30 July 1999 External T.I. 9918395 - MANDATORY COMPUTER SERVICE FEES

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:

Are mandatory computer service fees eligible for the tuition tax credit?

Position TAKEN:

Yes.

Reasons FOR POSITION TAKEN:

See paragraph 26(i) of IT-516R2.

XXXXXXXXXX 			5-991839
J. Wilson
Attention: XXXXXXXXXX 

July 30, 1999

Dear Sirs:

Re: Mandatory Computer Service Fees

This is in reply to your letter of June 30, 1999, wherein you requested our comments with respect to whether certain mandatory computer service fees are eligible for the tuition tax credit.

You have indicated that at your university certain degree programs require that the student provide himself or herself with a laptop computer with a current level of capability, and specific application software. The current cost of the computers that are required for these programs is about $XXXXXXXXXX. The university acquires computers and makes them available to these students, supplying not only hardware and software, but also additional services such as a weekly data back-up/restoration, battery back-up, wireless modem, and equipment repair. The charge to the student is approximately $XXXXXXXXXX per semester or $XXXXXXXXXX for the year. The computers belong to the university and must be returned at the end of each year. Ownership does not pass to the students as a part of the arrangement.

For some students, your internal computer service program would be their only means of meeting the mandatory computer requirement of the degree program. Other students, for personal reasons, would prefer to provide themselves with their own computer rather than avail themselves of your internal service program. You are concerned whether by allowing some students the opportunity to purchase their own computer rather than use your computer service program, this may invalidate the tuition credit eligibility for those students who do use your services. Again, the use of a computer is mandatory within that degree program in either case.

You are aware that where a student does purchase his or her own computer, the costs are not eligible for the tuition tax credit.

Our Comments

With respect to the above situation, it is the Department's position, as set out in paragraph 26(i) of Interpretation Bulletin IT-516R2, "Tuition Tax Credit", that mandatory computer service fees that relate to a particular program are eligible tuition fees. Consistent with this position, it is our view that the computer fees described above, with respect to those students who have opted into that particular computer service program (i.e. the students who have not purchased their own computer), would be eligible for the tuition tax credit.

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