REASONS
FOR JUDGMENT
V.A. Miller J.
[1]
The issue in this appeal is whether the
Appellant can claim tuition credits of $8,095 in 2011 for fees paid to private
instructors for piano lessons for his two children. The children transferred
the tuition credits to the Appellant under section 118.9 of the Income Tax
Act (“ITA”).
[2]
The only witness was Susan Savage, the
Appellant’s spouse.
[3]
In 2011, the Appellant claimed $10,000 as
tuition or education amounts transferred to him from his children. His
daughters, “D” and “G”,
were both enrolled in a music class at the Academy of Music at Mount Royal University in Calgary. The Appellant was allowed a credit of $1,095 for tuition
fees for these music classes and for examination fees paid to the Royal
Conservatory of Music, (“RCM”).
[4]
Subsection 118.5(1) of the ITA provides
that an individual may claim a credit for tuition fees under certain conditions.
It reads in part:
(1) Tuition credit – For the purpose of
computing the tax payable under this Part by an individual for a taxation year,
there may be deducted,
(a) [institution in Canada] – subject to
subsection (1.1), where the individual was during the year a student enrolled
at an educational institution in Canada that is
(i)
a university, college or other educational
institution providing courses at a post-secondary school level, or
[5]
In order to receive the credit under
subsection 118.5(1), the Appellant’s daughters must have been (1) enrolled at
an educational institution in Canada; (2) that educational institution had to
be a university, college or “other educational
institution”; and, (3) the educational institution provided courses at a
post-secondary school level.
[6]
In 2011, the
Appellant paid fees for his daughters to take piano lessons from private
instructors. According to Ms. Savage, each of her daughters had three hours of
private piano lessons and a one hour theory lesson each week. The piano
instructors were Linda Kundert-Stoll and Dr. Lana Henchell. The lessons were
given at the private residences of the instructors.
[7]
In 2011, the
Appellant’s daughter “D” completed her grade 10 level in piano and started to
prepare for her examinations to receive her ARCT in Performance Diploma. His
daughter “G” completed her grade 9 level in piano.
[8]
The Appellant
presented evidence to show that the grade levels in piano are set by the RCM
and many school systems in Canada give a high school credit for achievement in
RCM examinations. In Alberta, the Ministry of Education gives a grade 12 credit
to students who successfully complete their RCM grade 8 piano examinations.
Relying on this evidence and W.W. Webb J.’s decision in Tarkowski v R,
2007 TCC 632, it was the Appellant’s position that his daughters, who had
completed grade 9 and grade 10 levels in piano, had completed courses at the
post-secondary school level in 2011.
[9]
The Appellant
further relied on Tarkowski to argue that the private instructors who
taught his daughters were “educational institutions”. The relevant passage in Tarkowski
is the following where W.W. Webb J., as he then was, found that the facility
where the taxpayer’s son in that case was taking music lessons was an “educational
institution” for the purposes of subsection 118.5(1). He stated:
10 The Mississauga School of Music was a school that was teaching the courses referred to above.
In Hillman v. R., 2006 TCC 578 (T.T.C. [Informal Procedure]) Rip J. (as
he then was) made the following comments:
[12] Although I have already determined
that BAR/BRI is not an educational institution in Canada, it may serve some
purpose to consider whether it is an education institution. In Friedland v.
R., Rowe D.J.T.C.C., after noting that there does not appear to be a universal
definition of “educational institution”, attempted
to establish the parameters of the definition as it pertains to the Act:
The Oxford
English Dictionary defines “education” as:
3. the
systematic instruction, schooling or training given to the young in preparation
for the work of life; by extension similar instruction or training obtained in
adult age. Also, the whole course of scholastic instruction which a person has
received. Often with limiting words denoting the nature or the predominant subject
of the instruction or kind of life for which it prepares, as classical,
legal, medical, technical, commercial, art education.
and “institution” as:
7. an establishment, organization, or association, instituted for
the promotion of some object, esp. one of pubic or general utility, religious,
charitable, educational, etc., e.g. a church, school, college, hospital,
asylum, reformatory, mission or the like; […] The name is often popularly
applied to the building of the appropriated to the work of a benevolent or
educational institution.
[13] Black’s Law
Dictionary, 6th Edition, defines “educational institution” as
follows:
A school, seminary, college, university, or other educational
establishment, not necessarily a chartered institution. As used in zoning ordinance,
the term may include not only buildings, but also all grounds necessary for the
accomplishment of the full scope of educational instruction, including those
things essential to mental, moral, and physical development.
11 Mateusz Tarkowski
was taking Grade 3 and Grade 4 Harmony and Grade 9 Piano lessons at the
Mississauga School of Music at the school’s premises. He was tutored at the
school by a teacher.
12 Therefore it
seems clear that the Mississauga School of Music was an educational institution
as it was providing Mateusz Tarkowski with an education in music. The method of
teaching was by tutoring but this is simply the method by which the courses
were taught. The fact that the Mississauga School of Music itself did not have
examinations did not mean that they were not providing him with an education or
that he was not taking courses.
13 In the Canadian
Oxford Dictionary, second edition, “course” is defined as “a series of
lectures, lessons, etc., in a particular subject”. Courses can be taught that
do not have examinations at the end. There can still be “systematic
instruction, schooling or training”, without examinations. As a result I find
that the Mississauga School of Music is an educational institution.
