7 November 2011 Ministerial Correspondence 2011-0423081M4 - children's arts 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.

Principal Issues: Are fees paid for mathematics tutoring at a learning centre once a week for two children aged 13 and 16 eligible for the CATC?

Position: Although the Canada Revenue Agency administers the CATC, it does not determine the general eligibility of a particular activity. Based on the specifics of the program, the person or organization offering the program can determine if it meets the requirements of the proposed legislation. However, based on the proposed legislation, developmental activities include mathematics tutoring programs. The child participating in the activity must be under 16 at the beginning of the tax year for the fees paid to qualify for the CATC. Providing all other requirements are met, the fees paid for a mathematics tutoring program qualify as eligible expenses for the CATC.

Reasons: Proposed legislation.

November 7, 2011

XXXXXXXXXX

Dear XXXXXXXXXX :

The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence, which I received on September 28, 2011, concerning the new children's arts tax credit (CATC).

You are asking if the fees for your two children aged 13 and 16 to receive mathematics tutoring at a learning centre once a week throughout the year, excluding the summer, are eligible for the CATC.

Mr. Flaherty introduced the legislation regarding the CATC in the House of Commons on June 6, 2011. The legislation has not yet been made law. In the absence of enacted legislation, I trust that the following general comments regarding the CATC will help.

Effective for the 2011 tax year, the proposed CATC will provide individuals a 15% non-refundable income tax credit on eligible expenses of up to $500 paid in a tax year for any child who is under 16, or under 18 if the child is eligible for the disability tax credit at the beginning of the year. If there is more than one person entitled to claim a deduction for a particular child, the total CATC claimed for that child must not exceed the maximum amount of $500 allowed per child.

The proposed legislation states that expenses for a child will qualify as eligible expenses if they are paid to a qualifying entity as fees for the cost of registration or membership in a prescribed program of artistic, cultural, recreational, or developmental activities. Such activities fall under these categories:

• literary arts
• visual arts
• performing arts
• music
• media
• language
• customs
• heritage
• wilderness
• natural environment

Developmental activities include activities that help children develop and use particular skills and activities with structured interaction among children where supervisors teach, tutor, enrich academic subjects, or help children develop interpersonal skills.

Only fees charged by the qualifying entity for costs to operate and administer a program, offer instruction, rent facilities, and purchase uniforms and equipment qualify for the CATC. However, please note that the uniforms and equipment must not be made available to be acquired by the participants for an amount less than their fair market value. Fees paid for costs related to travel, meals, and accommodation do not qualify as eligible expenses for the CATC. The qualifying entity offering the program is responsible for calculating specific program expenses and issuing receipts.

To be eligible for the CATC, an activity must:

• be supervised;
• be suitable for children; and
• contribute to the development of creative skills or expertise in an artistic or cultural activity.

Generally, an eligible program (which does not include those programs that are part of
a school curriculum) includes:

• a weekly program of at least eight consecutive weeks where a minimum of 90% of the activities are eligible;
• a program of five or more consecutive days where more than 50% of the daily activities are eligible; or
• a weekly program of at least eight consecutive weeks where a child can select among a variety of activities if more than 50% of the activities offered are eligible or if more than 50% of the time scheduled is for eligible activities.

Expenses like child care expenses that have been claimed as a deduction to calculate income or to reduce the tax payable, such as expenses claimed for the children's fitness tax credit, are not eligible for the CATC. Also, taxpayers cannot claim expenses paid to an individual who, at the time of payment, is under 18 or is the spouse or common-law partner of the individual claiming the credit.

Although the Canada Revenue Agency administers the CATC, it does not determine the general eligibility of a particular activity. Based on the specifics of the program, the person or organization offering the program can determine if it meets the requirements of the proposed legislation. However, based on the proposed legislation, developmental activities include mathematics tutoring programs. Please note that the child participating in the activity must be under 16 at the beginning of the tax year for the fees paid to qualify for the CATC. Providing all other requirements are met, the fees paid for a mathematics tutoring program qualify as eligible expenses for the CATC.

I trust that the information I have provided is helpful.

Yours sincerely,

Gail Shea, P.C., M.P.
Minister of National Revenue

Nancy Shea-Farrow
(905) 721-5099
2011-042308