3 May 1999 External T.I. 9909445 - PART-TIME EDUCATION TAX CREDIT

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 XXXXXXXXXX requested information on the part-time education tax credit under subsection 118.6(2) as it relates to students enrolled in their correspondence courses.

Position TAKEN:

Few, if any, students would qualify for the education tax credit. Many would be disqualified as they take the courses while working as XXXXXXXXXX . Also, from the information provided, there may be difficulty in meeting the hours in the month criteria.

Reasons FOR POSITION TAKEN:

Question of fact.

XXXXXXXXXX 5-990944
D. Miller
May 3, 1999

Dear XXXXXXXXXX:

Re: Part-Time Education Tax Credit

This is in reply to your letter of March 31, 1999, regarding the availability of the proposed part-time education tax credit to students enrolled in various formats of your correspondence programs.

We understand that your association is a designated educational institution, certified by the Minister of Human Resources Development, which offers the majority of its courses through correspondence in two formats. The first, a paper-based version, is offered in a four month semester format, with a set starting date and a final exam date. Typically, there are two assignments with specified due dates representing 10% of the grade and a final exam representing the remaining 90% of the grade. The second, a computer-based version, is less structured but covers the same material. A student may enrol at any time and submit a series of module tests worth 40% of the grade and an exam representing 60% of the grade. These must be completed within six months of the enrolment date.

You advanced a number of specific questions concerning the application of the proposed legislation to students enrolled in your programs:

1. Subsection 118.6(2) was amended in 1991 to allow students enrolled in correspondence courses to be eligible for the education tax credit. Paragraph 11 of IT-515R2 sets out the criteria used to determine whether sufficient hours of “instruction or work” are involved. The brochure “Students and Income Tax” notes that hours of “instruction or work” excludes study time but does not make any specific reference to correspondence courses. You ask how are hours of “instruction or work” measured in the case of self-study courses.

2. Assuming the courses meet the 12 hours of “instruction or work” test, you consider that the paper-based courses would constitute four months of eligible enrolment. You ask if the computer-based format would reflect the same four months as the same material is covered.

3. Most of the students are already working in the XXXXXXXXXX field. Some are considered to be employees in their working relationships, while others are considered to be self-employed. You ask if the exclusion in subparagraph (b)(i) of the definition of “qualifying educational program” in subsection 118.6(1) of the Act would apply only to employees, leaving those considered to be self-employed free to claim the education tax credit.

Our Comments

We will respond to your questions in the same order as they are listed:

1. As you have indicated, the criteria to be applied by the Department in determining hours per week on courses or work in the program is discussed in paragraph 11 of IT-515R2. This criteria applies equally to all types of programs: traditional lecture, correspondence or self-study. There are no separate or special rules for self-study courses. The ”instruction or work” criteria discussed in IT-515R2 should be applied to determine the relevant hours for part-time students, whether enrolled in a traditional lecture program or a self-study program.

We confirm that hours of “instruction or work” excludes study time (e.g. time spent studying for exams). However, the hours spent in the preparation of assignments, essays, term papers and other written work would be eligible. We recognize that students enrolled in correspondence courses and self-study courses may have, in some circumstances, a more difficult time meeting the “instruction or work” criteria as opposed to a student in actual attendance at an educational institution who attends lectures and performs laboratory work. However, we suspect that in many cases the “12 hours in the month” test can be met by students enrolled in correspondence and self-study courses.

The onus would generally be on the designated educational institution to determine the amount of eligible hours of “instruction or work” that would be expected of a student to complete a particular program.

2. In your description, although the course content is the same, the hours per month on courses in the program could differ because there are two assignments in the paper-based format and a series of assignments (module tests) in the computer-based format. Provided the “12 hour in the month” test on the course is met each month, the longer period could be claimed for the computer-based format.

3. Paragraph (b) of the definition of “qualifying educational program” in subsection 118.6(1) of the Act only refers to income from an office or employment and does not specify that a self-employed student is not entitled to the education tax credit. It is a question of fact whether the student’s working relationship is such that the student would be considered to be self-employed for income tax purposes. Any questions in this regard should be referred to the nearest Tax Services Office (TSO).

We trust that these comments will be of assistance.

Yours truly,

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

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