[OFFICIAL ENGLISH TRANSLATION]
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Citation: 2003TCC266
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Date: 20030414
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Docket: 2001-641(IT)I
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BETWEEN:
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JOANE LESSARD,
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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
Lamarre Proulx, J.T.C.C.
[1] These are appeals under the
informal procedure concerning the 1998 and 1999 taxation
years.
[2] There are two issues, as
follows:
(1) whether, under section 63 of
the Income Tax Act ("the Act"), the
appellant is entitled to deduct child care expenses for her
daughter, who lives in residence at the Royal Winnipeg Ballet
Professional School where she is studying ballet; and
(2) whether, under
subsection 118.6(2) of the Act, the appellant is
entitled to claim the education credit.
[3] In making the assessments, the
Minister of National Revenue ("the Minister") relied in
particular on the following assumptions of fact, set out in
paragraph 9 of the Reply to the Notice of Appeal ("the
Reply"):
(a) the appellant
has been employed for over 20 years by the corporation
S.E.C.A.L., a factory in Jonquière;
(b) the appellant
has two children, a son Maxime Lessard Pelletier, born on
October 21, 1991, and a daughter Josée Lessard
Harvey, born on June 10, 1984;
(c) the appellant
deducted the following amounts as child care expenses for the
1998 taxation year:
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Maxime
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$1,876.25
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Garderie le Jardin Ensanté
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Josée
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735.25
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Prisme Culturel
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Josée
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2,000.00
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Royal Winnipeg Ballet
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Total
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$4,611.50
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(d) the appellant
deducted $7,400 paid to the Royal Winnipeg Ballet as child care
expenses for Josée for the 1999 taxation year;
(e) the appellant
claimed the following amounts as amounts transferred from a
child: tuition fees of $1,818 and an education amount of $2,200
for the 1998 taxation year; and tuition fees of $1,908 and
an education amount of $2,200 for the 1999 taxation
year;
(f) the
appellant's daughter Josée is studying full-time in
Winnipeg at the Royal Winnipeg Ballet School, Professional
Division, in order to become a professional ballet dancer;
(g) the Royal
Winnipeg Ballet School is recognized as a post-secondary
educational institution by the Minister of Employment and
Immigration;
(h) the appellant
paid the following amounts as residence fees for her daughter at
this school: $4,205 in 1998 and $7,400 in 1999;
(i) these
residence fees include accommodation, meals and continuous
supervision;
(j)
Josée attends ballet classes at the school in the morning
and secondary-level academic courses at the Boniface School
Division in the afternoon;
(k) a letter from
the Royal Winnipeg Ballet states as follows: "Students who
successfully complete levels four, five and six, earn three
credits towards their high school diploma."
(see Appendix A);
(l) this
ballet school's program has seven levels: Josée
reached level five in 1998 and graduated to level six
in June 1999;
(m) the appellant was
unable to provide to the Minister either form T2202A or
form T2202.
[4] The appellant admitted the truth
of the assumptions of fact set out in subparagraphs 9(a),
9(c) to 9(i), and 9(k) to 9(m) of the Reply.
[5] Concerning subparagraph 9(b)
of the Reply, the appellant pointed out that she had three
children: her first child was a daughter born in 1977, but the
information concerning the two other children was correct.
Concerning subparagraph 9(j) of the Reply, she pointed out
that the school where her daughter attends courses in the
afternoon is Collège Louis Riel. Concerning
subparagraph 9(m) of the Reply, she wondered whether it was
her responsibility to supply the forms.
[6] The appellant adduced as
Exhibit A-1 a letter from the Royal Winnipeg Ballet that
reads in part as follows:
...
This letter is to confirm that Josee Lessard-Harvey is a
full-time student with the Royal Winnipeg Ballet
Professional School for the 1998-99 school year. She is enrolled
in Level 5 of a seven level program. The 1998-99 school year
begins on September 8, 1998 and ends on July 30, 1999.
The Royal Winnipeg Ballet School's Professional Program is
recognized by the Minister of Employment and Immigration as a
post-secondary institution.
...
[7] Philippe Demeule, an auditor with
the Canada Customs and Revenue Agency, testified for the
respondent. In response to a question from the Court
concerning child care services provided at boarding schools, he
answered that, in his opinion, deduction of these expenses would
not be allowed unless the children were placed in the boarding
school in order to enable the parents to perform the duties of
employment. He explained that the tuition credit claimed
under subsection 118.5(1) of the Act was apparently
allowed as the result of a generous interpretation of
clause 118.5(1)(a)(ii.2)(B): the purpose of the
individual's enrolment at the institution could reasonably be
regarded as being to provide the individual with skills for, or
to improve the individual's skills, in an occupation.
The education credit claimed under subsection 118.6(2) of
the Act was disallowed because the appellant's
daughter had not attained the age of 16 years.
