXXXX has confirmed, in a telephone conversation, that XXXXXXXXXX has also been certified.

XXXXXXXXXX 982787
M. Eisner
Attention: XXXXXXXXXX

May 14, 1999

Dear Sir:

Re: Tuition Tax Credit

This is in reply to your letter of October 13, 1998, concerning the above-noted subject. We also acknowledge our telephone conversations (Eisner/XXXXXXXXXX and Eisner/XXXXXXXXXX) in which we obtained some clarification of the circumstances of your situation as well as your subsequent submission of an agreement between the XXXXXXXXXX We apologize for the delay in responding.

In your situation, XXXXXXXXXX have entered into an agreement (the “Agreement”) with respect to the delivery of XXXXXXXXXX courses. The Agreement became effective on XXXXXXXXXX and remained in effect until XXXXXXXXXX with provision for an automatic one year extension at the option of XXXXXXXXXX. The Agreement is currently in effect. Some of these courses, if they are successfully completed, allow the student to become licensed by XXXXXXXXXX. Other courses are in the nature of continuing education. In order for an individual to be eligible to enrol for a course, the student must be at least eighteen years of age.

Under the Agreement, XXXXXXXXXX is responsible for providing the course material (including textbooks), setting examinations, marking the examinations, preparing instructors, and developing the courses. XXXXXXXXXX, pursuant to the Agreement, promotes the courses, hires instructors from lists provided by XXXXXXXXXX, provides examination supervisors, and provides the facilities where the course is taught and examinations are written. XXXXXXXXXX purchases the course material (including textbooks) from XXXXXXXXXX for the students that are enrolled in a course. XXXXXXXXXX collects the registration fees from the students, who, we understand, are enrolled with XXXXXXXXXX. For the purpose of the determination of the amount of a registration fee to be charged to a student, XXXXXXXXXX each determine the amount required from a student in determining the total registration fee. In the case of the XXXXXXXXXX, the amount includes an amount for the course material and textbooks. XXXXXXXXXX remits the relevant portion of the fee to XXXXXXXXXX is responsible for issuing tuition receipts to the students for income tax purposes.

For income tax purposes, you have asked us about the issuing of tuition receipts by XXXXXXXXXX.

Our Comments

Eligible fees that qualify for the tuition tax credit are discussed in Interpretation Bulletin IT-516R2 “Tuition Tax Credit”, which has been enclosed for your convenience.

The types of educational institutions in Canada whose tuition fees may be eligible for the tuition tax credit are described in paragraph 118.5(1)(a) of the Income Tax Act (the “Act”). Paragraph 118.5(1)(a) of the Act provides that a student must be enrolled at

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

(b) an educational institution in Canada 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 student’s skills in, an occupation.

In the case of an institution described in (a) above, subparagraph 118.5(1)(a)(ii.1) of the Act requires that the courses for which the fees are paid must actually be at the post-secondary school level. Where the institution is described in (b) above, clause 118.5(1)(a)(ii.2)(B) of the Act denies a tuition tax credit in respect of tuition fees paid to an educational institution if the purpose of the individual’s enrolment at the institution cannot reasonably be regarded as being to provide the individual with skills, or to improve the individual’s skills, in an occupation.

Even though XXXXXXXXXX is an institution described in (a) above, it is our understanding that XXXXXXXXXX for that matter, are certified by the Minister of Human Resources Development as described in (b) above. Accordingly, it is not necessary to consider whether the XXXXXXXXXX courses are at a “post-secondary school level”, for purposes of subparagraph 118.5(1)(a)(ii.1) of the Act. It is likely that such courses would not be considered to be at a post-secondary level.

It is not clear from the Agreement whether a particular student would be considered to be enrolled at XXXXXXXXXX or both with respect to the XXXXXXXXXX courses being offered. We understand that you consider them to be enrolled at both institutions. Regardless, since both institutions have been certified by the Minister of Human Resources Development for purposes of paragraph 118.5(1)(a) of the Act and, for all intents and purposes, are jointly delivering the XXXXXXXXXX courses with each institution carrying out certain functions, we would not object to your current process. That is, subject to the comments below regarding eligible tuition fees, XXXXXXXXXX can continue to issue tuition fee receipts to the students for the full amount of the eligible tuition fees collected, regardless that a portion of the tuition fees is collected on behalf of XXXXXXXXXX.

The term “tuition” is generally considered to refer to instruction. Where a portion of the fees to be charged in respect of courses are determined by reference to the costs of developing courses and preparing instructors, this would not, in and by itself, prevent the fees from being regarded as being tuition. Examination fees are normally considered to qualify as tuition (See paragraph 26(e) of IT-516R2). On the other hand, the costs of text books and course material are not regarded by the Department as qualifying as tuition subject to the comments in paragraph 28 of IT-516R2 concerning correspondence courses. Consistent with comments in paragraph 29 of IT-516R2, a fee for a license XXXXXXXXXX would not be considered to be tuition.

For the purposes of the tuition tax credit, the Department provides standard T2202 and T2202A forms, or an institution may design their own, provided they are approved by Revenue Canada. With respect to these forms, there is the condition set out in clause 118.5(1)(a)(ii.2)(B) of the Act that an individual must be enrolled at the institution to obtain skills for, or improve the individual’s skills in, an occupation. However, in the preparation of the forms, we do not believe that it is the educational institution’s responsibility to make the necessary enquiries to ascertain whether the student meets the condition. While this requirement must be satisfied by the student, the educational institution is not expected to be aware of the student’s circumstances in relation to that condition.

We trust you will find the above comments to your satisfaction.

Yours truly,

Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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