4 October 1996 Income Tax Severed Letter 9625795 - Child care component of fees paid to private school

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:

determining the child care component of fees charged by a private school

POSITION:

question of fact, no % guidelines, but amounts paid for after& before school care will ordinarily qualify as well as the actual per student cost of lunchtime supervision, with respect to kindergarten, no amount of the fees for the educational program qualify even if the program offered is full day rather than half day but if a separate child care program is provided to ensure full day supervision, the amount paid for the separate child care program will qualify

REASONS:

63(3) def'n of child care specifically excludes education costs and board

962579 XXXXXXXXXX A. Humenuk

Attention: XXXXXXXXXX

October 4, 1996

Dear Sirs:

Re: Child Care component of Tuition Fees paid for Private School

We are replying to your letter of April 26, 1996, in which you ask whether any portion of the tuition fees paid to a private school may be deducted as a child care expense in computing an individual's income for tax purposes.

In this regard, you note that the parents of some of your students have alleged that Revenue Canada has guidelines as to what percentage of the fees may be considered to be on account of child care.

As stated in paragraph 3 of the attached Interpretation Bulletin IT-495R "Child Care Expenses," no amount of the expense incurred in respect of education may be used in the calculation of the amount deductible as a child care expense as that term is defined in subsection 63(3) of the Income Tax Act (Act). However, even though the definition of a child care expense in the Act specifically excludes the items described in paragraph 3 of IT-495R, and amounts paid for education in particular, we recognize that an educational institution may provide child care services outside of the institution's normal curriculum, typically before or after school or possibly during the lunch hour.

It is not possible to provide guidelines, in terms of percentages of total fees or otherwise, as to what portion, if any, of the fees paid to a particular educational institution might qualify as a child care expense. If, for example, the fees charged by an educational institution include supervisory child care before and after school for those students who require such service, the portion of the fees that relates to such service qualifies as an eligible child care expense, provided that the institution is prepared to make a reasonable allocation between the "education" and "child care" costs. On the other hand, for those students who do not use such services before or after school, no amount of the fees paid on their behalf can be considered as a child care expense, even if the fees charged by the institution make such service available at no extra charge.

With respect to the supervision of children during the lunch hour, it should be noted that the definition in the Act of a "child care expense" excludes the cost of meals or board. However, to the extent that an institution can identify the cost per student of supervision during that time (i.e. the amount paid as salary solely for the supervision of the children during that time divided by the number of students so supervised), such cost may be considered to be a child care expense within the meaning of subsection 63(3) of the Act.

In our conversation of September 30, 1996 (XXXXXXXXXX\Humenuk), you raised the issue of whether any portion of the fees paid for a full day kindergarten program would qualify as a child care expense when the comparable program offered by the public educational system consists of a half day or alternate day program only.

It is our view that fees charged by an educational institution in respect of children below the regular age for starting school (pre-kindergarten) will normally qualify as child care expenses unless there is clear and conclusive evidence that the fees are paid in respect of a program of education. In this regard, a program of education can be distinguished from child care in that a program of education is more goal-oriented and the child is expected to learn skills and progress through a planned program of instruction whereas a child in a child care setting is not expected to achieve any specific educational goals.

Accordingly, when an educational institution offers a full day kindergarten program, no amount of the fees payable for such program is deductible as a child care expense. On the other hand, if an educational institution provides a separate or additional program of child care in addition to a half day or alternate day kindergarten program, the proportion of the fees applicable to the child care program would qualify as a child care expense.

We trust our comments will be of assistance to you.

Yours truly,

Jack A. Szeszycki for Director Business and Publications Division Income Tax Rulings and Interpretations Directorate Policy and Legislation Branch Enclosure