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Citation: 2005TCC109
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Date: 20050511
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Docket: 2004-2973(IT)I
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BETWEEN:
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CLEMENTINA C. CASTELA,
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Appellant,
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And
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Hershfield
J.
[1] The
Appellant, a resource teacher, appeals the Minister of National Revenue's
disallowance of the education tax credit amount claimed in her 2002 taxation
year pursuant to section 118.6 of the Income Tax Act, (the Act) in
respect of a Masters Degree program taken by her. That section allows a tax credit for a full-time
student enrolled in a qualifying educational program at a designated
educational institution. The Minister's disallowance is based on the position that
the program of study completed by the Appellant was connected with her teaching
job and thereby not a "qualifying educational program" as defined in
subsection 118.6(1).
[2] It is not necessary to set out all the
requirements for eligibility for the education tax credit or even the whole
definition in the Act of a "qualifying educational program"
since it is only this one narrow aspect of this definition (that the program of
study not be connected with employment) that has been put in issue. The portion
of the definition in subsection 118.6(1) that addresses this issue is found in subparagraph
(b)(ii). Under that provision an educational program is not a "qualifying educational program"
if it is taken by the student during a period in which she received income from
an office or employment, and the program is taken:
(ii) in
connection with, or as part of the duties of, that office or employment.
[3] If
the program taken by the Appellant falls within this broad exclusionary provision
then it will not be a qualifying educational program and she will not be
entitled to the credit claimed.
[4] The
subject program which extended over an 11‑month period in the 2002
calendar year (January – July and September – December) allowed the Appellant
to earn her Master of Arts in Education/Curriculum and Instruction. She
attended the program on a full-time basis at the Vancouver campus of the University of Phoenix while continuing to work full-time as a resource teacher at a Burnaby
District elementary school. As a teacher she earned employment income for
teaching during the school year (January – July and September – December). The issue then in this appeal is
whether the Masters program she took was "in connection" with that
employment. To make a finding of fact on this question requires a review of
the evidence as to the nature and duties of the Appellant's employment and the
nature, content, purpose and application of her program of study. The Appellant
gave evidence at the hearing as to these matters as did a second witness, called
by the Appellant, a teacher who had been enrolled in the same program at the
same time as the Appellant.
[5] The
Appellant has a Bachelor of General Studies Degree from Simon Fraser University where she majored in psychology and sociology. As
well she has her professional teachers' certificate earned some 22 years ago. She
has taught at several schools since qualifying as a professional teacher and has
been engaged at her current work place for some seven years. As a resource
teacher she deals with special needs students and ESL students. She teaches out
of a separate resource room to which students from other classes come to her in
small groups. In this setting I would think it fair to say that she works
according to the needs of the child in the context of the program in which the
child is enrolled.
[6] Nothing
more need be said about the nature and duties of her employment which takes me
to consider the nature, content, purpose and application of her program of
study.
[7] The
Appellant testified that the Masters program was unrelated to her job and that
there was no direct application of program studies to her teaching job. This
testimony was corroborated by the testimony of the second witness and is borne
out by a review of the courses taken by them. As well, the program or at least the
courses offered in the program were inter-disciplinary. There were a number of
courses taken that were participated in by a variety of persons including
nurses and business students. Many of the courses were research oriented. They are an essential part of graduate
studies in general and of particular importance in formulating research proposals
and carrying out the research that forms the basis for a graduate research
paper.
[8] Many
other courses, non-research courses, were of inter-disciplinary interest and
value as well and were not necessarily related and certainly not directly related
to the Appellant's teaching position. For example, the three-credit course
"Lifespan Development and Learning" was taken by nurses doing post‑graduate
studies as well as by teachers. Such courses, which make up a great number of
the credit hours required to complete the program, might be said to be related
to the respective careers of the students but it would be stretching it
considerably in my view to say that such courses could be said to have been
taken by different professionals "in connection" with their
respective jobs unless there was evidence of such connection. In the case at
bar the Appellant and the second witness deny such connection and an objective
analysis does not contradict their testimony.