Analysis and conclusion
[8] In her
February 27, 2003, written comments on the child care
expenses, counsel for the respondent confirmed that these
expenses were disallowed because the appellant did not incur them
in order to enable her to perform the duties of an office or
employment.
[9] The definition of "child care
expense" set out in subsection 63(3) of the Act
reads as follows:
"child care expense" means an expense incurred in a
taxation year for the purpose of providing in Canada, for an
eligible child of a taxpayer, child care services including baby
sitting services, day nursery services or services provided at a
boarding school or camp if the services were provided
(a) to
enable the taxpayer, or the supporting person of the child for
the year, who resided with the child at the time the expense was
incurred,
(i) to
perform the duties of an office or employment,
(ii) to carry
on a business either alone or as a partner actively engaged in
the business,
(iv) to carry on
research or any similar work in respect of which the taxpayer or
supporting person received a grant, or
(v) to attend
a designated educational institution or a secondary school, where
the taxpayer is enrolled in a program of the institution or
school of not less than three consecutive weeks duration that
provides that each student in the program spend not less than
(A) 10 hours per week on courses
or work in the program, or
(B) 12 hours per month on
courses in the program, and
(b) by a
resident of Canada other than a person
(i) who
is the father or the mother of the child,
(ii) who is a
supporting person of the child or is under 18 years of age and
related to the taxpayer, or
(iii) in
respect of whom an amount is deducted under section 118 in
computing the tax payable under this Part for the year by the
taxpayer or by a supporting person of the child,
except that
(c) any
such expenses paid in the year for a child's attendance at a
boarding school or camp to the extent that the total of those
expenses exceeds the product obtained when the periodic child
care expense amount in respect of the child for the year is
multiplied by the number of weeks in the year during which the
child attended the school or camp, and
(d) for
greater certainty, any expenses described in
subsection 118.2(2) and any other expenses that are paid for
medical or hospital care, clothing, transportation or education
or for board and lodging, except as otherwise expressly provided
in this definition, are not child care expenses;
[10] Counsel for the respondent did not cite
any case law that could guide the Court in reaching a decision in
the present case. To the Court's knowledge, there is no
case law specifically on the nature or the terms and conditions
of the child care services chosen.
[11] A parent may choose to place a child in
a boarding school because the parent believes that the child will
do better in an institution of that kind rather than in the
neighbourhood school. This choice is based, not on the work
needs of the parent, but on the improved performance or needs of
the child. Would such a choice prevent a parent from
deducting the child care expenses? Does the Act
itself not provide that child care services may be provided at a
boarding school?
[12] The Court considers that, in applying
the Act, it must determine whether the child is eligible,
and whether the parent performed the duties of an office or
employment or was in other circumstances set out in the
definition of child care expenses. In the Court's
opinion, the Act does not require that the parent's
choice of child care services be justified by the parent's
work needs. The taxpayer is responsible for choosing the
boarding school at which he or she wishes the child to study, or
the child care services he or she wishes to use; the taxpayer
makes this choice on the basis of the child's needs, and this
choice is an exercise of parental discretion. In the
Court's opinion, the Act does not require that
questions be asked about whether a particular form of child care
is chosen on the basis of the parent's work needs or the
child's needs.
[13] Under section 118.9 of the
Act, the appellant may transfer the tuition credit and the
education credit. The tuition credit she claimed was
allowed; she has asked that the education credit she claimed be
allowed as well.
[14] With respect to the education credit
claimed under subsection 118.6(2) of the Act, counsel
for the respondent explained in her written comments why the
Minister disallowed this credit, as follows:
[TRANSLATION]
However, the Canada Customs and Revenue Agency was right in
disallowing the education tax credit claimed under
subsection 118.6(2) of the Income Tax Act. The
ground for disallowing this credit is that the [child] had not
attained the age of 16 years; this requirement is set out in
subsection 118.6(1).
Indeed, the first passage relevant to computing this credit
reads as follows:
(2) Education credit - There may be deducted in
computing an individual's tax payable under this Part for a
taxation year the amount determined by the formula
A × B
where
A is the
appropriate percentage for the year; and
B is the
total of the products obtained when
(a) $400 is
multiplied by the number of months in the year during which the
individual is enrolled in a qualifying educational program as a
full-time student at a designated educational institution,
and
(b) $120 is
multiplied by the number of months in the year (other than months
described in paragraph (a)), each of which is a month
during which the individual is enrolled at a designated
educational institution in a specified educational program that
provides that each student in the program spend not less than 12
hours in the month on courses in the program,
Thus the first requirement for entitlement to claim this
credit is enrolment in a "qualifying educational
program" or a "specified educational
program". The definitions of these two expressions are
set out in subsection 118.6(1) and require that the courses
taken be at the post-secondary level. The courses taken at
the Royal Winnipeg Ballet School by the appellant's daughter
give her credits at the secondary level and therefore do not
allow the appellant to claim the education credit.
