Citation: 2011 TCC 64
Date: 20110203
Docket: 2010-1597(IT)I
BETWEEN:
JESSICA YAKUBOWICZ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Boyle J.
[1]
Jessica Yakubowicz
attended post‑graduate level studies in Art Business at Sotheby’s
Institute of Art New York (“Sotheby’s Institute”) in New York City in 2006 and
2007. Sotheby’s Institute did not at that time have degree‑granting
powers. Rather, under an agreement with the University of Manchester in the
United Kingdom, Sotheby’s Institute credits, together with a thesis
subsequently completed under the supervision of Sotheby’s Institute of Art in
London, would be recognized by the University of Manchester and would qualify
the student for a degree of Masters of Arts in Art Business granted by the University
of Manchester.
[2]
At the time, Sotheby’s
Institute was accredited by the United States National Association of Schools
of Art and Design. In addition, its MA programme was accredited by the
University of Manchester. While Sotheby’s Institute was also listed
in the U.S. Department of Education Database of Accredited Postsecondary
Institutions and Programs, it is not identified as a degree‑granting
institution.
[3]
Ms. Yakubowicz
paid Sotheby’s Institute for her studies at the institute and, under its arrangement
with the University of Manchester, Sotheby’s Institute paid a per‑student
fee to the University of Manchester.
[4]
Ms. Yakubowicz
completed her school year of studies at Sotheby’s Institute in New York,
transferred her credits from that institution and, upon completing her master
thesis, was granted her MA in Art Business by the University of Manchester.
[5]
In 2007 Ms. Yakubowicz
claimed a tuition credit under section 118.5 of the Income Tax Act
(the “Act”) and an education and textbook credit under subsection 118.6
in respect of the tuition paid to Sotheby’s Institute and her attendance at its
New York courses. The Canada Revenue Agency (“CRA”) denied her these credits on
the basis that Sotheby’s Institute was not a university.
[6]
Since
Jessica Yakubowicz completed her studies, Sotheby’s Institute has been granted
degree‑granting powers by the New York State Education Department. This
was effective in 2010.
[7]
The tuition credit in paragraph 118.5(1)(b)
for studies outside Canada is only available in respect of tuition paid to a
university outside Canada. Unlike the tuition credit for studies in Canada
under paragraph 118.5(1)(a), it is not also available in respect of
tuition paid for attendance at colleges or other post‑secondary
institutions. This was a clear and specific choice by Parliament.
[8]
While the term
“university” in not defined in the Act, the Federal Court of
Appeal in Klassen v. The Queen, 2007 FCA 339,
2007 DTC 5612, upheld the approach taken in numerous earlier cases by
this Court, and the position taken by the CRA, that in order to be a university
an educational institution must itself have degree‑granting powers at, at
least, the baccalaureate or bachelor’s level. It is not sufficient that the
credits earned at the school to which the tuition is paid can result in a
degree issued by an affiliated university. In Klassen, above, Noël J.
wrote:
17 The expression “university outside
Canada” must be read in context, according to its ordinary sense, harmoniously
with the scheme of the ITA, its object and the intention of Parliament. At the
same time, it is important to pay particular attention to the textual meaning
of the words when attempting to construe detailed provisions of the ITA such as
the ones here in issue (A.Y.S.A. Amateur Youth Soccer Association
v. Canada (Revenue Agency), 2007 SCC 42, at para. 16).
18 The common feature which runs
through the above quoted definitions is that a university is an institution of
higher learning which confers degrees attesting to some definite proficiency. A
bachelor degree is generally recognized as a minimum requirement for the
pursuit of higher studies (usually referred to as “graduate” studies) leading
to masters and doctorate degrees.
19 It is significant that in the case
of educational institutions located in Canada, and in the case of cross-border
commuters (i.e., those who commute daily to an educational institution in the
United States), the benefit of the credits extends not only to those enrolled in
a university, but also in a “college or other educational institution providing
courses at a post-secondary school level, ...” (see subparagraphs 118.5(1)(a)(i), 118.5(1)(c)(i) and
paragraph 118.6(1)(c)). It seems clear that
Parliament, in extending the benefit of the credits in those two instances, drew
a distinction between a “university” on the one hand, and the other educational
institutions referred to in that phrase, on the other.
