28 October 2011 Ministerial Correspondence 2011-0421401M4 - children's arts 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: Do costs for a specialized arts program qualify for the new children's arts tax credit (CATC)? Is a handwritten receipt from a qualifying entity acceptable to be able to claim the CATC? Will a program still qualify for the CATC if there is a statutory holiday within the eight weeks?

Position: Based on the proposed legislation, artistic activities include specialized art programs. If all the other requirements are met, the fees paid for specialized arts programs qualify as eligible expenses for the CATC. A handwritten receipt is acceptable if all the required information as outlined on the CRA Web site at www.cra.gc.ca/artscredit under "What does the CRA consider to be an acceptable receipt?" is on the receipt and is legible. If a statutory holiday occurs during the schedule of a program that would usually run for eight or more consecutive weeks, thereby extending the program by a week and interrupting the consecutive nature of the lessons, the CRA will still consider that the program meets the consecutive week requirement.

Reasons: Proposed legislation and administrative requirements.

October 28, 2011

XXXXXXXXXX

Dear XXXXXXXXXX :

The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence, which I received on September 15, 2011, asking if costs for a specialized arts program qualify for the new children's arts tax credit (CATC).

The legislation regarding the new CATC has not yet been made law. Without enacted legislation, I can give you only the following general comments regarding the CATC.

Effective for the 2011 tax year, the proposed CATC will give individuals a 15% non-refundable income tax credit on eligible expenses of up to $500 paid in a tax year for any child who is under 16 or under 18 if the child is eligible for the disability tax credit at the beginning of the year. If there is more than one person entitled to claim a deduction for a particular child, the total CATC claimed for that child must not exceed the maximum amount of $500 allowed per child.

The proposed legislation states that expenses for a child are eligible if they are paid to a qualifying entity as fees for the cost of registration or membership in a prescribed program of artistic, cultural, recreational, or developmental activity. Such activities fall under the categories:

* literary arts
* visual arts
* performing arts
* music
* media
* language
* customs
* heritage
* wilderness
* natural environment

Developmental activities include activities that help children develop and use particular skills and activities with structured interaction among children in which supervisors teach, tutor, enrich academic subjects, or help children develop interpersonal skills.

Only fees the qualifying entity charges for costs to operate and administer a program, to offer instruction, to rent facilities, and to purchase uniforms and equipment (provided that they are not made available to be acquired by the participants for an amount less than their fair market value) qualify for the CATC. Fees paid for costs that relate to travel, meals, and accommodation do not qualify as eligible expenses for the CATC.

To be eligible, an activity must:

* be supervised;
* be suitable for children; and
* contribute to the development of creative skills or expertise in an artistic or cultural activity.

Generally, an eligible program (which does not include those that are part of a school curriculum) includes:

* a weekly program of at least eight consecutive weeks with a minimum of 90% of the activities eligible;
* a program of five or more consecutive days of which more than 50% of the daily activities are eligible; or
* a weekly program of at least eight consecutive weeks where a child can select among a variety of activities if more than 50% of the activities offered are eligible or if more than 50% of the time is scheduled for eligible activities.

Expenses that have been claimed as a deduction in calculating a taxpayer's income, such as child care expenses, or to reduce a taxpayer's tax payable, such as expenses claimed for the children's fitness tax credit, are not eligible for the CATC. Also, taxpayers cannot claim expenses paid to an individual who, at the time of payment, is under 18 or is the spouse or common-law partner of the individual claiming the credit.

I am unable to comment on Creative Escape Arts Programs, but I can offer general comments for you to determine whether your particular programs would qualify. Based on the proposed legislation, artistic activities include specialized art programs. If all the other requirements are met, the fees paid for specialized arts programs qualify as eligible expenses for the CATC.

The qualifying entity offering the program is responsible for calculating specific program expenses and issuing receipts. You ask if a handwritten receipt from a qualifying entity is acceptable to be able to claim the CATC. A handwritten receipt is acceptable if all the required information as outlined on the CRA Web site at www.cra.gc.ca/artscredit under "What does the CRA consider to be an acceptable receipt?" is on the receipt and is legible.

You also ask whether a program will still qualify for the CATC if there is a statutory holiday within the eight weeks. If a statutory holiday occurs during the schedule of a program that would usually run for eight or more consecutive weeks, thereby extending the program by a week and interrupting the consecutive nature of the lessons, the CRA will still consider that the program meets the consecutive week requirement.

I trust that the information I have provided is helpful.

Yours sincerely,

Gail Shea, P.C., M.P.
Minister of National Revenue

Nancy Shea-Farrow
(905) 721-5099
2011-042140