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 a post-secondary institution can issue T2202A when the fees have been paid by the student's employer. The employer has included a taxable benefit in each employee-student's income equal to the amount paid by the employer (more than market rate because employer was charged an unsubsidized rate for costs of courses). Should an amount have been included and if so, how much.

Position:

tuition receipts can be issued as student-employees are entitled to a tuition tax credit, so long as the employer reimbursement or payment is included in their income. A taxable benefit does result when the employer pays this amount as the employer has not provided the course at the employer iniative nor is the employer the primary beneficiary. The value of the benefit should equal the rate charged other students attending the same courses, even though the employer had to pay more than regular students.

Reasons:

		March 26, 1997

	XXXXXXXXXX Tax Services Office	HEADQUARTERS
	Revenue Collections	Sandra Short
(613) 957-8953
	Attention:  XXXXXXXXXX
            Assistant Director
		970772

Course Costs Paid by Employer

This is in reply to your March 12, 1997, correspondence which asks whether a post-secondary institution can issue tuition tax credit receipts when course costs have been paid by the students' employer. The students, employees of a Crown corporation, have had an amount included in their income as a result of their employer paying all costs relating to the courses or programs taken by them and paid for by the employer. You have asked that we address the issue of whether a taxable benefit is required to be included in the employees' income, and if so, what amount should be included.

Background:

XXXXXXXXXX

Our Comments:

It is our opinion that:

I. the employees are enjoying a taxable benefit when XXXXXXXXXX pays their tuition, or full course costs, for courses at the College.

II. The value of the benefit to be included in the employees' income is the fair market value of the applicable course or program as is determined by reference to the rates regularly charged to the public for enrollment in the applicable course or program.

III. The employees are entitled to a tuition tax credit for "tuition," to the extent permitted in subsection 118.5(1) of the Act.

IV. No benefit should be assessed to employees, or to former employees, for the value of the benefit derived from the Counselling Center, to the extent that such counselling services relate to the re-employment or retirement of the employees, as provided for in clause 6(1)(a)(iv)(B) of the Act.

We explain and expand opinions I-III below. We believe that IV is self explanatory.

I. As you are aware, the Department's general position is that when an employer pays tuition fees on behalf of an employee, or reimburses an employee for tuition fees paid by the employee, the amount paid should be reported as income of the employee. An exception to this rule is made when the course, for which the fees are paid, is undertaken on the employer's initiative and for the primary benefit of the employer, rather than the employee. These positions are contained in paragraphs 18 and 19 of Interpretation Bulletin IT-470R. We do not believe that a successful argument can be made that the fees or costs are being incurred at

XXXXXXXXXX

II. Paragraph 6(1)(a) provides that there shall be included in the income of a taxpayer from an office or employment, the value of board, lodging and other benefits of any kind whatsoever, received or enjoyed by the taxpayer in the year, in respect of, in the course of, or by virtue of an office or employment. When an amount is required to be included in an employee's income, the employer must determine the "value" of the benefit, or make a reasonable estimate of it, and include that value on the employee's T4 information return. We believe that the "value" of the benefit received or enjoyed by the employees of XXXXXXXXXX is the market rate for the courses being taken, that is, the rate ordinarily charged "walk-in" students in the course or program. However, if the employer paid additional amounts, such as the costs for books, supplies, or other amounts, the value of these amounts must also be included in income. In our March 25 conversations with the College (XXXXXXXXXX/Short) and XXXXXXXXXX/Short), it was indicated that while the XXXXXXXXXX employees' course costs were being paid by the employer, at a per diem rate of about $XXXXXXXXXX/day, the employees were actually attending the same courses and programs as all regular students at the College. While the employer was required to pay costs which exceeded ordinary tuition, the benefit being enjoyed by the individual employees in a course, was no different than that enjoyed by a "walk-in" student. The employees were required to apply for courses in the usual manner as ordinary students and their applications were apparently processed through the usual approval procedures. The employees attended the same classes as ordinary students.

III. Subparagraph 118.5(1)(a)(iii) of the Act only denies the tuition tax credit when the fees are paid on the individual's behalf by the individual's employer and the fees are not included in computing the individual's income. Given our position in I above, the College can issue income tax receipts for the amount of "tuition" paid by the employer and which is included in the employees' income from employment. The College should use its ordinary procedures for determining how much of the amount paid by the employer qualifies as "tuition" for purposes of issuing form T2202A (paragraph 27 of Interpretation Bulletin IT-516R explains this in more detail).

John F. Oulton
Section Chief
Business, Property & Personal Section
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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