[9] For
the sake of completeness I note that there were courses taken by the Appellant
that appeared more geared to her profession. Such courses included:
"Cooperative Learning", "Diversity in Education",
"Integrating Technology in the Classroom" and "Critical Issues
in Canadian Education". While neither witness was able to give much detail
on the content of these courses it can readily be said that they are related to
the Appellant's chosen field of endeavour but that is not to say, and it is
hard to imagine, that the academic studies associated with these courses could
in any practical sense be said to be "in connection with" her job as
a resource teacher at a Burnaby elementary school. The Appellant admitted the
potentiality of applying theory learned in these courses but her uncontradicted
testimony corroborated by the second witness was that there was nothing in
these courses or in the program as a whole that would have direct application
in the classroom.
[10] One aspect of the program however that arguably was "connected"
to the Appellant's employment was the research proposal and paper required to
be completed. Her Action Research Proposal and Action Research Presentation
dealt with cooperative learning techniques in teaching children. While this clearly
relates to her profession as an educator it arguably, in spite of her denial, might
have had a direct connection to her job as an elementary school resource
teacher. However, there are two reasons to suggest that that would not be
determinative of whether the program as a whole was connected to her
employment.
[11] Firstly, the enrolment for the degree was governed by a written
contract (the Enrolment Agreement) which simply required 36 credit hours of
which only two credit hours were given to the research proposal and
presentation. This is such a small part of the program that it should not be
regarded as having significant weight. Secondly, and importantly, I accept that
even if the paper was a more relevant component of the program than reflected
in the Enrolment Agreement, as an academic work geared to employing and
demonstrating research skills it should be given more weight or emphasis in
relation to her professional development than in relation to her job per se.
As an academic work it reflects skills suitable to a variety to potential pursuits
that require post‑graduate research skills. On this point I also note
that there was a letter, tendered in evidence, from the Appellant's employer
confirming that the program taken by the Appellant was not related to her
employment.
The university also wrote that the program was not a "one time job-related
course". Such correspondence recognizes that programs such as this Masters
Degree from an institution of higher learning is not generally offered or
regarded in the market place as related to a specific job. While Respondent's
counsel did not object to the introduction of these two letters as evidence
they are, of course, hearsay, the authors of which were not available for
cross-examination. While I would not give such correspondence determinative weight,
such evidence need not be totally ignored particularly in an informal
proceeding case such as this.
[12] A further possible connection between the Appellant's job and the subject
program is that the Appellant's salary in part is based on her education level
so that she received an automatic raise on completion of the Masters Degree. The
Respondent relies heavily on this connection and argues that on a proper
construction of the subject provision I should not limit my analysis to
determining whether there is an applied connection between the program content
and the duties of the job which she argues is what the foregoing analysis does.
She wants me to find that the exclusionary net cast by the subject provision is
sufficiently wide to exclude the tax credit, not only where there is an
incidental connection such as a salary increment, but also where there is no
new career path being pursued by the student.
[13] As to the raise in salary, it is not clear on the evidence whether the
recognition of the degree was dependent in this case on the degree being an "Education"
degree. The Reply to the Notice of Appeal makes no such assumption yet the
Respondent's position effectively is that I must presume such connection. I am
not persuaded that I should make such an assumption on behalf of the Crown where
it is neither pleaded nor proven. If the degree were a Masters in Space Science
would the school board's pay structure still bump the Appellant's pay scale? Even
if it did, would that consequence of having the degree mean necessarily
that the program was taken in connection with her employment at the school? I
think not. While her employer's recognition of a credential for compensation
purposes is a result of having taken the program, that employer denies a relationship
between the program and the employment which underlines the distinction.