[10]
The Appellant further submitted that just
as the Mississauga Music School was found to be an “educational
institution” in Tarkowski, the private instructors in this case should
be found to be educational institutions. Here, the private instructors were
extremely well qualified and to demonstrate this point, the Appellant gave the
resumés of each instructor. Ms. Savage made the following argument on behalf of
the Appellant:
The Mississauga Music School was determined to be an educational institution without regard
to its incorporated status. As a result of the analysis performed by the judge,
the tuition fees paid were deductible under ITA 118.5(1)(i). As the
incorporated status of the educational institution would have no impact on the
quality of the post-secondary education received, it follows that self-employed
teachers would also be deemed to be educational institutions for providing the
same educational experience as an incorporated entity.
[11]
The Respondent did not dispute whether the
Appellant’s daughters took courses at the post secondary level in 2011.
However, counsel for the Respondent did dispute the amount of fees actually paid
to the private instructors and whether piano teachers who give instructions
from their home are “educational institutions” under
subsection 118.5(1) of the ITA.
The Fees and Hours
[12]
The Appellant presented no documentary evidence
to support his position that $8,095 of fees was paid to the private
instructors. Instead, Ms. Savage gave evidence of the 2013/2014 fees charged by
Linda Kundert-Stoll and the 2011/2012 fees charged by Dr. Lana Henchell but she
did not submit any receipts for the fees actually paid to these instructors in
2011. Ms. Savage stated that the fees charged by Linda Kundert-Stoll in 2011
were similar to those she charged in 2013/2014. Ms. Savage also referred to
fees paid to Kathy Dornian for accompanist services and to Babette Jenson for
music theory lessons. Ms. Savage also did not provide any documentary evidence
to support these fees.
[13]
Whereas, Respondent’s counsel tendered
two receipts which totalled $3,117.50. One receipt showed that $1,865 was paid
by “D” to Dr. Lana Henchell for piano lessons in
preparation for the RCM ARCT piano exam and the other receipt showed that
$1,252.50 was paid by “G” for piano lessons for the RCM grade 9 piano exam. These
receipts also showed that “D” received approximately 26.6 one-hour piano
lessons in 2011 while “G” had 17.9 one-hour piano lessons with Dr. Lana
Henchell in 2011.
Educational Institution
[14]
It is my view that Webb J. was over-reaching
in Tarkowski when he found that the Mississauga School of Music was an
educational institution under subsection 118.5(1). However, even using the
definitions he relied on, the private instructors in this appeal are not an “educational institution”. They are not a “school, seminary,
college, university, or other establishment…”.
[15]
The facts in Kam
v R, 2013 TCC 266 were very similar to those in the present situation.
There Mr. Kam claimed tuition credits for the fees paid for his son’s private
piano lessons. Mr. Kam also relied on the decision in Tarkowski. In
dismissing the appeal, Favreau J. made the following comments:
23 In any event, I
am not bound by the Tarkowski’s decision because it was decided under
the informal procedure and I doubt that Parliament ever intended to allow
tuition credits in a situation like this one in relation to tuition fees paid
to a piano teacher providing private piano lessons from home.
[16]
I agree with his comments. A review of the
debates which took place in the House of Commons when the predecessor to
subsection 118.5(1) was first proposed confirms that the term “educational institution” was not intended to apply to
situations as in the present appeal.
[17]
In the 24th Parliament, 4th
Session, the discussion concerning the deductibility of tuition fees focused on
assisting students to attend university by reducing their financial burden. The
measure, as part of a bill to amend the ITA was proposed as follows:
That the 1961 and
subsequent taxation years a student in full-time attendance at a university in
a course leading to a degree be permitted to deduct in computing his income the
tuition fees paid by him in the year to the university, and that the said
tuition fees also be deducted in computing the income of the student for
purposes of determining whether the student is a dependent.[1]
[18]
This resolution was later struck and the
provision was broadened to include the phrase “college or
other educational institution” so that a greater number of people would
benefit from the resolution. It then read as follows:
That for the 1961
and subsequent taxation years a student in full-time attendance at a university
in a course leading to a degree, or in full-time attendance at a college or
other educational institution in Canada in a course at a post-secondary school
level, be permitted to deducted in computing his income for the year, fees for
his tuition paid to the university, college or other educational institution
in respect of a period not exceeding 12 months commencing in the year and not
included in the calculation of a deduction for such fees for a previous year
(except any such fees paid in respect of a course that did not require his
full-time attendance for a period of at least three consecutive months), and
that the said tuition fees also be deducted in computing the income of the
student for purposes of determining whether the student is a dependent. [2] (emphasis added)
[19]
The Minister of Finance, at the time, was asked
to explain how the resolution would work and his response was:
Mr. Fleming
(Eglinton): Mr. Chairman, there have been resolutions received from time to
time broadly relating to this subject. Sometimes they have come from student
organizations. Since the introduction of the supplementary budget on December
20, I have received a number of communications from student organizations and
educational bodies expressing most cordial approval of the recommendations.
Some of them proposed extensions such as those that are now put forward in the
amendment.
There are some
colleges that are not affiliated with any university but which are
well-recognized educational institutions at post-secondary level. Their case
was very carefully considered and it seemed to my colleagues and myself that it
was a fair case they had put forward. Representations of that kind led to the
broadening of the resolution. (emphasis added)
There were some
representations received from individual students. In every case these have
been carefully studied and I think that the resolution in its amended and
broadened form will cover and accede to practically all the representations in
this field that we have received.[3]
[20]
In conclusion, the original intent of the
tuition credit was to make post secondary education more accessible to students
by lessening their financial burden. Although subsection 118.5(1) should be
interpreted broadly, it is clear that Parliament did not intend that the
provision should apply to fees which students paid for private piano lessons at
an instructor’s home.
[21]
The appeal is dismissed.
Signed at Ottawa, Canada, this 13th day of June 2014.
“V.A. Miller”
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