12 April 1995 External T.I. 9431385 - TUITION FEE REIMBURSEMENT - TAXABLE BENEFIT

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether the reimbursement by the employer of tuition fees incurred by the employee for professional development courses is a taxable benefit.

Position TAKEN:

Yes, based on the information provided.

Reasons FOR POSITION TAKEN:

The courses appear to lead to a professional designation of some kind which would enhance the employees career in the field, an indicator that the primary benefit from the employer-funded education goes to the employee.

		943138
XXXXXXXXXX	J.A. Szeszycki

Attention: XXXXXXXXXX

April 12, 1995

Dear Sirs:

Re: Reimbursement of Tuition Fees

This is in reply to your letter of November 17, 1994 in which you requested clarification of the Department's position with respect to the reimbursement by an employer of the tuition expenses incurred by an employee. We regret the delay in providing you with a response.

It is our understanding of the circumstances that employees of XXXXXXXXXX are being reimbursed by XXXXXXXXXX in respect of tuition fees expended by them for certain professional development courses. You have indicated that the taking of these courses is an ongoing educational requirement for the employees of XXXXXXXXXX This requirement applies to courses which are necessary to obtain the following designations: Fellow of the Canadiam Institute of Actuaries, Certified Employee Benefits Specialist, Certified Human Resources Professional and Chartered Financial Analyst. In your letter you recognize the Department's general position concerning the taxability of tuition fee reimbursements and refer to the exception to that position discussed in paragraph 19 of Interpretation Bulletin IT-470R.

Paragraph 19 sets out the circumstances where the courses are undertaken at the employer's initiative and more for the benefit of the employer than the employee. It also refers to the normal presumption made that the willingness of the employer to provide the employee with salaried time to take the course is an indicator that the employer expects to draw the primary benefit. Conversely, the unwillingness of the employer to provide salaried time for this purpose would seem to support the opposite conclusion.

You have indicated that the policy of XXXXXXXXXX is to provide time during the normal business day, as required, for study time and to write examinations and that courses are undertaken after business hours only when they are not offered during the day. As a result, it is your view that the specific circumstances at XXXXXXXXXX fall within the exception to the rule described in paragraph 19 of the bulletin.

In trying to make a determination as to whether the primary benefit from an employee undertaking a particular course of study is derived by the employer or the employee himself or herself the Department attempts to relate the education or training undertaken to the employees' duties of employment. Clearly, if the employer has identified a training need that would improve the employee's ability to carry out the duties of his employment such that without the additional training that employee's ability is eroded, then the primary benefit would be considered derived by the employer since the benefit to the employee is largely limited to how the present job is done. In contrast, where an employee undertakes a course of studies as a means of enhancing his chances of a promotion in the short term or enhancing his overall career opportunities in the long term, then the primary benefit is considered to be derived by the employee even though the employer may also benefit from the employee's higher level of education.

Consequently, the presumptions described in paragraph 19 of the bulletin, and generally made in considering these issues, cannot be made in all cases. Normally, courses that lead to degrees or professional designations would be viewed as career enhancing studies, of primary benefit to the student even though the employer obviously also benefits during that student's period of employment with that employer. The designations referred to in your letter appear to relate more closely to those in the latter example of the previous paragraph. As a result, any reimbursement by XXXXXXXXXX in respect of the tuition fees for those courses would be considered a taxable benefit in the hands of the student/employees. We would mention, however, that the tuition fees could then be used in the computation of the tuition tax credit, if they otherwise qualify for the credit.

We hope our comments somewhat clarify the Department's position on these issues.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch