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: Should a designated educational institution issue T2202As to students who are fully funded through various funding sources to attend the institution? Should T2202As be issued to students who only have tax exempt income?
Position: T2202As should be issued to all students who are in qualifying education programs or specified educational programs at the designated educational institution.
Reasons: It is the students' responsibility to determine if they can claim the education and post-secondary textbook credits.
XXXXXXXXXX
2010-038266
Andrea Boyle, CGA
November 25, 2010
Dear XXXXXXXXXX :
Re: Provision of T2202As
I am writing in reply to your letter dated September 27, 2010, in which you asked for our views regarding the provision of T2202A Tuition, Education and Textbook Amounts Certificates to students in certain funding circumstances. You have asked whether the College should provide T2202As to students who are fully funded to attend the college in certain circumstances:
- Students receive a full scholarship
- Students are funded by the Canada-Saskatchewan Career Employment Services
- Students are funded by their Band or Metis Organization
The particular situation outlined in your letter appears to relate to a factual one, involving specific taxpayers. 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 submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. We are, however, prepared to offer the following general comments, which may be of assistance.
All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended.
Provision of T2202As
It is our view that designated educational institutions should be providing T2202s or T2202As to students who are enrolled in qualifying education programs or specified educational programs at the institution. It is each individual student's responsibility to determine whether he or she is eligible to claim credits such as the education and textbook tax credits.
Outlined below are some general comments on a student's eligibility for the education and textbook tax credits in the three circumstances which you have highlighted.
Funding Sources and the Education and Post-Secondary Textbook Tax Credits
The non-refundable education and post-secondary textbook tax credits, provided in subsection 118.6(2) are available to students enrolled at a "designated educational institution" in a "qualifying educational program" or "specified educational program" subject to certain restrictions. For the purposes of claiming these credits, a "qualifying educational program" does not include a program if a student receives, from a person with whom the student is dealing at arm's length, any allowance, benefit, grant, or reimbursement for expenses in respect of the program other than these amounts:
- a scholarship, fellowship or bursary or prize for achievement in a field of endeavour ordinarily carried on by the student;
- a benefit received under the Canada Student Loans Act, An Act respecting financial assistance for education expenses, or the Canada Student Financial Assistance Act;
- financial assistance under a program established by the Canada Employment Insurance Commission under Part II of the Employment Insurance Act;
- financial assistance under a program established by a government or government agency or an organization where the program is similar to a program established under part II of the Employment Insurance Act and the program is the subject of an agreement between the government, government agency or organization and the Canada Employment Insurance Commission because of section 63 of that Act;
- an amount received under a program established under the authority of the Department of Human Resources and Skills Development Act; or
- an amount received under a "prescribed program" (currently there is no prescribed regulation).
Therefore, an individual receiving any amount of reimbursement, allowance or benefit from an arm's length person (including an employer) would not qualify for the education and textbook tax credits unless the amount received fits within the exceptions noted above.
Students Receiving Full Scholarships
Whether an amount is a scholarship or bursary can only be determined after a review of the facts in each situation. Pursuant to paragraph 56(1)(n), a taxpayer must include in income for a taxation year the amount, if any, by which the total amount received as or on account of scholarships or bursaries exceeds the taxpayer's scholarship exemption for the year computed under subsection 56(3). In 2006, subsection 56(3) was amended to expand the scholarship exemption so that scholarships and bursaries received by a student, in connection with the student's enrolment in a program for which the student is entitled to claim the education tax credit, are exempt from tax.
Receipt of a scholarship or bursary by itself will not generally preclude a student from claiming the education and textbook tax credits.
Students funded by Canada-Saskatchewan Career Employment Services
It is a question of fact whether or not the funding provided to students by the Canada-Saskatchewan Career Employment Services falls into one of the categories of "financial assistance" or other amounts listed above. We would require additional details on the funding in order to make this determination. If the funding falls into one of the listed categories, then students in receipt of this assistance could be entitled to claim the education and textbook credits.
Students funded by their Bands or Metis Organizations
Generally, Status Indians are taxable in Canada on the same basis and in the same manner as other individuals except that paragraph 81(1)(a) of the Income Tax Act together with paragraph 87(1)(b) of the Indian Act exempt from tax certain income of Status Indians. Specifically, paragraph 87(1)(b) of the Indian Act states that "the personal property of an Indian or a band situated on a reserve" is exempt from taxation. Income has been held by the courts to be "personal property" for these purposes and, therefore, income may qualify for an exemption from income tax if the income is "situated on a reserve." It is always a question of fact whether the non-taxing provisions of the Indian Act apply to a given individual and whether specific income would be exempt from tax under paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act.
However, assuming that the amounts received by the students from their Band or Metis Organizations are determined to be scholarships or bursaries, and assuming that all the other usual criteria are met, these amounts would be exempt from income due to the general exemption for scholarships and bursaries under 56(3). As previously indicated, the receipt of a scholarship or bursary which is exempt from tax under 56(3) will not preclude a student from claiming the education and textbook tax credits.
More information on topics specifically for Aboriginal peoples can be found on our Web site at http://www.cra-arc.gc.ca/brgnls/.
Non-refundable Credits
Individuals who earn only tax-exempt income in a year will not have any tax payable against which non-refundable credits can be applied. Because the education and textbook amounts are federal non-refundable tax credits, if the total of the student's credits is more than the student's federal tax, the student will not get a refund for the difference.
However, a student may be able to transfer any unused credit to a spouse, common-law partner, parent, or grandparent, or the student can carry forward the part of the education and textbook amounts which were not used or transferred in the year and claim a credit in a future year.
These concepts are discussed in more detail in the Canada Revenue Agency's pamphlet P105, Students and Income Tax which is available on our Web site. More information on these credits and other topics specifically for students can be found on our Web site at http://www.cra-arc.gc.ca/students/.
We trust that these comments will be of assistance.
Yours truly,
Guy Goulet CA, M.Fisc.
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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