Further, the Appellant denied, and I accept her testimony, taking the program
for the raise in salary that it afforded. She stated she took the program as a
way of breaking away from her routines as a mother and improving her knowledge
base, her education, while continuing to work, which is to underline the purely
incidental and consequential nature of the salary increase. The language of the
subject provision requires that the program be "taken by the student -- in
connection with" her employment. While a purely subjective analysis (from
the perspective of either employer or student) may not be warranted, the
provision does not, nonetheless, suggest that the consequences of having taken
the program are relevant as a connecting factor.
[14] Respondent's counsel argues that such narrow construction of the
subject provision is not warranted. Indeed, as stated, she argues that the exclusionary
provision be applied as having such wide scope as to deny the education tax
credit wherever there is no new career path being pursued by the student. In
arguing for such a wide construction, Respondent's counsel relies on two points
of statutory construction: one relating to narrowing the importance of
connecting job "duties" with program content and the other relating
to an amendment to the subject provision which is said to support a wide
application of the exclusionary provision. The Appellant argues in effect that
only a direct substantive connection between taking the program and the
particular job (such as a direct connection with one's duties or an employer
requirement to take the program) would suffice to deprive a person of the
subject education tax credit and relies on the recent case of Reiner v. The
Queen, 2004-2727(IT)I (February 10, 2005).
[15] Respondent's counsel argues that the relevant provision on a plain
reading makes it clear that there are two exclusionary provisions in the
subparagraph cited above. One (the general exclusion) is where there is a
connection between the program and the job (as opposed to a connection between
the course content and the duties of employment) and the other (the specific
exclusion) is where the program is taken as part of the duties of the job. She
argues that a connection between course content and job requirements (duties) should
not be read in as a requirement in the general exclusion (particularly since
"duties" are referred to in the specific exclusion but not in the
general exclusion). In the general exclusion any connection, in the broadest
sense, should suffice. She relies on an oft cited passage from Nowegijick v.
The Queen
where it was found that the "words in respect of" import such
meanings as "in relation to", "with reference to" or "in
connection with" and is probably the widest of any expression intended to
convey some connection between two related subjects. Aside from that passage
suggesting that "in connection with" is itself not the widest of
expressions, that passage does not deal with any contextual implications of the
use of the expression such as might have to be considered where the context is
one subject matter being "taken -- in connection with" another
potentially related subject matter. The only real connection here between the
program in the case at bar and the job is the potential for the Appellant to
bring to bare to her work in the classroom a more learned mind. The subject
provision of the Act does not speak of such potential connections. It
speaks rather, in my view, of an actual connection. Many academic programs have
potential utility in a variety of job settings. That potentiality does not
establish a connection between the taking of such program and a particular job
– even a job engaged in concurrently with the taking of the program. Where
taking the program "connects" principally with something other than
the job per se without direct and material application to the duties of
employment, the connection required to deny the tax credit does not, in my
view, exist.
[16] Without belabouring the point further, there is nothing, in my view,
in the employment of the expression "in connection with" in the
subject provision that supports a finding that the widest of connecting factors
be considered as sufficient to deny an education tax credit to a student
advancing his/her professional education even while employed in that
profession. As simply put in Reiner by Justice Beaubier at paragraph 11 in
virtually indistinguishable circumstances: "‑‑ the
program was not part of her duties of her employment. Nor was it in connection
with her duties of employment. Rather, it was in connection with her
profession." In that case as in the present case, the connection was
between the program and the profession of the student, not between the program
and the particular employment of the student in that profession. The indirect
or incidental connection between the employment and the program (including a
consequential pay raise) was not found relevant or sufficient and I agree with
that conclusion. On the other hand, I would add to the principles contained in Reiner
that where the program or program content has direct and material application
to the student's employment duties, a finding that the taking of it is
connected to that employment may be warranted even if the program is
"profession" connected.
