Principal Issues: 1. Does being enrolled in Beavers [Scouts Canada] qualify for this tax credit?
2. Does a martial arts program qualify for this tax credit?
Position: 1.Although the CRA 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 legislation. 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. If all the requirements are satisfied, the fees paid for the Beaver program under Scouts Canada may be eligible for the CATC.
2. No.
Reasons: Legislation
April 5, 2012
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 February 15, 2012, concerning the children's arts tax credit (CATC).
You ask if fees paid for your XXXXXXXXXX -year-old XXXXXXXXXX to attend Scouts Canada's Beaver Scouts program and a martial arts program are eligible for the CATC.
Effective for the 2011 tax year, the CATC, as outlined in section 118.031 of the Income Tax Act, 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 per child.
Expenses are eligible for the CATC if they are paid to a qualifying entity for the cost of a child's registration or membership in a prescribed program of artistic, cultural, recreational, or developmental activities. The prescribed program also has to meet at least one of the following criteria:
- contribute to the development of creative skills or expertise in an artistic or cultural activity;
- provide a substantial focus on wilderness and the natural environment;
- help children develop and use particular intellectual skills;
- include structured interaction among children in which supervisors teach or help children develop interpersonal skills; or
- provide enrichment or tutoring in academic subjects.
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.
An activity that develops creative skills or expertise is eligible only if it improves a child's dexterity or coordination or helps in acquiring and applying knowledge through artistic or cultural activities such as literary, visual, or performing arts, music, media, languages, customs, and heritage.
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, 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.
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 in which a minimum of 90% of the activities are eligible;
- a program of five or more consecutive days in which more than 50% of the daily activities are eligible; or
- a weekly program of at least eight consecutive weeks in which 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.
Child care expenses that have been claimed as a deduction to calculate income or reduce the tax payable, such as expenses claimed for the children's fitness tax credit (CFTC), 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 (CRA) 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 that offers the program can determine if it meets the requirements of the legislation. If all the above requirements are satisfied, Scouts Canada's Beaver Scouts program may be eligible for the CATC.
The prescribed programs for the CFTC, as outlined in section 118.03 of the Income Tax Act, refer to significant physical activity that contributes to cardio-respiratory endurance, and at least one of the following:
- muscular strength
- muscular endurance
- flexibility
- balance
The Canadian Physical Activity Guidelines published by The Canadian Society for Exercise Physiology include daily activity sports such as basketball, hockey, soccer, martial arts, swimming, tennis, golf, skiing, and snowboarding. Because martial arts is listed as an eligible activity for the CFTC, it does not qualify under the CATC.
You can find more information about the CATC on the CRA Web site at www.cra.gc.ca/artscredit and the CFTC at www.cra.gc.ca/fitness.
I trust that the information I have provided is helpful.
Yours sincerely,
Gail Shea, P.C., M.P.
Minister of National Revenue
George A. Robertson
(905) 721-5196
2012-043731