7 May 2007 Ministerial Correspondence 2007-0230731M4 - Assistance for ex-employees re retraining courses

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.

Principal Issues: Whether tuition assistance received from Service Canada is taxable.

Position: Yes.

Reasons: Financial assistance received by a taxpayer under a program established by the Canada Employment Insurance Commission under Part II of the Employment Insurance Act is taxable under subparagraph 56(1)(r)(ii) of the Act.

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter received on April 2, 2007, outlining the concerns of the XXXXXXXXXX, about the taxation of tuition assistance, which they received from Service Canada. The assistance was paid to cover the full cost of their tuition for a retraining course at the XXXXXXXXXX. The union members, XXXXXXXXXX, are asking that the Canada Revenue Agency (CRA) consider treating this assistance as tax-exempt.

The CRA is responsible for administering and enforcing the Income Tax Act as enacted by Parliament, and it cannot go beyond the provisions of the Act to exempt otherwise taxable income. Although tuition assistance received under a skills development program administered by Service Canada must be included in income, depending on the nature of the education or retraining undertaken by the individual, offsetting income tax credits or deductions are generally available to mitigate any adverse tax consequences.

Provided the courses described in your letter were at the post-secondary level, or at an institution certified by the Minister of Human Resources and Skills Development, more recently known as the Minister of Human Resources and Social Development, and were courses that furnish a person with skills for, or improve a person's skills in, an occupation, the union members will likely qualify for the tuition, education, and textbook tax credits in respect of their enrolment at the XXXXXXXXXX. Additional information about the requirements to qualify for these credits is available in Interpretation Bulletins IT-515R2, Education Tax Credit, and IT-516R2, Tuition Tax Credit, both of which are available on the CRA Web site at www.cra.gc.ca. To support their claims for these credits, the students should receive a T2202 or other applicable information slip from the College.

Alternatively, if the particular courses taken by the members do not qualify for the above-noted credits, it may be possible that the assistance they received will qualify for a deduction from taxable income under paragraph 110(1)(g) of the Act. In general terms, this provision provides recipients an offsetting deduction for tuition assistance for adult basic education. Additional information about this deduction can be found in paragraph 38 of Interpretation Bulletin IT-75R4, Scholarships, Fellowships, Bursaries, Prizes, and Research Grants, which is also available on the CRA Web site.

I appreciate your having taken the time to write, and I trust that the information provided will be helpful.

Sincerely,

The Honourable Carol Skelton, P.C., M.P.

James Gibbons
819-458-3538
2007-023073