File: 11910-1(GN)
Doc: HQR0000548
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Rebate Section
Small & Medium Enterprises
Audit Directorate
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March 20, 1997
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XXXXX
This is in reply to your electronic message (e-mail) dated February 4, 1997, regarding the education sector. This is also in reply to a letter sent by XXXXX XXXXX, regarding the eligibility of school authorities to claim public service body rebates.
Questions
Do the following organizations meet the definition of university found in subsection 123(1) of the Excise Tax Act (the ETA):
1. affiliated organization (i.e. an institution) that is not specifically described as a college, affiliated university;
2. federated college, federated university.
You provided an example from a listing in the XXXXX directory where XXXXX is listed as an affiliated college and XXXXX is listed as a federated college. You are asking if these organizations are universities for purposes of the ETA.
Answers
Legislative References
In accordance with subsection 123(1) of the ETA university "means a recognized degree-granting institution and an organization or that part of an organization that operates a college affiliated with such an institution or that operates a research body of such an institution."
As you know, the Notice of Ways and Means Motion of April 23, 1996, proposed to amend the definition of "university" as follows:
"university" means a recognized degree-granting institution or an organization that operates a college affiliated with, or a research body of, such an institution;
This new definition came into effect April 24, 1996. This proposed amendment removes the reference to "part" of an organization and is consequential to the addition of subsection 259(4.1), which provides specific rebate apportionment rules for a selected public service body such as a university that undertakes a range of activities in different capacities. However this proposed amendment has no effect on the question that you have asked.
Therefore, to meet the definition of university an organization must either be:
1. a recognized degree granting institution;
2. an organization that operates a college affiliated with a recognized degree granting institution; or
3. an organization that operates a research body of such a recognized degree granting institution.
It is the Department's interpretation that a recognized degree granting institution means an institution that grants degrees and meets the accreditation requirements for degree granting institutions in the country where it is based. Therefore, a resident university would have to meet the requirements of the provincial legislature where they are based and a non resident university would have to meet the accreditation requirements of its own country
Please note that the ability to grant degrees is insufficient to satisfy the definition in subsection 123(1) of the ETA. The institution must currently be offering programs for which degrees are granted upon completion of the program.
A federated institution is responsible for its own administration and has the power to grant degrees, but during the term of the federation agreement it holds some or all of its degree-granting powers in abeyance. That is a federated institution agrees that it will not grant some or all of its degrees for the time of the federation and will let the university with which it is affiliated grant degrees on its behalf. Therefore a federated institution, would appear to qualify as a university as a recognized degree granting institution where it was currently offering programs for which it granted degrees.
An affiliated institution is responsible for its own administration, but does not have the power to grant degrees. Rather it is affiliated with a university which grants degrees on its behalf. It is our understanding that affiliated institutions may be called colleges, institutes or schools. The second part of the definition of university allows for certain affiliated organizations to be considered universities for purposes of the ETA. Therefore, it is our opinion that an affiliated institution that is not called a college within its title but that is affiliated with a recognized degree granting institution would meet the definition of university.
Question
Can an independent kindergarten which is separate from an elementary school, qualify as a school authority?
You currently have a claim for XXXXX[.] You mentioned in your correspondence that they do meet the standards of education set out by XXXXX and operate on a not-for-profit basis. However, they indicated that they are a kindergarten/nursery school, and they are not operated by an elementary school.
Answer
Pursuant to subsection 123(1) of the ETA, the definition of "school authority", as proposed by the Notice of Ways and Means Motion of April 23, 1996, means an organization that operates an elementary or secondary school in which it provides instruction that meets the standards of educational instruction established by the government of the province in which the school is operated.
As the establishment is only operating a kindergarten/nursery, it is not operating an elementary school and therefore, it does not qualify as a school authority. As each XXXXX school is different, each school must be considered on a case by case basis to determine if the school is providing child care services or educational services. For your information we are providing you with a letter which deals with the XXXXX Programs.
Question
You would like us to provide you with a criterion that you could use when you are determining if an establishment "provides instruction that meets the standards of education established by the government of the province in which the school is operating". You provided us with an example where the claimant has a valid charity number, but part of the claim is for a rebate as a school authority. The claimant advised that the church operates an elementary school on a non profit basis. When asked about meeting the educational standards of the province, the claimant thought so but was not quite sure how to answer the question. The claimant was not totally aware just what the provincial standards were.
Answer
To determine if an establishment meets the definition of "school authority" as defined in subsection 123(1) of the ETA, a review of the applicable provincial legislation would be required. We understand that in some provinces, the provincial ministries of education do not monitor the activities of the private elementary schools.
This raises the issue/question of whether private schools meet the requirements of the ETA and this can only be determined on a case by case basis. Therefore it is not possible for us to provide you with a general criteria that would help you determine if the school is meeting the standards of education of the province.
Question
In your letter of April 18, 1996, you provide an example of a private, not-for-profit school in XXXXX that filed an application for a PSB rebate as a school authority. The school has been established for students who XXXXX and who are currently residing in Canada. You have no evidence that the school meets the requirements under the ETA. However other similar schools are being paid the rebate.
Is the legislation intended to include this type of school and if the XXXXX is unable to provide evidence that educational instruction in any particular school meets their provincial standard, where can you acquire that evidence?
Answer
It is possible that XXXXX may not have evidence that a particular school meets the standards of education of the province. For example we are aware that in XXXXX private elementary schools are not required to register or to file an annual report with XXXXX[.] Although, under the XXXXX any person under the age of sixteen must regularly attend a school that meets the standards of the province. If a private school providing educational services to persons who are under the age of sixteen has not been inspected by the province, the province assumes that the school meets the required standards until it is proven otherwise.
If XXXXX has doubts about the standard of education offered by such private schools or if it has received complaints about the educational standards of a particular private school, the department has the power to inspect the school. XXXXX XXXXX will also make an inspection at the request of a school in which it will provide a letter to the school indicating whether the school meets the standards of education required by the province
As stated earlier, there is an issue/question of whether private schools meet the requirements of the ETA and this can only be determined on a case by case basis. Therefore it is not possible for us to provide you with guidelines that would help you in determining if the school is meeting the standards of education of the province.
Question
Should you be requesting from XXXXX periodic confirmation that the schools remain eligible for PSB rebates?
Answer
Pursuant to proposed subsection 259(3) of the ETA, where a school authority is on the last day of a claim period or the last day of the fiscal year that includes that claim period, a school authority, the Minister shall pay a rebate to the school authority equal to the prescribed percentage rate of non creditable charged in respect of property of service for the claim period. The monitoring of the eligibility for rebates is an operational issue.
Question
Should a change to the legislation be considered to ensure that you are able to confirm that school authorities meet the eligibility requirements for PSB rebates?
Answer
We have been informed by the Department of Finance that they will review the education sector in the 97/98 fiscal year. We will bring your concerns to their attention at that time.
I hope that our comments will be of assistance to you. If you have any questions, please do not hesitate to contact me at (613) 952-4157.
Gabrielle Nadeau
GST Rulings and Interpretations}
Charities, Non-Profit Organizations and Educational Services
Attachment
G. Nadeau
J.A. Venne
D. Gagnon
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