11 April 2012 Ministerial Correspondence 2012-0438041M4 - 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: Are fees paid to attend a 10 week program for photography lessons or a 5 consecutive day photography camp eligible for the children's arts tax credit?

Position: If all of the other criteria are met, the fees paid for photography programs qualify as eligible expenses for the CATC.

Reasons: The CATC includes fees paid for artistic or cultural activities. An artistic or cultural activity includes an activity that is intended to contribute to a child's ability to develop creative skills or expertise, acquire and apply knowledge, or improve dexterity or coordination in a discipline such as visual arts. Visual arts would include any art meant to be appreciated mainly or exclusively through sight such as drawing, painting, sculpturing and photography.

April 11, 2012

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 February 15, 2012, concerning the children's arts tax credit (CATC).

You ask if fees paid to attend a 10-week program (2.5 hours per week) for photography lessons or a photography camp of 5 consecutive days qualify for the CATC.

Effective for the 2011 tax year, the CATC will provide 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.

An eligible expense for a qualifying child are fees paid to a qualifying entity for the cost of registration or membership in a prescribed program of artistic, cultural, recreational, or developmental activities. Activities that contribute to the development of creative skills or expertise in an artistic or cultural discipline are eligible, including:

• literary arts
• visual arts
• performing arts
• music
• media
• languages
• customs
• heritage

Other activities that are eligible include activities that provide a substantial focus on wilderness and the natural environment; assist with the development and use of intellectual skills; provide structured interaction among children in which supervisors teach or help children develop interpersonal skills; or provide enrichment or tutoring in academic subjects.

Only fees charged by the qualifying entity for costs to operate and administer a program, offer instruction, rent facilities, and purchase uniforms and equipment qualify for the CATC. However, uniforms and equipment must not be made available to be acquired by the participants for an amount less than their fair market value. Fees paid for costs that relate to travel, accommodation, food, or beverages do not qualify as eligible expenses for the CATC.

To be eligible for the CATC, activities must:

• be supervised;
• not be a "physical activity" as defined for purposes of the children's fitness tax credit; and
• be suitable for children.

Generally, eligible programs (which do not include those that are part of a school curriculum) include:

• weekly programs of at least eight consecutive weeks in which a minimum of 90% of the activities are eligible;
• programs of five or more consecutive days in which more than 50% of the daily activities are eligible; or
• weekly programs of at least eight consecutive weeks in which 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 scheduled is for eligible activities.

Expenses like child care expenses that are deductible in calculating a taxpayer's income or any amount included in calculating a tax credit to reduce a taxpayer's tax payable, 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.

The qualifying entity offering the program is responsible for calculating specific program expenses and issuing receipts. A qualifying entity is a person or partnership, which can include individuals and corporations that provide a prescribed activity.

I am unable to comment on XXXXXXXXXX , but I can offer general comments for you to determine if your particular programs would qualify. Artistic or cultural activities would include an activity that is intended to contribute to a child's ability to develop creative skills or expertise, acquire and apply knowledge, or improve dexterity or coordination in a discipline such as visual arts. Visual arts would include any art meant to be appreciated mainly or exclusively through sight such as drawing, painting, sculpting, and photography. If all the other criteria are met, the fees paid for photography programs qualify as eligible expenses for the CATC.

I trust that the information I have provided is helpful.

Yours sincerely,

Gail Shea, P.C., M.P.

Nancy Shea-Farrow
(905) 721-5099
2012-043804