Principal Issues: Whether an apprentice in a trade that is an aircraft maintenance engineer or an aircraft structural technician is an "eligible apprentice" [ITA 127(9)] for the purposes of the apprentice job creation tax credit.
Position: No.
Reasons: Neither of the above-noted trades is a prescribed trade.
March 2, 2009
Business Programs Section HEADQUARTERS Field Support and Communications Tim Fitzgerald, CGA Tax Services Directorate
Attention: Jean-Francois Goulet
2009-030739
Prescribed Trade - Apprenticeship Job Creation Tax Credit
We are responding to your correspondence of January 22, 2009 concerning trades in aviation such as an aircraft maintenance engineer and an aircraft structural technician. You wanted to know whether an apprentice in either of the above noted trades would be considered an eligible apprentice for the purposes of the apprenticeship job creation tax credit.
Our Comments
Generally, among other things, subsection 127(5) of the Act provides for an apprenticeship job creation tax credit in respect of a taxpayer's "apprenticeship expenditure" (as defined in subsection 127(9)) for an "eligible apprentice" (also defined in subsection 127(9)). This non-refundable tax credit is equal to 10% of the eligible salaries and wages payable to eligible apprentices in respect of employment after May 1, 2006. The maximum credit is $2,000 per year for each eligible apprentice.
The term "eligible apprentice" is defined in subsection 127(9) of the Act to mean an individual who is employed in Canada in a trade prescribed "in respect of a province" or "in respect of Canada" during the first 24-months of the individual's apprenticeship contract registered with the province or Canada, as the case may be, under an apprenticeship program designed to certify or license individuals in the trade.
Section 7310 of the Income Tax Regulations (the "Regulations") provides that a prescribed trade in respect of a province means, at all times, in a taxation year, a trade that is, at any time in the taxation year, a Red Seal trade for the province under the Interprovincial Standards Red Seal Program.
The Interprovincial Standards Red Seal Program is managed by the Canadian Council of Directors of Apprenticeship (CDDA), a national body comprised of federal and provincial/territorial representatives. The mission of the council is to facilitate the mobility of the apprentices and journeypersons in Canada by means of the establishment of uniform standards in training and examinations that are confirmed by a Red Seal endorsement. According the Red Seal website, a designated Red Seal trade is a trade or occupation that has been designated by the CDDA for inclusion in the Interprovincial Standards Red Seal Program. Human Resources and Skills Development Canada ("HRSDC") [previously, Human Resources and Social Development Canada] is the federal department responsible for providing secretariat services for the Interprovincial Red Seals Program. HRSDC is also responsible for development and distribution of the National Occupational Analyses ("NOA"), the standards Red Seal endorsements are based on. For a trade to be designated Red Seal, a number of provinces and territories should already have independently designated that trade for training and certification within their respective provinces/territories. It is for industry to submit a request for designation of a trade under the Red Seal Program. Further information regarding the Red Seal program can be found on the Red Seal web-site at http://www.red-seal.ca.
We examined the current list of designated Red Seal trades at http://www.red-seal.ca/Site/trades/analist_e.htm and noted that neither an aircraft maintenance engineer nor an aircraft structural technician is included among that list. An informal consultation with an official at HRSDC confirmed our finding that neither of the above-noted trades is a designated Red Seal trade. Therefore, for the purposes of section 7310 of the Regulations, neither of the above-noted trades is a prescribed trade "in respect of a province" for the purposes of apprenticeship job creation tax credit.
Since under the Regulations no trades are prescribed "in respect of Canada" for the purposes of the definition of an "eligible apprentice", neither an aircraft maintenance engineer nor an aircraft structural technician is a prescribed trade in respect of Canada for the purposes of the apprenticeship job creation tax credit. We would mention that the drafting of federal income tax regulations prescribing a trade in respect of Canada is the responsibility of the Department of Finance Canada.
Whether a trade is a designated Red Seal trade is also relevant for the purposes of determining whether an individual is eligible for an Apprenticeship Incentive Grant ("AIG"). The AIG is a taxable cash grant. Applicable to the 2007 and subsequent taxation years, paragraph 56(1)(n.1) of the Act requires that an amount received under the AIG program is included in the income of the recipient in the year it is received. Paragraph 60(p) provides for a deduction in respect of repayments made in the taxation year of amounts that were included in income in the year or a previous year under paragraph 56(1)(n.1). The AIG program is administered by HRSDC. Further information about the AIG program can be obtained by visiting the Service Canada website at http://www.servicecanada.gc.ca/eng/goc/apprenticeship.shtml.
We trust our comments are helpful.
Sandy Parnanzone
for Director,
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Division