Meaning of “recognized degree-granting institution” in domestic context
3. For GST/HST purposes, 3 types of domestic entities qualify as universities:
- institutions that grant degrees and that are established as universities by legislation enacted by the appropriate Canadian jurisdiction in which they are situated, as well as colleges or similar organizations that are authorized by a relevant authority, such as a province under provincial legislation, to grant a degree where degree is defined by the relevant authority to mean a level of academic achievement, such as at the associate level or higher
- organizations that operate colleges affiliated with universities
- organizations that operate research bodies of universities
University usually but not always established by provincial legislation
4. A university is usually established by legislation enacted by the government of the province in which the institution is situated. However, if a university is built on federal land, then the establishing legislation is enacted by the federal government. The Royal Military College in Kingston, Ontario, is an example of a degree-granting institution that was established by federal legislation.
Example of degree authorization test being satisfied
The Degree Authority Act (DAA) of a province requires private and out-of-province public post-secondary institutions to obtain consent from the Minister of Advanced Education (Minister) if they wish to grant or confer a degree in the province.
Under the DAA, degree means “academic achievement that is specified in writing to be an associate, baccalaureate, masters, doctoral or similar degree”.
The DAA prevents a person from directly or indirectly granting or conferring a degree unless the person is authorized to do so by the Minister and the Minister is satisfied that the person has met the necessary conditions.
Private College XYZ is a private, post-secondary institution that operates in the province. Private College XYZ has met the necessary requirements such that the Minister has granted Private College XYZ permission to grant or confer associate degrees under the DAA.
Private College XYZ is a university as defined in subsection 123(1) of the Act because the college has been authorized by the Minister to grant associate degrees, degree is defined in the applicable legislation and the definition of degree includes associate degrees. All of the conditions necessary for Private College XYZ to qualify as a university as defined in the Act have been met.
Meaning of “affiliated” organization
7. An organization is only considered to be operating a college affiliated with a university where there is a formal affiliation agreement that states that the parent organization (the university) agrees to grant degrees to graduates of the affiliated college in exchange for a certain amount of control over the academic standards of, and the courses offered by, the affiliated college.
Meaning of research body
8. An organization is considered to be a research body of a university if the organization is both:
- established and operated primarily to perform research
- owned and controlled by the university
9. To determine whether an organization was established primarily to perform research, the Canada Revenue Agency (CRA) normally looks to the instruments by which the organization was created, such as incorporating legislation, incorporating documents and by-laws. To determine whether the organization is operating primarily to perform research, the organization’s financial statements and/or information on the organization’s website may assist in making the determination.
Meaning of owned and controlled
10. An organization is considered to be owned by a university if one of the following conditions is met:
- the university owns all or substantially all (90% or more) of the shares or capital of the organization
- the university holds title to the organization’s assets or controls the disposition of these assets such that in the event of wind up or liquidation, these assets are vested in the university
11. An organization is considered to be controlled by a university if one of the following conditions is met:
- the university selects and appoints a majority of the members of the governing body of the organization (directors, governors, commissioners, etc.)
- the organization is required, by virtue of legislation, by-laws or an operating agreement, to submit its operating budget and, where applicable, its capital budget to the university for review and approval
Example re ownership and control test
Organization C, which was incorporated under the legislation of a province, is established and operated primarily to undertake research activities related to the agricultural industry. It operates in space provided to it by University D.
Organization C receives funding from, and submits related expenditure statements to, the province. However, Organization C’s incorporating documents provide that upon dissolution, its assets shall be conveyed to University D. As such, Organization C is considered to be owned by University D.
The board of directors of Organization C has 14 seats in total and is made up of:
- 4 representatives from University D
- 2 representatives from the province
- 1 representative from the Government of Canada
- 5 representatives from private sector producers of agricultural products
- 2 members at large representing the purchasers of agricultural products
University D selects nominees representing University D, the private sector producers and the members at large (a total of 11 of the 14 members of the board). The province and the Government of Canada select their representatives. Once all 14 nominees are selected, University D appoints the board of directors. Organization C is not required to submit operating or capital budgets to University D for review and approval. However, because a majority of the members of Organization C’s board of directors are selected and appointed by University D, Organization C is considered to be controlled by University D.
Because Organization C was established and is operated primarily to perform research and is both owned and controlled by University D, Organization C qualifies as a university for GST/HST purposes.