28 January 2003 Internal T.I. 2003-0181917 - EDUCATION AND TUITION TAX CREDIT

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:

Whether a particular association can issue a T2202A for purposes of the tuition and education tax credit given the circumstances surrounding the particular program.

Position: Likely no.

Reasons:

Tuition Tax Credit: No tuition is actually paid to the association. Education Tax Credit:The program is jointly provided by two organizations, only one of which is certified by HRDC. This tends to indicate that the program is not provided by a designated educational institution.

				January 28, 2003

	HEADQUARTERS		HEADQUARTERS
	Special Processing Division		Income Tax Rulings
	Validation Section		  Directorate
				Renée Shields
	Attention:  Dianne Waterfield			948-5273

				2003-018191

Education Tax Credit and Tuition Tax Credit - Issuance of Form T2202A

This is in response to your memorandum of January 7, 2003 regarding an inquiry by the XXXXXXXXXX (the "Association") as to whether it should be issuing Form T2202A to students taking the XXXXXXXXXX (the "Program") jointly offered by the Association and XXXXXXXXXX (the "Partner").

We understand that the Association is certified by Human Resources Development Canada ("HRDC") to be a designated educational institution for purposes of sections 118.5 and 118.6 of the Income Tax Act (the "Act"). The Partner is not so certified. The arrangement between the Association and the Partner is substantially set out in the agreement contained in a letter dated November 26, 2001 from the Partner to the Association. We note that Appendices XXXXXXXXXX referred to therein were not provided for our review.

The tuition tax credit

The Canada Customs and Revenue Agency's ("CCRA's") general interpretation of the provisions of the Act that apply to the tuition tax credit is contained in Interpretation Bulletin IT-516R2, "Tuition Tax Credit." Subject to certain enumerated exceptions, (and leaving aside a discussion of universities or colleges, which is not applicable in the case at hand) the tuition tax credit is generally available to individuals enrolled at an educational institution certified by HRDC in accordance with subparagraph 118.5(1)(a)(ii) of the Act. The tuition tax credit is computed with reference to the amount of tuition paid to the educational institution.

From the description of the Program provided, the following details are relevant:

? The Partner makes the Program available to independent study students (XXXXXXXXXX).

? The Partner invoices students (XXXXXXXXXX).

? The Partner collects all course fees payable (XXXXXXXXXX).

? The Partner has discretion to raise or lower the fee charged for the Program (XXXXXXXXXX).

? The Partner pays royalties to the Association XXXXXXXXXX in the amount of XXXXXXXXXX% of net revenue derived from sales of courses in the first XXXXXXXXXX months and XXXXXXXXXX% of net revenue from sales of courses after the first XXXXXXXXXX months (XXXXXXXXXX).

Based on the foregoing, it appears that students registering for the Program are doing so with the Partner. Tuition paid is not paid to the Association but to the Partner. Any revenue earned by the Association in connection with the Program appears to be in the form of royalties received from the Partner. Accordingly, our opinion is that the Association should not issue Form T2202A because it does not receive tuition fees.

The education tax credit

The CCRA's general interpretation of the provisions of the Act that apply to the education tax credit is contained in Interpretation Bulletin IT-515R2, "Education Tax Credit." Generally, the education tax credit is available in respect of regular and correspondence education programs for students who are enrolled in qualifying or specified educational programs at designated educational institutions in Canada and is computed based on the number of months enrolled in the program.

A "designated educational institution" may issue a T2202 or a T2202A to a full-time student enrolled in a "qualifying educational program" or to a part-time student enrolled in a "specified educational program". The expressions "qualifying educational program", "specified educational program" and "designated educational institution" are defined in subsection 118.6(1) of the Act.

In the situation at hand, it is questionable whether it is the Association that is providing the Program. Rather, it appears that the Program is provided jointly by two organizations - the Association and the Partner. This determination would be a question of fact. The following factors would likely be relevant to the discussion:

? In electronic and textbook formats, the Program is identified as being offered by the Association in partnership with the Partner (XXXXXXXXXX).

? XXXXXXXXXX.

? The Partner developed, administers and manages the course delivery system known as the XXXXXXXXXX.

? The Partner provides technical support (XXXXXXXXXX). It is acknowledged that the Association provides student support (XXXXXXXXXX).

? The Partner ships all course materials, invoices students and collects course fees (XXXXXXXXXX).

? The Partner has discretion to change course fees (XXXXXXXXXX).

? As additional courses are added XXXXXXXXXX, the Partner revises course material, and assumes responsibility for course development, marketing and administration (XXXXXXXXXX).

? The Partner and the Association participate in a joint marketing program (XXXXXXXXXX).

? The Partner pays royalties to the Association computed as a percentage of net revenue from sales of courses (XXXXXXXXXX).

We discussed the situation in general terms with an official of HRDC in the Certification of Private Educational Institutions area (947-3131). It is their position that where a program is provided jointly, there are two alternative means of satisfying the certification requirement of subparagraph 118.6(1)(a)(ii) of the Act. Either both organizations should secure certification from HRDC, or if the partnership has a legal identity, the partnership can apply for certification.

Accordingly, for purposes of the education tax credit, since it appears that the Program is offered by two organizations, only one of which is certified by HRDC pursuant to subparagraph 118.6(1)(a)(ii) of the Act, we are not convinced that the individual is enrolled in a program at a designated educational institution as required by subsection 118.6(2) of the Act. As such, and in light of the factors listed above, it would be our opinion that the Association should not be issuing a Form T2202A for purposes of the education tax credit.

We trust that these comments will be of assistance.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CCRA's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

Mickey Sarazin, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch