26 March 2003 Internal T.I. 2003-0004967 - SR&ED APPROVED UNIVERSITY

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 CCRA.

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

Principal Issues:

Paragraph 33 of IT-151R5 states that "For the purposes of clause 37(1)(a)(ii)(B), all Canadian universities and affiliated colleges are considered to be approved"- does this statement cover institutions called "university colleges" which are found throughout Canada (in this particular case the institution in question is situated in XXXXXXXXXX )

Position:

Question of fact, in most cases no.

Reasons:

- exemption is administrative in nature, therefore it should be applied restrictively to those public Universities and affiliated Colleges that are legislatively recognized as universities and receive government funding. This may include some University-Colleges.

		March 26, 2003

	Financial Legislative Application Section	HEADQUARTERS
	SR&ED Directorate	Lena Holloway,CA
	Connie Ng	(613) 957-2104

		2003-000496
	Paragraph 33 of IT 151R5

We are writing in response to your email message of February 25, 2003 wherein you asked if a Canadian post-secondary educational institution known as a "University-College" would qualify for the administrative relief provided for in paragraph 33 of IT-151R5.

Our Comments

Subparagraph 37(1)(a)(ii) of the Income Tax Act (the "Act") provides that certain payments to "approved" organizations will qualify (subject to certain conditions) as scientific research and experimental development expenditures and clause (B) of this subparagraph includes payments made to "an approved university, college, research institute or other similar institution". For the purpose of clause 37(1)(a)(ii)(B) of the Act, IT-151R5 provides that all Canadian universities and "affiliated colleges" are considered to be approved. All colleges are not automatically exempt, rather the college must be affiliated with a university in order to obtain the administrative approval exemption.

This administrative exemption from obtaining approval was granted at the writing of the first version of IT-151 in 1974. Given that the exemption is unsupported in legislation, it should be applied restrictively to those public Universities and affiliated Colleges that are legislatively recognized as universities and receive government funding. This may include some University Colleges.

IT-151R5 does not define the word "affiliated", hence it is reasonable to adopt the dictionary meaning as being owned or associated as described in your letter. Where specific programs offered by a college are directly affiliated with a particular University (in your example a bachelors degree is awarded by an affiliated university for a program offered by a college) the entire college would not be exempt from the requirement to obtain written approval from the Minister. The affiliation mentioned in IT-151R5 should be restricted to those instances where a clear affiliation is present (i.e. XXXXXXXXXX). All other colleges and institutions should obtain approval.

We trust that the above comments will be helpful to you. Should you require any additional information, please do not hesitate to contact us.

Daryl Boychuk, LL.B
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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