7 October 2011 External T.I. 2011-0403581E5 - Children's fitness 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: Can Parent A who has a child that lives with Parent B claim the children's fitness tax credit (CFTC) for the tax year?

Position: Parent A should be able to claim the CFTC provided that the expense is an eligible fitness expense as defined under subsection 118.03(1) of the Act, and the maximum amount of $500 for the qualifying child has not been used for the tax year by any other individual that may be entitled to claim it.

Reasons: Eligibility to claim the CFTC does not depend on whether the child resides with the parent who is claiming the credit.

XXXXXXXXXX
    									2011-040358
									N. Shea-Farrow

October 7, 2011

Dear XXXXXXXXXX :

Re: Technical Interpretation Request - Children's Fitness Tax Credit

This in reply to your e-mail of April 18, 2011, in which you asked whether Parent A who has a child that lives with Parent B can claim the children's fitness tax credit (CFTC) for the tax year. You also specifically mention that you are looking for an interpretation of the term "eligible child" for the purposes of the CFTC.

The facts as we understand them are:

1) Parent B claims the child tax credit (CTC) provided for under paragraph 118(1)(b.1) of the Income Tax Act (the "Act") for the tax year.
2) Parent B does not claim the children's fitness tax credit provided for under section 118.03 of the Act for the tax year.
3) Parent A and Parent B live in separate residences for the tax year.

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 CFTC is a non-refundable tax credit that is available to an individual for amounts paid in the tax year by the individual, or by the individual's spouse or common-law partner for an eligible fitness expense in respect of a qualifying child of the individual. The CFTC is equal to 15% multiplied by the lesser of $500.00 and the amount paid in respect of an eligible fitness expense for the qualifying child of the individual. There are special rules for a child that qualifies for the disability tax credit.

An eligible fitness expense is an amount that is paid in respect of the qualifying child to a qualifying entity that is for the cost of registration or membership of the qualifying child in a prescribed program of physical activity. The physical activity must be supervised and suitable for children. The activity must contribute to cardio-respiratory endurance and to one or more of the following: muscular strength, muscular endurance, flexibility and balance. You can go to our website at www.cra.gc.ca for details on prescribed programs and other details on the CFTC.

Subsection 118.03(1) of the Act defines a "qualifying child" (not "eligible child") of an individual for a taxation year for the purposes of the CFTC as a child of the individual who is, at the beginning of the taxation year, under 16 years of age; or in the case where a child qualifies for the disability tax credit for the tax year, under18 years of age.

There is an extended meaning of "child" in subsection 252(1) of the Act that is applicable to the whole Act and it states that words referring to a child of a taxpayer include:

(a) a person of whom the taxpayer is the legal parent;
(b) a person who is wholly dependent on the taxpayer for support and of whom the taxpayer has, or immediately before the person attained the age of 19 years had, in law or in fact, the custody and control;
(c) a child of the taxpayer's spouse or common-law partner; and
(d) a spouse or common-law partner of a child of the taxpayer.

You state that Parent B claims the CTC in respect of Parent A and B's child. The CTC requires that the child reside with the individual in the tax year. However, eligibility to claim the CFTC does not depend on whether the child resides with the parent who is claiming the credit.

Under subsection 118.03(3) of the Act, if more than one individual is entitled to the CFTC for a tax year in respect of a qualifying child, one of the individuals can claim the CFTC for the child as long as another individual has not already claimed the same eligible fitness expenses and as long as the total amount claimed for that qualifying child is not more than the maximum amount that would be allowed if only one of the individuals were claiming the CFTC. If the individuals cannot agree as to what portion of the eligible amount each can deduct, the Minister may fix the portions. In the situation provided by you Parent B is not claiming the CFTC therefore Parent A should be able to claim the CFTC provided that the expense is an eligible fitness expense as defined under subsection 118.03(1) of the Act, and the maximum amount of $500 for the qualifying child has not been used for the tax year by any other individual who may be entitled to claim it.

We trust our comments will be of assistance to you.

Yours truly,

Sharmini Ratnasingham
Assistant Director
For Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch