29 May 2007 Ministerial Correspondence 2007-0233601M4 - Children's Fitness 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.

Principal Issues: 1. Will the cost of a uniform included in a program's registration fee affect the calculation of the fitness tax credit? 2. Will a low-income parent's receipt of financial assistance or a discounted registration fee affect the individual's eligibility for the credit?

Position: 1. In general, no. 2. No

Reasons: 1. Provided that the uniform/clothing is used for the program and has little or no residual value, then the cost of the clothing will not have to be removed from the registration fees. 2. Eligibility is not affected. However, because the formula for calculating the fitness tax credit makes reference to 'an amount paid in the tax year by the individual, only the amount actually paid may be used to calculate the credit.'

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Dear XXXXXXXXXX:

Thank you for your email received on April 27, 2007, concerning the children's fitness tax credit. I also received a copy of your email addressed to the Honourable James M. Flaherty, Minister of Finance, on April 23, 2007. I apologize for the delay in responding.

In general terms, the children's fitness tax credit is based on the amount paid in the year (up to a maximum of $500) by an individual as an "eligible fitness expense" in respect of his or her child under the age of 16. You have requested a breakdown of what constitutes an eligible fitness expense. The phrase "eligible fitness expense" is defined in the Income Tax Act to be a fee attributable to the cost of the child's registration or enrolment in a program of prescribed physical activity.

The Department of Finance Canada has not yet published the provision of the Income Tax Regulations that will define a prescribed physical activity for purposes of the credit. It has, however, indicated in public announcements that the provision will require that the activity be ongoing (either a minimum of eight weeks duration with a minimum of one session per week or, in the case of children's camps, five consecutive days), supervised, and suitable for children. In addition, substantially all of the activities must include a significant amount of physical activity that contributes to cardio-respiratory endurance plus one or more of muscular strength, muscular endurance, flexibility, or balance.

Furthermore, the Department of Finance Canada has indicated its support of the recommendation of the Public Health Agency of Canada's report, Canada's Physical Activity Guides for Children and Youth, that programs of prescribed physical activity should encourage children to strive towards at least 30 minutes of sustained moderate to vigorous physical activity per session for children under the age of 10, and 60 minutes for children 10 and older. The Department of Finance Canada has also indicated that an activity occurring as part of physical education programming during the school day will not be eligible, even if a surcharge is levied for the activity.

You also posed a question about uniform charges included in registration fees. It is recognized that many organizations provide a team T-shirt or uniform to the children participating in their programs. When this clothing is used for the program and has little or no residual value when it is over, the organization need not modify its receipting procedures to remove the cost of the clothing from the registration fee.

Finally, you asked whether a low-income parent's receipt of financial assistance from a social program or a discounted registration fee will affect the individual's eligibility for the credit. As described above, the formula to calculate the credit makes reference to "an amount paid in the tax year by the individual". Accordingly, it would not be in accordance with the Act for an individual to calculate the credit based on an amount that includes any portion of the registration fee that he or she did not pay.

While information on the credit is available on both the Canada Revenue Agency (CRA) and Department of Finance Canada Web sites at www.cra.gc.ca/whatsnew/fitness-e.html and www.fin.gc.ca/news06/06-084e.html, respectively, the CRA is in the process of updating its Web site to provide additional information.

I trust that the information I have provided will be of assistance.

Sincerely,

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

Renée Shields
(613) 957-4920
2007-023360
May 11, 2007