Citation: 2005TCC455
Date: 20050722
Docket: 2004-4409(IT)I
BETWEEN:
MUI YEAH MARGARET CUNNINGHAM,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(delivered
orally from the Bench on June 6, 2005
at
Vancouver, British Columbia)
Woods J.
[1] This is an appeal by Margaret Cunningham in
respect of an assessment under the Income Tax Act for the 2002 taxation
year. The assessment disallowed Mrs. Cunningham’s claim for an education
tax credit in respect of her enrollment in a program leading to a Masters of
Science in Nursing at the University
of British Columbia.
[2] The relevant section is section 118.6(2) of
the Act. In general, it allows a tax credit of a specified amount for
each month during the taxation year that the taxpayer is enrolled in a
qualifying educational program. Mrs. Cunningham claimed the credit for 12
months in 2002.
[3] There are a number of conditions that must
be satisfied in order to qualify for the credit. The Crown takes issue with
only one of these and that is the exclusion described in clause (b) of
the definition of qualifying educational program. I have assumed that the other
conditions are satisfied and that clause (b) is the only issue.
[4] The taxpayer obtained a nursing diploma in
Singapore in 1983 and practiced as a nurse in that jurisdiction before coming
to Canada in 1990. In 1995 she attended university
in a Bachelor of Nursing program which she successfully completed in 1999.
Immediately after that, the taxpayer enrolled in a program leading to a Masters
of Science in Nursing which was granted in 2004. So the taxpayer attended a
Canadian university from 1995 to 2004.
[5] At the beginning of 2002, the taxpayer was
a nurse practicing at St. Pauls Hospital in Vancouver. In February of that year, she took a
two-month secondment from St. Pauls to become a clinical teacher at the University of British Columbia. During this time, the taxpayer
continued to be paid by St. Pauls Hospital and
the hospital was reimbursed by the University.
[6] After the secondment, the taxpayer became
employed as a clinical instructor by another college, the Vancouver Community
College. This job lasted from
mid May until the end of July and during this time, the taxpayer took a leave
of absence from St. Pauls.
[7] At the end of the summer, the taxpayer
accepted a one year contract as a clinical instructor with the University of British Columbia. She continued her leave of absence from
St. Pauls during this time.
[8] The job of clinical instructor involves in
the main the supervision of students in hospitals. It also involves a few
lectures and supervision of labs in which students practice basic nursing
skills.
[9] The taxpayer testified that she took the
undergraduate and graduate degrees for her own personal and professional
development and that her university work was not related to any employment.
[10] I turn now to an analysis of whether the
exclusion in clause (b) applies so as to deny the credit in these
circumstances.
[11] Clause (b) contains a two-part test
and both parts must be satisfied in order for the tax credit to be denied. The
first part is that the program must be taken during a period in respect of
which the student receives income from an office or employment. The second part
is that the program must be taken in connection with, or as part of the duties
of, that office or employment.
[12] I have concluded that clause (b)
does not apply on the facts of this case. I find that the taxpayer took the
program for personal and professional development generally and not in
connection with any particular employment. My reasons are as follows.
[13] First, I would note that the focus of the
inquiry is on the program as a whole. Either the program is a qualifying
educational program or it is not. Further, the definition distinguishes between
the program as a whole and courses within the program. Accordingly, the
question is whether the masters program as a whole qualifies – and not whether
a particular course qualifies. The question, then, is whether the masters
program taken by the taxpayer from 1999 to 2004 is taken in connection with an
employment.
[14] I note that clause (b) uses the word
“taken”, a program taken in connection with an office or employment. This
suggests that an important consideration in determining whether the program
qualifies is the reason that the taxpayer enrolled in the program in the first
place. Typically if a program is taken in connection with an employment, the
employment would exist at the time the student enrolls. The starting point of
the inquiry, then, should be to look at why the taxpayer entered the program in
the first place.
[15] In this case, the taxpayer enrolled in the
program in 1999. I do not recall any evidence regarding whether the taxpayer
was employed in 1999 as the focus at the hearing was on the 2002 taxation year.
In the absence of this evidence, there is nothing to suggest that taking the
masters program was originally connected with a particular employment.
[16] Even if the taxpayer were employed as a
practising nurse in 1999, in my view clause (b) would not apply to that
employment because the masters program was not related to the practice of
nursing to any significant degree. The taxpayer’s evidence regarding the
courses taken seems to suggest that the program was not designed to teach
nursing skills per se. It was geared more to the academic study of nursing
rather than the practical.
[17] I turn now to considering whether the
masters program was taken in connection with the taxpayer’s teaching jobs that
commenced in 2002, some three years after she started the masters program. As
I noted previously, I think it would be unusual for clause (b) to apply
if the employment commences after the educational program started. It is
unlikely that the program in these circumstances is “taken” in connection with
the employment.
[18] Further, on the facts of this particular
case, there is very little connection between the masters program and the
teaching jobs. The taxpayer no doubt would have continued to take the masters
program regardless of whether she obtained a teaching position. Similarly, she
might have been hired to teach without being enrolled in the masters program.
Further, the clinical instruction is concerned with the practice of nursing and
that is quite removed from most of the academic subjects in the masters
program. I agree with counsel for the Crown that the words “in connection
with” are broad but in my view an insubstantial connection is not sufficient.
[19] The Crown suggests that its interpretation
of “in connection with” is consistent with the purpose of the legislation which
is to provide an incentive for education in a new field of endeavour. I do not
agree.
[20] The general purpose of the education tax
credit seems to be to encourage higher education. The legislative purpose
appears to be quite broad. In my view, the exclusions in clauses (a) and
(b) suggest a legislative intent to deny the credit when a taxpayer
receives financial support for the program. Clause (a) refers to direct
financial support and clause (b) suggests indirect financial support. I
note that it is not sufficient to have a connection to a field of endeavour or
profession. The connection must be to a particular office or employment. In
addition, clause (b) has a rather unusual reference to “income” from
employment. This suggests a tie between the income and the educational program.
For these reasons, I am not satisfied that the legislative intent is as broad
as the Crown suggests.
[21] For all these reasons, I would conclude
that the education tax credit claimed by the taxpayer for the 2002 taxation
year should be allowed. In addition, the taxpayer should have such costs as are
permitted by the applicable rules.
Signed at Toronto, Ontario this 22nd
day of July, 2005.
Woods
J.
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