7 May 2008 Internal T.I. 2008-0272161I7 - Tuition Arrears Paid to a Collection Agency

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: Can an educational institution issue a T2202A to a student who has paid tuition arrears to a collection agency, acting on its behalf?

Position: Yes.

Reasons: Where the student has paid tuition arrears for a particular year to the educational institution's agent, the institution should issue a Revised T2202A for that year reflecting the correct amounts paid for that year.

May 7, 2008

Tuition Paid after student's debt sent to Collection Agency

This is in response to your memorandum of March 20, 2008 inquiring if tuition arrears paid to a collection agency qualify for the tuition tax credit. Specifically you ask if an educational institution may provide a T2202A indicating the amount of tuition paid and the number of months the individual was enrolled either on a full-time or part-time basis in the program for a prior year if the tuition arrears are paid to a collection agency instead of being paid directly to the educational institution.

Paragraph 118.5(1)(a) of the Income Tax Act provides a tax credit for tuition paid to an educational institution in Canada during a particular year if that institution is either:

(i) a university, college or other institution offering courses at a post-secondary level; or

(ii) an educational institution certified by Human Resources and Skills Development to be providing courses (other than courses for university credit) designed to provide individuals with skills in an occupation. The individual taking the course must be at least 16 years of age during the year the course was taken and the purpose for taking the course must be to acquire or improve the individual's skills with respect to an occupation.

Tuition fees are not eligible for the credit if:

the fees were paid by the individual's employer and not included in the individual's income;

the fees were reimbursed, or if certain types of financial assistance has been provided to the individual by a federal or provincial program and these amounts are not included in the individual's income; or

the individual's parent received an employment allowance on behalf of the individual and the amount of the allowance was not included in the income of the individual's parent.

The tuition tax credit is based amounts paid to certain educational institutions. In our view this would include tuition amounts paid in arrears to a collection agency that was acting as agent for such an educational institution.

The educational institution may already have issued a Form T2202A to the student for the year of study, to report the information required to claim an education tax credit. If this is the case, then the educational institution upon receiving the tuition arrears should issue to the student a revised T2202A slip for that year, indicating both the amount of tuition paid and the information related to the education tax credit. For further information on the tuition tax credit please see Interpretation Bulletin IT-516 R2 "Tuition Tax Credit" which is available on the CRA website at http://www.cra-arc.gc.ca/E/pub/tp/it516r2/it516r2-e.html.

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 Canada Revenue Agency'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.

Robin Maley
Manager
Non-Profit Organizations and
Aboriginal Issues
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch