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.
Principal Issues: 1.If the University adds the work component on to the Program to make it a new co-op Program does the Credit apply if there is only one work term?
2.Does the Credit apply to the work term if the Program is to obtain a certificate rather than a degree?
3.What does the phrase "time spent in required academic study" in the definition of qualifying co-operative education program in paragraph 2 of subsection 88(5) of the Taxation Act, 2007 (TA) mean? Is it only the academic terms or it is the entire length of the program including the mandatory work terms that are included in the phrase?
4.If the University decides that the work component of the Program will be an internship rather than a co-op work term does it have to be 8 months in length to qualify for the Credit? If the answer is yes are there requirements/restrictions for "time spent in work component" that need to be considered in the University's program design? Does the Credit apply to a 4 month work term that meets the co-op parameters outlined by Canadian Association for Co-operative Education (CAFCE), even if it is not actually being called co-op?
Position: 1. It should qualify, if it otherwise meets the criteria of the Credit. 2. Yes, if otherwise meets the criteria of the Credit. 3.The phrase "total time spent in required academic study" in the definition of qualifying co-operative education program includes only the academic terms. 4. Yes. The program would be offside since the work placement would be 100% of the time spent in academic study. The parameters for one 4 month work term would be that of an educational program other than an internship program as outlined in the Ontario Bulletin 4014, Co-operative Education Tax Credit.
Reasons: The definitions of qualifying work placement and qualifying co-operative education program.
XXXXXXXXXX
2011-039627
N. Shea-Farrow
April 20, 2011
Dear XXXXXXXXXX :
Re: Technical Interpretation Request - Ontario co-operative education tax credit
We are writing in response to your e-mail of February 16, 2011 requesting our comments on the Ontario co-operative education tax credit (the "Credit").
As we understand it you are a representative from a University and you have a number of questions, on the Credit with respect to adding a work component on to a certificate program that the University is currently offering, that are listed below:
1. If the University adds the work component on to the certificate program to make it a new co-op program does the Credit apply if there is only one work term?
2. Does the Credit apply to the work term if the certificate program is to obtain a certificate rather than a degree?
3. What does the phrase "time spent in required academic study" in the definition of qualifying co-operative education in paragraph 2 of subsection 88(5) of the Taxation Act, 2007 (TA) mean? Is it only the academic terms or it is the entire length of the certificate program including the mandatory work terms that are included in the phrase?
4. If the University decides that the work component of the certificate program will be an internship rather than a co-op work term does it have to be 8 months in length to qualify for the Credit? If the answer is yes are there requirements/restrictions for "time spent in work component" that need to be considered in the University's design? Does the Credit apply to a 4 month work term that meets the co-op parameters outlined by Canadian Association for Co-operative Education (CAFCE), even if it is not actually being called co-op?
The facts as we understand them are:
The University is considering adding a work component to their certificate program. This certificate program is a bridging program that allows students who are considering pursuing a masters program in XXXXXXXXXX to improve their eligibility to get into the masters program. Students in the certificate program begin in January and take 8 academic courses in total over two academic terms; the winter and summer terms. If a work component is added, it will be in the fall term that follows the two terms of academic study.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request as set out in Information Circular IC 70-6R5 dated May 17, 2002. Where the particular transactions are completed the inquiry should be addressed to the relevant tax services office. However, we are prepared to offer the following general comments, which may be of assistance.
Our Comments
The Credit is a refundable tax credit that is equal to an eligible percentage (10% to 30%) of the eligible expenditures incurred by a taxpayer for a qualifying work placement. The maximum credit amount is $1,000 for each qualifying work placement ending before March 27, 2009, and $3,000 for each qualifying work placement beginning after March 26, 2009.
