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: Is a teacher that is studying at a XXXXXXXXXX College entitled to the education tax credit and the scholarship exemption?
Position: It depends on the facts.
Reasons: A teacher that is enrolled at a HRSDC-certified institution must be enrolled in the course(s) for the purpose of gaining or improving skills in an occupation and either as a full-time student in qualifying educational program or as a part-time student in a specified educational program to qualify for the education tax credit. If the amount received by the teacher from the HRSDC-certified institution is a scholarship the teacher should be allowed the scholarship exemption in accordance with subsection 56(3) of the Act.
MEMORANDUM NOTE DE SERVICE
DATE March 19, 2012
TO Agnes Migneault FROM Senior Appeals Officer
À Senior Appeals Officer DE Income Tax Rulings Directorate
Tax and Charities Appeals Nancy Shea-Farrow
Directorate 905-721-5099
Attention: Agnes Migneault
+ +
FILE 2011-043079 DOSSIER
SUBJECT: Education Tax Credit and Scholarship Exemption
We are responding to your e-mail dated December 9, 2011 wherein you asked for our opinion on whether a teacher that is studying at a XXXXXXXXXX (the "Institution") in XXXXXXXXXX is entitled to the education tax credit (the 'Credit") and the scholarship exemption for the 2010 taxation year given recent amendments to the Income Tax Act (the "Act").
The facts according to you are that the Institution that the teacher is attending for his studies is listed as a "designated educational institution" and is certified by the Minister of Human Resources and Skills Development. The Institution has awarded him a scholarship to study in a 5 year program that will result in a certificate granted upon completion in XXXXXXXXXX and is worthy of serving in the capacity of religious instructor.
Education Tax Credit
A T2202A, Tuition, Education and Textbook Amounts Certificate or T2202, Education and Textbook Amounts Certificate must be issued by the designated educational institution for the student to be able to claim the Credit.
A designated educational institution includes an educational institution in Canada that is certified by the Minister of Human Resources and Skills Development to be an educational institution providing courses, other than courses designed for university credit, that furnish a person with skills for, or improve a person's skills in, an occupation.
It is always a question of fact whether a particular individual has enrolled at an institution for the purpose of gaining or improving skills in an occupation in order to meet the requirements of section 118.6 of the Act. Where an individual takes a course at a HRSDC-certified institution, the course must be undertaken for the purpose of gaining or improving skills in an occupation (actual or anticipated), in order for the individual to qualify for the Credit. Thus, where an individual is engaged in religious studies at an HRSDC-certified institution for personal growth, the individual will not qualify for the Credit.
In contrast, where courses are taken at a "university, college or other educational institution providing courses at a post-secondary level", the Credit is not dependent on the individual's purpose for enrolment. However, the courses taken in these institutions as just stated must be at the post-secondary level, which is not required for courses taken at a HRSDC-certified institution.
We are of the view that "occupation" means not only a profession, vocation, or trade, but also "employment", whether as an employee or as a self-employed person. In our view, the objective of being employed, in the sense of earning a living - as an employee or as a self-employed person - is critical to the meaning of "occupation" in this provision of the Act. Therefore, where an individual is enrolled at an HRSDC-certified institution, the purpose of the individual's enrolment at the institution will determine, in part, whether the individual qualifies for the Credit.
The individual also must be enrolled in either a "qualifying educational program" or a "specified educational program" to qualify for the Credit.