20 I agree with the statement made by
Mogan J. in Gilbert supra, (at para. 21) and
adopted by McArthur J. in Cleveland supra (at
para. 16) that Parliament in limiting the application of paragraphs 118.5(1)(b) and 118.6(1)(b) to a
“university outside Canada” opted for a more restrictive approach with respect
to foreign institutions. This was done in order to allow the Minister to
exercise some measure of control over the type and level of education supported
by the credits. In giving effect to the distinction drawn by Parliament, the
most salient feature which distinguishes a “university” is the type of degree
which a university grants and in particular the baccalaureate degree, which is
the threshold requirement imposed by universities for the pursuit of graduate
studies. I can think of no other reliable or objectively ascertainable criteria
on which the distinction drawn by Parliament could rest.
21 I therefore conclude that the
expression “university outside Canada” refers to an educational institution
which confers degrees usually granted by universities, that is a doctorate
degree, a master degree or at minimum degrees at the baccalaureate level or its
equivalent. The degree granted by MSU‑Bottineau in this case (i.e., the
“associate degree”) attests to the successful completion of a two year
undergraduate program. As this is the highest degree which MSU‑Bottineau
can confer, it does not qualify as a “university outside Canada”. The fact that
MSU‑Bottineau calls itself a university cannot alter this conclusion.
22 If MSU‑Bottineau is not itself
a qualifying university, the appellant submits that it should be viewed as part
and parcel of M.S.U., which, as earlier noted, grants baccalaureate degrees and
post‑graduate degrees, and is a “designated educational institution”.
23 In support of his submission, the
appellant relies in particular on the fact that although MSU‑Bottineau
operates on a different campus (some 100 kilometres away from the MSU campus),
it is governed by the same President and seven member governing board.
Furthermore, the Dean of MSU‑Bottineau reports to the President of MSU
and any general education course taken at MSU‑Bottineau is deemed to have
been taken at MSU. Students who successfully complete the two year general
education requirements at MSU‑Bottineau can transfer to MSU (or any other
university) to complete the four year baccalaureate program.
24 I agree that the MSU‑Bottineau
educational program is integrated with MSU’s baccalaureate program and that
from this perspective MSU‑Bottineau might be viewed as an extension of
MSU. However, I do not believe that this alone can provide the appellant with
the relief which she seeks.
25 According to paragraph 118.5(1)(b), the tuition credit is computed by reference to the
tuition paid “to the university”. As was noted by the Tax Court Judge, MSU‑Bottineau
and MSU are distinct corporate bodies, and the record shows they have separate
registrars and collect tuition independently. It follows that even if MSU‑Bottineau
could be viewed as an extension of MSU, the tuition was not paid “to the
university” as required by paragraph 118.5(1)(b).
[9]
I am bound by the
interpretation given to the term university by the Federal Court of Appeal in Klassen.
It is clear that when Ms. Yakubowicz paid her tuition to Sotheby’s
Institute in respect of her 2006-2007 school year, Sotheby’s Institute was not
a university. While Sotheby’s Institute may have been on its way in 2007 to
becoming a university, it could not, in the years which the Appellant attended
and for which she paid tuition, be considered to meet the definition of
university set out by the Federal Court of Appeal in Klassen. The fact
that Sotheby’s Institute has, since that time, obtained degree‑granting
powers is not relevant to section 118.5 or the meaning of the term
university. For this reason, Ms. Yakubowicz’s appeal in respect of her
tuition tax credit cannot succeed.
[10]
The taxpayer’s position
is not assisted by the decision of Webb J. in Laprairie v. The Queen,
2007 TCC 135, 2007 DTC 528, which involved the payment of
tuition to one university for attendance and courses which qualified towards a
degree granted by a different university. In that case, both institutions were
universities. In this case, Sotheby’s Institute was not a university when
Ms. Yakubowicz attended. Similarly, the taxpayer is not assisted by the
decision of Lamarre Proulx J. in Shea v. The Queen,
2008 TCC 184, 2008 DTC 3376, since the London School of
Economics (“LSE”) was a constituent college forming part of the University of
London and both the LSE and the University of London had degree‑granting
powers.
[11]
The education credit
under subsection 118.6(2) is also only available in respect of study
periods outside of Canada at universities. The textbook credit under
subsection 118.6(2.1) is only available if the education credit is
available. Since Sotheby’s Institute does not qualify for the tuition tax
credit, the Appellant’s studies cannot qualify for the education and textbook
credit.
[12]
The appeal is
dismissed.
Signed at Toronto,
Ontario, this 3rd day of February 2011.
"Patrick Boyle"
Email this Content