Principal Issues: What is the meaning of "enrolled" for purposes of paying an educational assistance payment out of an RESP and for purposes of claiming the tuition tax credit?
Position: RESP - When the promoter of an RESP is provided with satisfactory proof that a beneficiary is enrolled, the promoter may pay an EAP to the beneficiary. Tuition tax credit - the Act requires that the student be enrolled with the educational institution during the year and that the tuition fees be paid in respect of that year.
Reasons: Relevant provisions of the Act.
April 16, 2007
XXXXXXXXXX
Dear XXXXXXXXXX:
I am writing in reply to your letter addressed to your Member of Parliament, XXXXXXXXXX, regarding the income tax affairs of your son XXXXXXXXXX. I received a copy of your letter from XXXXXXXXXX on February 20, 2007, and I apologize for the delay in responding. I am providing you with the following information as signed authorization from your son is on file.
I note your comments about the educational assistance payment (EAP) that XXXXXXXXXX received from his registered education savings plan (RESP) in 2005 and the early payment of his tuition fees to the XXXXXXXXXX. I understand that while XXXXXXXXXX paid the fees in 2005, he was not scheduled to begin attending classes until the fall of 2006.
An RESP can only pay an EAP to a beneficiary of the RESP when the beneficiary is enrolled as a full-time or part-time student in a qualifying educational program at a post-secondary educational institution. The Canada Revenue Agency (CRA) will generally consider a beneficiary to be enrolled as a full- or part-time student in a post-secondary educational institution when the educational institution considers the beneficiary to be enrolled. Accordingly, when the promoter of an RESP is provided with satisfactory proof that a beneficiary is enrolled, the promoter may pay an EAP to the beneficiary.
For purposes of claiming the tuition tax credit, however, the Income Tax Act not only requires that the student be enrolled with the educational institution during the particular year, it also requires that the fees for the individual's tuition be paid in respect of that year. Therefore, in a situation where an individual prepays tuition in 2005 in respect of courses to be taken in 2006, the individual has not satisfied this requirement for purposes of making the tuition tax credit claim in 2005. The student is entitled to claim the credit in the year the courses are taken. For further information about this credit, please refer to the attached interpretation bulletin IT-516R2, Tuition Tax Credit.
The CRA is responsible for administering the tax system and applying the current tax legislation, whereas the Department of Finance Canada is responsible for developing federal tax policy and legislation. Any proposal to change tax policy or legislation would have to be considered by the Minister of Finance and approved by Parliament. I am therefore forwarding a copy of your correspondence to the Honourable James M. Flaherty, Minister of Finance, for his consideration.
Please note that the information outlined above is of a confidential nature and is being provided to you in accordance with the Income Tax Act.
I appreciate the opportunity to respond to your concerns.
Sincerely,
The Honourable Carol Skelton, P.C., M.P.
Attachment
c.c.: XXXXXXXXXX
The Honourable James M. Flaherty, P.C., M.P.
Minister of Finance
House of Commons
Ottawa ON K1A 0A6
Input from Gary Allen - LPRAB
March 30, 2007