2 February 2009 External T.I. 2008-0267551E5 - Requirement to issue T4A - tuition paid

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 costs paid by an organization on behalf of students are taxable pursuant to paragraph 56(1)(n) or (r) of the Act and subject to subsection 200(2) of the Regulations?

Position: Yes

Reasons: Provided that paragraph 56(1)(r) of the Act does not apply, tuition costs paid by an organization on behalf of students will be bursaries and as per subsection 200(2) of the regulations the payer must issue T4A slips.

XXXXXXXXXX 							2008-026755
N. Shea-Farrow
February 2, 2009

Dear XXXXXXXXXX :

Re: Requirement to issue T4A slips

We are writing in response to your letter of February 4, 2008 concerning the requirement to issue T4A slips to students for tuition costs paid on their behalf by XXXXXXXXXX , a non-profit Crown Corporation (the "Organization").

We understand that the Organization has introduced a program to pay tuition costs for individuals undertaking XXXXXXXXXX (the "Program"). Pursuant to the Program, an applicant must meet certain conditions. When an applicant is approved by the Program administrator, the applicant will be eligible to have its tuition costs paid by the Organization if the applicant meets the following conditions:

• Meet all the conditions of the XXXXXXXXXX program.
• Complete the XXXXXXXXXX program successfully; no less than 80 hours in-class, 40 hours in-lab and 120 hours in-XXXXXXXXXX .
• Complete all evaluations requested.
• Sign a contract to XXXXXXXXXX when the applicant begins on-the-job training. The applicant must meet this contract for no less than XXXXXXXXXX years of full-time employment.
• Finish on-the-job training, mentoring and XXXXXXXXXX years employment commitment successfully XXXXXXXXXX .

If the applicant does not complete the Program or otherwise fails to meet its requirements, the applicant will have to repay the tuition fees.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request as set out in Information Circular IC 70-6R5 dated May 17, 2002. Where the particular transactions are completed the inquiry should be addressed to the relevant tax services office.

The determination of the income tax treatments of payments such as those described in your letter involves a question of fact that can only be determined after reviewing all of the relevant documentation and agreements related to the Program. However, based on the limited information provided to us, we are prepared to offer the following general comments, which may be of assistance.

It is possible that the amounts paid by the Organization fall within subparagraph 56(1)(r)(ii) or (iii) of the Income Tax Act (the "Act"). These provisions require an income inclusion for certain amounts received as financial assistance under programs established by the Canada Employment Insurance Commission under Part II of the EI Act (subparagraph 56(1)(r)(ii)) or under similar programs established by other government entities or organizations pursuant to agreements with the EI Commission (subparagraph 56(1)(r)(iii)). Under Part II of the EI Act, benefits are available to qualifying members of the public at large for various purposes, including help in starting a business, becoming self-employed, gaining work experience and obtaining skills for employment. However, in the situation you describe, we do not have sufficient information to ascertain whether paragraph 56(1)(r) of the Act applies.

Paragraph 56(1)(n) of the Act includes in income the total of all amounts received in the year as or on account of a scholarship, fellowship or bursary. Paragraph 6 of Interpretation Bulletin IT-75R4, "Scholarships, Fellowships, Bursaries, Prizes, Research Grants and Financial Assistance", describes scholarships and bursaries as follows:

"Scholarships and bursaries are amounts paid or benefits given to students to enable them to pursue their education. Scholarships and bursaries usually apply to education at a post-secondary level or beyond, such as at a university, college, technical institute or other educational institution. However, there are circumstances where scholarships are awarded for education below the post-secondary level. Scholarships and bursaries normally assist the student in proceeding towards a degree, diploma, or other certificate of graduation. Scholarships and bursaries may apply to any field of study, including an academic discipline (such as the arts or sciences), a professional program (such as law or medicine) or a trade or skill (such as plumbing or carpentry). Normally, a student is not expected to do specific work for the payer in exchange for a scholarship or bursary. ..."

It has been a long-standing position of the Canada Revenue Agency that the definition of bursary is broad enough to encompass any form of financial assistance to enable a student to pursue his or her education.

Accordingly, provided that paragraph 56(1)(r) of the Act does not apply, it is our view that the tuition fees paid by the Organization would represent benefits given to the students to enable them to pursue their education and would fall within the meaning of bursaries as contemplated under paragraph 56(1)(n) of the Act. This view is consistent with the definition of bursary that was adopted in the Federal Court of Appeal decision in Simser v The Queen, 2005 DTC 5001.

You mention in your letter that you feel that the amounts paid by the Organization could be deemed to be employer-related training in substance and suggest that paragraph 18 of Interpretation Bulletin IT-470R "Employees' Fringe Benefits" may be applicable and thus the amount paid by your organization would be a non-taxable and non-reportable benefit.

In our view, the position in paragraph 18 of Interpretation Bulletin IT-470R is not relevant in addressing the issue of the taxability of the tuition paid by the Organization since it relates to tuition fees paid by an individual's employer which is not the case in the situation you describe.

Subsection 200(2) of the Income Tax Regulations requires that every person who makes a payment as or on account of, or who confers a benefit or allocates an amount that is for a scholarship, fellowship or bursary or an amount that is required by paragraph 56(1)(r) of the Act to be included in computing a taxpayer's income, to issue a T4A slip. Consequently, it is our view that the Organization is required to file a T4A information return and provide students with T4A slips with respect to the tuition fees paid on their behalf.

We trust that these comments will be of assistance.

Sharmini Ratnasingham
Manager
For Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch