2 June 2010 External T.I. 2009-0338271E5 - Tuition Fees, Professional Membership Dues

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. Where an employee repays amounts to a former employer in respect of tuition fees, may the employee claim the tuition tax credit?
2. Where an employee repays amounts to a former employer in respect of professional dues paid as a student, may the employee deduct the dues from income?

Position: 1. Yes, providing the tuition fees meet the requirements under s. 118.5 of the ITA.
2. No. As a student, the amounts were not incurred to maintain professional status.

Reasons: 1. The employee has in effect paid the tuition fees and is eligible to claim the tuition tax credit.
2. Subparagraph 8(1)(i)(i) of the ITA only applies to individuals that have already obtained the recognized professional status.

XXXXXXXXXX 							2009-033827
								Robert Dubis
June 2, 2010

Dear XXXXXXXXXX :

Re: Tuition Credit

This is in response to your correspondence of August 21, 2009, regarding amounts repaid by an employee to a former employer and the eligibility of those amounts for the tuition tax credit. You also asked if the individual is entitled to deduct retroactive dues paid as a student to a professional association. If the individual was not a member of a professional association, then a deduction for dues is not permitted under subparagraph 8(1)(i)(i) of the ITA. We apologize for this delayed reply.

In the situation you described, an employee had entered into an agreement with his employer whereby the employee undertook to obtain his Certified Management Accountant designation through the XXXXXXXXXX Program at XXXXXXXXXX and the employer would pay the tuition fees for the program. The employee remained on the employer's payroll for the period of study and was required to remain employed by the employer for XXXXXXXXXX years after completion of the program. If the employee left the employer within the XXXXXXXXXX year period, under the terms of the agreement, he was required to repay to the employer all monies paid by the employer. The employee resigned his position before the expiry of the XXXXXXXXXX year retention period and repaid the amount to his employer in accordance with the terms of the agreement. You ask whether the employee is entitled to claim the tuition tax credit under subsection 118.5(1) of the Income Tax Act (ITA).

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 ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings. As noted in paragraph 7 of Information Circular IC 70-6R5, the Canada Revenue Agency (CRA) will not provide an advance ruling on a completed transaction. Where a situation involves a specific taxpayer and a completed transaction, the request should be addressed to the relevant tax services office. Although we cannot comment on your specific situation we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature and are not binding on the CRA.

Where the amounts are included in income, and otherwise meet the requirements under subparagraphs 118.5(1)(a)(i) or 118.5(1)(a)(ii) of the ITA, the student is entitled to the tuition tax credit under section 118.5 of the ITA. However, where an employer pays or reimburses an employee for tuition fees and the amount is not included in income, subparagraph 118.5(1)(a)(iii) denies a claim for the tuition tax credit.

In document 2003-0009597 which is a specific technical interpretation dealing with the repayment of tuition fees, it states that where a student/employee subsequently reimburses the employer for these fees, the student has in effect paid the tuition fees. Furthermore, it states that if the program in question satisfied the requirements of subparagraphs 118.5(1)(a)(i) or 118.5(1)(a)(ii) of the ITA, the student is entitled to the tuition tax credit under section 118.5 of the ITA. In specific circumstances, an individual may qualify for the tuition tax credit but not the education tax credit. We refer you to document E9620555 in this regard and its comments with respect to the definition of a "qualifying educational program" as defined in subsection 118.6(1) of the ITA.

For the purposes of claiming the tuition tax credit, paragraph 118.5(1)(a) of the ITA requires that they be "in respect of the year". Where amounts are paid in a subsequent period, document E2004-0070671I7 states that these fees are still considered eligible tuition fees for the purposes of the particular year of study. Information Circular IC75-7R3, Reassessment of a Return of Income, outlines the Canada Revenue Agency's policies for reassessing a particular taxation year. Subsection 118.61(2) of the ITA provides a carryforward deduction for any unused tuition, textbook and education tax credits.

With regards to the retroactive membership dues paid as a student to a professional association, paragraph 8 of Interpretation Bulletin IT-158R2, Professional Membership Dues, states that dues paid by students before becoming members of a professional organization are not allowable under subparagraph 8(1)(i)(i) of the ITA. However they may qualify as tuition fees for the purpose of computing the tuition tax credit under section 118.5 of the ITA. The determination of whether a particular fee may be deductible under subparagraph 8(1)(i)(i) or section 118.5 of the ITA is a question of fact.

We have enclosed copies of the relevant documents for your information and trust our comments will be of assistance to you.

Yours truly,

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

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