Principal Issues: [TaxInterpretations translation]
1. Is the word year in the definition of eligible apprentice interpreted according to the rules for the trade in question?
2. Can an apprentice who does not sign an individual contract with his or her employer satisfy the conditions of the definition of eligible apprentice?
Position:
1. No, the concept of year means any period of twelve months.
2. Possibly.
Reasons:
Application of the concept of year in the Interpretation Act.
The law requires a contract but not necessarily an individual contract.
2007-022861 XXXXXXXXXX A. Dagenais, Advocate, M. Fisc May 22, 2007
Dear Madam,
Subject: Apprenticeship Job Creation Tax Credit ('AJCTC')
This is in response to your fax of March 23, 2007, in which you requested clarification of the meaning of " the first two years of the individual’s apprenticeship contract, which is registered with Canada or a province " in the definition of "eligible apprentice" in subsection 127(9) of the Income Tax Act (the "Act").
Firstly, you wish to know whether the word year is interpreted according to the rules applicable to the trade in question. In that regard, you have indicated to us that in the construction industry, a year of apprenticeship means 2,000 hours of work and that an apprentice does not necessarily reach 2,000 hours within a 12-month period. That is also true for some trades outside the construction sector.
Secondly, you asked us whether an apprentice who does not sign a contract with the apprentice’s employer can satisfy the conditions of the definition of eligible apprentice. In that regard, you indicated that at the Commission de la Construction du Québec level, when an apprentice obtains a certificate of competence, the apprentice does not sign a contract.
Finally, you wish to know whether taxpayers who filed their federal tax returns before the bill was assented to on February 22, 2007, must file an amended return in order to take advantage of the AJCTC.
Unless otherwise indicated, all statutory references herein are to provisions of the Act.
Our Comments
Pursuant to paragraph 127(9)(a.4) of the definition "investment tax credit" ("ITC"), a taxpayer's ITC at the end of a taxation year includes an apprenticeship expenditure of the taxpayer for the year in respect of an eligible apprentice. For that purpose, the term "eligible apprentice" is defined in subsection 127(9) as an individual who is employed in a prescribed trade in Canada during the first two years of the individual’s apprenticeship contract, which is registered with Canada or a province under an apprenticeship program designed to certify or license individuals in the trade.
Consequently, where an employment is a prescribed trade, the individual is an eligible apprentice only during the first two years of their apprenticeship contract. The term "year" is not defined in the Act.
However, section 37 of the Interpretation Act defines the concept of year as follows:
37 (1) The expression year means any period of twelve consecutive months, except that a reference
(a) to a calendar year means a period of twelve consecutive months commencing on January 1;
(b) to a financial year or fiscal year means, in relation to money provided by Parliament, or the Consolidated Revenue Fund, or the accounts, taxes or finances of Canada, the period beginning on April 1 in one calendar year and ending on March 31 in the next calendar year; and
(c) by number to a Dominical year means the period of twelve consecutive months commencing on January 1 of that Dominical year.
Governor in Council may define year
(2) Where in an enactment relating to the affairs of Parliament or the Government of Canada there is a reference to a period of a year without anything in the context to indicate beyond doubt whether a financial or fiscal year, any period of twelve consecutive months or a period of twelve consecutive months commencing on January 1 is intended, the Governor in Council may prescribe which of those periods of twelve consecutive months shall constitute a year for the purposes of the enactment.
We are of the view that the term "year" in the phrase "first two years" should be interpreted in light of the concept of year in the Interpretation Act and means any 12 month period. Therefore, an industry-specific number of hours does not constitute a year for the purposes of the definition of eligible apprentice in subsection 127(9) such that the period of time an individual is an eligible apprentice cannot exceed two 12-month periods of their apprenticeship contract.
Second, an individual is an eligible apprentice only if the individual has an apprenticeship contract. In that regard, it is our view that an apprenticeship contract is a contract that sets out the terms and conditions of the individual's work. The legislation does not specify whether this contract must be individual and specific to each individual.
Consequently, we are of the view that an apprenticeship contract can be an individual contract between the apprentice and the employer or a collective contract in which the terms and conditions of employment for the entire industry are detailed and which binds the apprentice and the employer. Where an apprentice is bound by a collective agreement, the question of when the first two years start is a factual one that can only be resolved after a full analysis of all the facts surrounding a particular situation. However, since working in the construction industry in Quebec requires a certificate of competence, we believe that the issuance of the first certificate of competence is an indicator that an apprentice is eligible. In addition, once issued, the Commission de la construction du Québec must do supervisory work such as managing the apprenticeship system and record book, collecting hours worked, tracking apprentices' progress and qualifying them. Those elements could be relevant to a full analysis.
The AJCTC may be claimed by a taxpayer in respect of eligible salaries and wages payable by the taxpayer to each eligible apprentice employed in the taxpayer's business in the taxation year and after May 2, 2006.
The CRA will apply this new provision in respect of previously assessed taxation years in the ordinary manner set out in Information Circular 75-7R3, i.e., to any request for reassessment that will be made in respect of a taxation year that is not statute-barred and subject to the other conditions set out in that Circular. As such, the CRA will apply the discretionary power provided in subsection 152(4) according to the guidelines set out in the Circular. Consequently, a taxpayer must meet five conditions before the CRA will agree to reassess a refund.
These comments are not advance income tax rulings and do not bind the CRA with respect to any particular factual situation.
Best regards,
Louise J. Roy, CGA
Interim Manager
Business and Partnerships Division
Income Tax Rulings Directorate