The term "qualifying educational program" requires, in part, that the program run for at least 3 consecutive weeks and must provide that each student taking the program spend at least 10 hours per week on courses or work in the program and in respect of a program at a designated educational institution. If the student receives any benefit in respect of the program from a person with whom the student was dealing at arm's length (other than certain forms of financial assistance, including a scholarship), the program is not a qualifying educational program. There is a recent amendment to the definition of qualifying educational program that applies to 2010 and subsequent taxation years. The amendment clarified that a post-secondary educational program that consists primarily of research will be eligible for the Credit and the scholarship exemption, only if it leads to a diploma, bachelor, masters, doctoral or equivalent degree. This amendment is meant to clarify that a postdoctoral fellow will not be entitled to the full scholarship exemption or the Credit. A post-doctoral fellow (PDF) is an individual who has recently obtained his or her Ph.D. (usually within the last five years, although we understand that this timeline has increased), who is engaged in advanced research activities at a university or at a facility or laboratory connected with a university. A PDF is engaged in activities that consist primarily of research that do not lead to a diploma, bachelor, masters, doctoral or equivalent degree. This recent amendment does not apply to a program at a HRSDC-certified institution. Nevertheless, the individual must be a student at a designated educational institution including a HRSDC-certified institution to qualify for the Credit.
The term "enrolled...as a full-time student" is not defined in the Act. It should be noted that the requirement for "full-time" enrolment is in paragraph (a) of variable B of subsection 118.6(2), and not in the definition of "qualifying educational program". As indicated in paragraph 5 of IT-515R2, the requirement for enrolment as a full-time student at a designated educational institution is a separate test over and above the requirement respecting "qualifying educational program". While in many instances meeting the minimum requirements of a "qualifying educational program" may result in the student also meeting the educational institution's requirements for full-time enrolment, these tests remain, as explained above, distinct and are not necessarily the same. For example, in certain instances, institutions establish full-time enrolment based on a minimum amount of credits, whereas a qualifying educational program requires a minimum amount of hours (10 hours per week) on courses or work in the program, which may include both lecturing time and a reasonable estimate of time for work assignments.
A student may meet the requirements of a "qualifying educational program" and still not qualify for enrolment as a full-time student at the educational institution. The requirement for enrolment as a full-time student at a designated educational institution must ultimately be met on the basis of the facts of each case. Thus, the Canada Revenue Agency generally relies on the institution's determination as to whether an individual is registered as a full-time student.
Where the student is enrolled at a designated educational institution but does not qualify as a full-time student, the student may still qualify for the part-time credit. To qualify, the student must be enrolled in a "specified educational program" that provides that each student in the program spend not less than 12 hours in the month on courses in the program. A specified educational program means a program that would be a qualifying educational program if the definition for that term were read without reference to the 10 hours per week.
Scholarship Exemption
Scholarships are amounts paid or benefits given to students to enable them to pursue their education. Scholarships 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 school level. Scholarships normally assist the student in proceeding towards a degree, diploma, or other certificate of graduation and can apply to any field of study, including religious studies. For more details see Interpretation Bulletin IT-75R4, Scholarships, Fellowships, Bursaries, Prizes and Research Grants.
Generally, scholarships are included in income under paragraph 56(1)(n) of the Act to the extent that the amount received exceeds the individuals scholarship exemption calculated under subsection 56(3) of the Act. A recent amendment that applies to 2010 and subsequent taxation years states that only the portion of the scholarship amount received that is intended to support the taxpayer's enrolment in the program having regard to all the circumstances, is allowed under subparagraph 56(3)(a)(i) of the Act for the scholarship exemption. The circumstances include the terms and conditions that apply in respect of the award, the duration of the program and the period for which support is intended to be provided. Also if the taxpayer is eligible for the part-time Credit only, the scholarship exemption is limited to the portion of the scholarship that is for the cost of materials related to the program or a fee paid to a designated educational institution in respect of the program.
In summary, if the teacher is enrolled at the Institution for the purpose of gaining or improving skills in an occupation at a HRSDC-certified institution as a full-time student in qualifying educational program or as a part-time student in a specified educational program and a T2202A or a T2202 has been issued by the HRSDC-certified institution, the individual should qualify for the Credit. It is a question of fact if the amount received by the teacher from the Institution is a scholarship. If you determine that the amount received by the teacher from the Institution is a scholarship the teacher should be allowed the scholarship exemption to the extent allowed taking into account the information discussed above.
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 Celine Charbonneau at (613) 957-2137. A copy will be sent to you for delivery to the client.
We hope that these comments will be of assistance to you.
Sharmini Ratnasingham
Assistant Director
for Director
Financial Industries Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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