Pursuant to subsection 88(3) of the TA a work placement (WP) must meet all of the following conditions to be a qualifying work placement:
1. the student performs employment duties for an employer under a qualifying co-operative education program (QCEP) offered by the eligible educational institution ;
2. the WP has been developed or approved by an eligible educational institution as a suitable learning situation;
3. the terms of the WP require the student to engage in productive work;
4. the WP is for a period of at least 10 consecutive weeks or, in the case of an internship program, not less than 8 consecutive months and not more
than 16 consecutive months;
5. the student is paid for the work performed in the WP;
6. the employer is required to supervise and evaluate the job performance of the student in the WP;
7. the institution monitors the student's performance in the WP; and
8. the institution has certified the WP as a qualifying work placement.
An educational program or course of study is a "qualifying co-operative education program" pursuant to subsection 88(5) of the TA, if, it meets the following requirements:
1. The program or course of study formally integrates students' academic studies with work placements.
2. The program or course of study,
a. includes work placements, each of which is at least 10 consecutive weeks and at least half of which are mandatory, that total not more than 75 per cent of the time spent in required academic study and that include mandatory work placements totalling at least 30 per cent of the time spent in required academic study, or
b. includes one optional work placement of at least eight consecutive months and not more than 16 consecutive months that totals at least 30 per cent and not more than 75 per cent of the time spent in required academic study.
3. All optional work placements taken under the program or course of study must be completed before the start of the final academic term.
4. The program or course of study provides credit towards a post-secondary degree, diploma or certificate granted by an eligible educational institution in respect of qualifying co-operative education programs.
5. All optional qualifying work placements taken by a student under the program or course of study are recorded on the student's academic transcripts.
6. The Senate, board of governors or other governing body of the eligible educational institution, through its authorized delegate, has given to the Ontario Minister of Finance, or to his or her delegate, a document stating that the program or course of study meets the requirements of paragraphs 1 to 5.
Each of your questions will be considered separately.
1. If the University adds the work component on to the certificate program to make it a new co-op program does the Credit apply if there is only one work term?
If all the other criteria have been met, the certificate program should qualify as a course of study under subparagraph 2(i) of subsection 88(5) of the TA under the definition of a qualifying co-operative education program providing the work placement is at least 10 consecutive weeks and is mandatory.
2. Does the Credit apply to the work term if the certificate program is to obtain a certificate rather than a degree?
If the certificate program is to obtain a certificate rather than a degree, the certificate program will still qualify as a qualifying co-operative education providing it otherwise meets all the criteria as per paragraph 4 of subsection 88(5) of the TA.
3. What does the phrase "time spent in required academic study" in the definition of qualifying co-operative education program in paragraph 2 of subsection 88(5) of the Taxation Act, 2007 (TA) mean? Is it only the academic terms or it is the entire length of the certificate program including the mandatory work terms that are included in the phrase?
The phrase "total time spent in required academic study" in the definition of qualifying co-operative education program includes only the academic terms. Therefore, if the certificate program has 2 four month academic terms where each term has 4 academic courses and one mandatory 4 month work placement, the work placement would be 50% (4/8) of the time spent in required academic study.
4. If the University decides that the work component of the certificate program will be an internship rather than a co-op work term does it have to be 8 months in length to qualify for the Credit? If the answer is yes are there requirements/restrictions for "time spent in work component" that need to be considered in the University's program design? Does the Credit apply to a 4 month work term that meets the co-op parameters outlined by CAFCE, even if it is not actually being called co-op?
If the educational program is an internship program it must include an 8 month optional work placement however the work placement can not be more than 75% of the time spent in required academic study. An 8 month work placement in this case would be 100% of the time spent in required academic study (8 months) which would put the certificate program offside and ineligible for the Credit. Also all optional work placements taken under the program must be completed before the start of the final academic term which again would put the certificate program offside since the University is proposing to have the work component after all the academic studies have been completed.
While we trust that our comments will be of assistance to you they are given in accordance with the practice referred to in paragraph 22 of IC70-6R5 and are not binding on the Canada Revenue Agency in respect of any particular situation.
Yours truly,
Sharmini Ratnasingham
Assistant Director
For Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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