16 December 1998 External T.I. 9830065 - CHILD CARE EXPENSES

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: Supervised Sporting Activities or Sports Day Camp - whether costs paid in respect of a child qualify as child care or are essentially of a training or educational nature

Position: Law generally explained - along with comments that are analogous to comments in paragraph 2 of IT-495R2 on education (fourth bullet) - although the result for the taxpayer is likely unfavourable.

Reasons: Specific facts and documentation not available - However, for the purposes of paragraph 63(3)(d) of the definition of “child care expense” in subsection 63(3) of the Act, which, “for greater certainty”, excludes, inter alia, education and is regarded as also suggesting that activities such as athletic training do not qualify, it seems likely that athletic training and education are essentially involved in the circumstances under consideration with the result that the costs would likely not qualify as child care expenses.

XXXXXXXXXX 983006
M. Eisner
December 18, 1998

Dear XXXXXXXXXX:

Re: Child Care Expenses

This is in reply to your letter of October 27, 1998, concerning the above-noted subject.

In your letter, you indicated that when you filed your 1997 income tax return, you claimed child care expenses for the first time. Your claim was based on the premise that payments were made to a “day sports school” which is referred to on Form T778(E) (the “Form). While you were initially permitted to claim the expenses by this Department, the claim was subsequently disallowed.

In the circumstances of your situation, your daughter attended her academic classes at XXXXXXXXXX from approximately 11:00 a.m. to 3:15 p.m. This schedule for the academic classes was in accord with the calendar set by the XXXXXXXXXX. Your daughter also participated in the “Gifted Athlete Program” (the “Program”). Pursuant to the letter you provided from “XXXXXXXXXX”, your daughter participated in sports training sessions from 7:30 a.m. to 10:30 a.m. and from 4:00 p.m. to 6:00 p.m. (Monday to Friday) during the months of September to June. In addition, your daughter participated in sports training sessions during the months of July and August (Monday to Friday) from 4:00 p.m. to 9:00 p.m. Your daughter’s training fees for the year were $XXXXXXXXXX.

You have asked us for our comments on the deductibility of the training fees.

Our Comments

In order to determine the tax consequences of your situation, it would be necessary to review all the relevant facts and documentation including any promotional material that may be available on the Program. However, we are prepared to offer the following general comments.

At the outset, we wish to note that while the Form makes reference to a “day sports school”, the term “day sports school” is intended to cover those day camps providing a sufficient degree of child care services. The Form, under the heading, “What payments can’t you claim?”, indicates that education costs are not allowable. It is also our view that training costs are generally not allowable. Where a child participates in a particular program that involves sports, there can be an element of education, and perhaps training, as well as an element of child care. However, in any particular case, it is a question of fact as to whether child care services can be regarded as having been provided or whether a program of training and/or education is essentially involved.

With respect to any particular program, a degree of basic protection and safety (child care services) is normally involved although the program may also provide activities and instruction which enrich the program. In determining whether a particular sports program involves a sufficient degree of child care, some factors that would be considered would be the age of the participating children, the qualifications of the instructors, the extent that progress is measured and goal-orientation is involved, the time devoted to the program by a participant, the duration of the program, and the training and educational facilities that are used. For example, sports day camps for young children are generally not of an ongoing nature and it is generally recognized that there is a sufficient degree of child care even though the program is enriched by sporting activities with instruction. On the other hand, children, particularly those who are older, may participate in a sports program that is ongoing for a lengthy period of time, the instructors have degrees or certificates in respect of physical education, progress is regularly monitored and is goal-oriented, and sophisticated training methods and facilities are used. In this type of scenario, it is our general view that that education and training are essentially involved as opposed to child care.

Based on the limited information that you have provided, the program in which your daughter is a participant appears to essentially involve training and education as opposed to child care. Furthermore, it is unclear whether the costs of the Program were to enable yourself or the supporting person of the child to perform the duties of employment or those other activities (“qualified activities”) described in paragraph 1 of Interpretation Bulletin IT-495R2 “Child Care Expenses” (copy enclosed). For example, for the time period of 4:00 to 9:00 p.m. in July and August, this would generally be the time period where the parents are at home. In addition, had the child not participated in the Program, she would have likely had to attend school in the mornings from Monday to Friday. Accordingly, it is arguable that these fees were not incurred to enable the taxpayer or supporting person to carry out such qualified activities.

Should you decide to pursue the matter further, you should contact the XXXXXXXXXX Tax Services Office. We would be glad to assist the XXXXXXXXXX Tax Services Office should they so request.

We trust that our comments will be of assistance to you.

Yours truly,

Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

- 3 -