The last requirement set out in subsection 118.6(2), that
of attaining the age of 16 years, applies where the
institution attended qualifies as a "designated educational
institution" as defined in
subparagraph 118.6(1)(a)(ii) but not as defined in
subparagraph 118.6(1)(a)(i). The relevant
passage of the definition of "designated educational
institution" set out in subsection 118.6(1) of the
Act reads as follows:
"designated educational institution" means
(a) an
educational institution in Canada that is
(i) a
university, college or other educational institution designated
by the Lieutenant Governor in Council of a province as a
specified educational institution under the Canada Student
Loans Act, designated by an appropriate authority under the
Canada Student Financial Assistance Act, or designated by
the Minister of Higher Education and Science of the Province of
Quebec for the purposes of An Act respecting financial
assistance for students of the Province of Quebec, or
(ii) 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 person's skills in, an occupation,
...
Under subparagraph 118.6(1)(a)(i)of the Income
Tax Act, the institution attended by the appellant's
daughter could qualify as a "specified educational
institution" for the purposes of the Canada Student Loans
Act. However, the Canada Student Loans Act also
requires that the courses taken be at the post-secondary level
and, since the courses taken by the appellant's daughter are
secondary-level courses, they do not qualify.
"specified educational institution" means an
institution of learning, whether within or outside a province,
that offers courses at a post-secondary school level and
that is designated by the lieutenant governor in council of that
province, either particularly or as a member of a class, as a
specified educational institution within the meaning of this
Act.
"qualifying student" means a person
(a) who is a
Canadian citizen or a permanent resident within the meaning of
the Immigration Act,
(b) who is
qualified for enrolment or is enrolled at a specified educational
institution as a full-time or part-time student for a period of
studies at a post-secondary school level, and
(c) who
intends to attend at a specified educational institution as a
full-time or part-time student for a period of studies described
in paragraph (b) if it is financially possible for
that person to do so;
Thus, although the courses taken by the appellant's
daughter at the Royal Winnipeg Ballet School may qualify under
the definition of "designated educational institution"
set out in subparagraph 118.6(1)(a)(ii) of the
Act, given the last requirement set out in
subsection 118.6(2)¾that the individual have attained
the age of 16 years before the end of the year¾the
courses do not qualify.
We respectfully submit that, on these two grounds, the
appellant is not entitled to the education credit under
section 118.6 of the Act.
[15] The Court considers that all the points
made by counsel for the respondent are valid except the
penultimate paragraph with respect to the 1998 taxation
year. The requirement that the individual have attained the
age of 16 years before the end of the year applies to the 1999
taxation year. It did not form part of the Act as it
applied to the 1998 taxation year. For the 1999 taxation
year, the passage following variable B of the formula was amended
to include the requirement that the individual have attained the
age of 16 years.
[16] Subsection 118.6(2) of the
Act, as it applied to the 1998 taxation year, reads as
follows:
118.6(2) Education credit - There may be deducted in
computing an individual's tax payable under this Part for a
taxation year the amount determined by the formula
A × B
where
A is the
appropriate percentage for the year; and
B is the
total of the products obtained when
(a) $400 is
multiplied by the number of months in the year during which the
individual is enrolled in a qualifying educational program as a
full-time student at a designated educational institution,
and
(b) $120 is
multiplied by the number of months in the year (other than months
described in paragraph (a)), each of which is a month
during which the individual is enrolled at a designated
educational institution in a specified educational program that
provides that each student in the program spend not less than 12
hours in the month on courses in the program,
if the enrolment is proved by filing with the Minister a
certificate in prescribed form issued by the designated
educational institution and containing prescribed information
and, in respect of a designated educational institution described
in subparagraph (a)(ii) of the definition "designated
educational institution" in subsection (1), the individual
is enrolled in the program to obtain skills for, or improve the
individual's skills in, an occupation.
[17] For the 1999 taxation year, the passage
following variable B of the formula was amended to read as
follows:
if the enrolment is proven by filing with the Minister a
certificate in prescribed form issued by the designated
educational institution and containing prescribed information
and, in respect of a designated educational institution described
in subparagraph (a)(ii) of the definition "designated
educational institution" in subsection (1), the individual
has attained the age of 16 years before the end of the year and
is enrolled in the program to obtain skills for, or improve the
individual's skills in, an occupation.
[18] For the aforementioned reasons, the
appeals by the appellant are allowed and the assessments are
referred back to the Minister for reconsideration and
reassessment on the basis that, under section 63 of the
Act, the appellant is entitled to deduct child care
expenses for her daughter Josée for the 1998 and 1999
taxation years and to claim the education credit for her daughter
Josée for the 1998 taxation year.
Signed at Ottawa, Canada, this 14th day of April 2003.
J.T.C.C.
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