10 November 1998 External T.I. 9826725 - LEAVE WITH PAY FOR EDUCATION AND TRAINING.

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: The income tax implications of various types of employer-paid educational/professional development leaves which are available to teachers. In particular, the effect, if any, that our new guidelines, which were announced in Technical News #13, have on these types of leaves.

Position: The salary received by teachers while on leave is taxable as employment income. Since educational costs are fully paid by the teachers, our new guidelines have no effect.

Reasons: An employee cannot convert taxable salary into non-taxable employer-paid educational costs. The full amount of salary remains taxable as employment income.

XXXXXXXXXX 	J. Gibbons
		5-982672
Attention:  XXXXXXXXXX 

November 10, 1998

Dear XXXXXXXXXX:

We are replying to your letter of October 7, 1998, in which you inquire as to the income tax implications of three different types of educational/professional developmental leave which are available to teachers. In particular, you wish to know what effect, if any, our new guidelines concerning employer-paid educational costs, which were announced in “Technical News No. 13,” (TN-13), have on the income tax treatment of such plans.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. The following comments are, therefore, of a general nature only.

Educational Leave

This is a period of leave for up to one year, to undertake a program of study related to the teachers’ employment. The teacher receives a portion or all of salary, and is considered to be under full contract with the employing school board for the duration of the leave, retaining all status and benefits. Costs associated with travel and accommodation, program fees/tuition, and materials, are borne by the teacher.

Professional Development Leave

This is short-term leave to give the teacher an opportunity to engage in job-related programs such as workshops, conferences, trade-shows, short-term courses, visits to innovative teaching programs, etc. These are usually for periods of time from 7 days to 4 weeks. The teacher receives a portion or all of salary and maintains employee status and benefits. Costs associated with travel and accommodation, program fees/registration and material are borne by the teacher.

Unpaid Professional Leave

This is a period of unpaid leave granted by the employer to permit the teacher to engage in any of the activities described in the previous two categories of leave. The teacher retains full employment status and bears the full cost of the learning experience.

Our views

In all three categories of leave, the teachers bear the full cost of the education or training. Accordingly, it is our view that our new guidelines regarding employer-paid educational costs have no effect on the tax treatment of the salary received during educational or professional developmental leave. In our telephone conversation (Gibbons/XXXXXXXXXX) of October 23, 1998, you suggested that these new guidelines might have effect if we regard part of the employee’s salary while on leave, to the extent of the educational or training costs incurred by such employee, as a non-taxable reimbursement by the employer. However, the Act clearly requires that the full amount of an employee’s salary be included in employment income, regardless of how the employee chooses to spend it. This position is demonstrated in TN-13, which discusses the example of an arrangement between an employer and an employee whereby the employee’s salary is reduced by the amount of training or education costs paid by the employer. (See the penultimate paragraph on page 1 of TN-13.) Our view expressed therein is that the new guidelines do not apply in this situation. In other words, the amount of salary converted to employer-paid training or education would remain taxable as employment income.

Teachers may, however, be entitled to a tuition tax credit where they pay their own tuition. Refer to the enclosed Interpretation Bulletin IT-515R2, “Tuition Tax Credit,” which discusses these rules in detail.

We trust that these comments will be of assistance.

Yours truly,

J.F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate

Enclosure

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