[17] Respondent's counsel argues that I should distinguish Reiner or
not apply it. Respondent's counsel argues that unlike Reiner, there is
evidence in the case at bar that program content was connected to the
Appellant's job. That I have seemingly scrutinized program content more
rigorously than done in Reiner does not change the fact that my
findings, in light of such scrutiny, are that in the case at bar the program
was taken for personal and professional development and that the program
content was primarily related or connected to that and not materially related
to her job. Accordingly, the cases should not be distinguished on the basis of
program content.
[18] Respondent's counsel also argues that any professional, such as a
teacher, could assert that an educational program is for professional advancement
or development and thereby effectively render the general exclusionary
provision meaningless or selectively applicable to non-professionals. She
argues some effect must be given to the subject provision and that it cannot be
construed so as to be meaningless. Clearly, there are connecting factors or
circumstances that can be identified to give the general exclusionary provision
meaning – a meaning that is consistent with the language of the provision and its
apparent purpose as gleaned from that language. One such circumstance is where
the program content has direct and material application to one's employment
duties whether the student is a professional or not. That was apparently not the case in Reiner
and is not the case in the present appeal. In any event, the provision as
written has meaning without trying to expand it by finding general, loose,
incidental, indirect, or potential connections between a program and one's job
so as to deny the benefit of the education tax credit to persons like the
Appellant who have sought, while working, to improve their standing in life by
pursuing a new or revived interest in a post-graduate education.
[19] I also note that Reiner does not consider Respondent counsel's
second argument made to support the position that the general exclusionary
provision be applied on a broad basis so as to deny the education tax credit
wherever there is any connection between the program and the employment
(incidental or otherwise) or wherever there is no new career path being pursued
by the student. That argument relates to an amendment to the subject provision introduced
in March 2004.
[20] The amendment relied on by Respondent's counsel was contained in the
2004 Federal Budget which included the following resolution:
That, for the 2004 and subsequent
taxation years, a qualifying educational program for the purpose of the
education tax credit include an otherwise eligible program that an individual
takes in connection with, or as part of, the duties of an office or employment.
[21] The Supplementary Information distributed with the Federal Budget
materials on March 23, 2004 contained the following comment:
The education tax credit cannot
currently be claimed by students who pursue post-secondary education that is
related to their current employment [due to 118.6(1) "qualifying
educational program" (b) — ed.]. In order to facilitate the pursuit of
job-related lifelong learning, the Budget proposes to remove this restriction
provided that no part of the costs of education is reimbursed by the employer.
[22] The resolution is suggested by counsel for the Respondent as effecting
a change in policy effective in 2004 and subsequent taxation years and should, taken
with the Supplementary Information commentary, underline that in prior years
the legislative intent was restrictive and narrowed the availability of the
education tax credit by precluding "job-related lifelong learning
programs". If the Supplementary Information commentary had legislative effect,
Respondent's counsel would be correct but it does not and I do not embrace the
position that it be applied as determinative or even persuasive of the legislative
purpose of the exclusionary provision being considered in this appeal. More
importantly, resort to such external aids to interpretation should only be made
where there is an ambiguity in the legislation and counsel for the Respondent
has not argued that the subject provision was ambiguous. Indeed she asserted
that the provision was not ambiguous
and I concur with that view. Importantly as well I note that the Interpretation
Act of Canada at section 45 states that an amendment
of an enactment shall not be deemed to be or to involve any declaration as to
the previous state of the law. The amendment is far reaching and will eliminate
the need to draw the distinctions drawn in this analysis. Employer required
programs and programs with content materially connected to a job will no longer
be denied the education tax credit provided the cost of the program is not
borne by the employer. The new provision is reflective of a parliamentary
attitude consistent with the narrow construction of the former exclusionary
provision dictated by the express and unambiguous language of the former
provision and if there is any uncertainty or ambiguity as to that, the benefit
of the uncertainty goes to the taxpayer.
[23] Accordingly and for all these reasons the appeal is allowed with costs.
Signed at Ottawa,
Canada, this 11th day of May 2005.
Hershfield
J.
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