Principal Issues: [TaxInterpretations translation] If a partial reimbursement is made for an eligible fitness expense incurred in the previous taxation year, how should the organization treat that reimbursement for purposes of the Children's Fitness Tax Credit.
Position: The eligible expense for physical activities will be reduced by the amount of the reimbursement. Thus, the organization will have to issue a receipt for the year reflecting the reduced amount of the eligible expense. If a receipt was previously issued for the original amount, an amended receipt will have to be issued.
Reasons: Element D of subsection 118.03(2) of the Income Tax Act.
2008-026815 XXXXXXXXXX François Bordeleau, Advocate February 20, 2008
Dear Sir,
Subject: Children's Fitness Tax Credit
This is in response to your email of February 12, 2008 asking how to deal with refunds received by taxpayers for purposes of the children's fitness tax credit ("CFTC").
Specifically, you referred to a situation where an organization issues a receipt to a taxpayer in respect of an eligible fitness expense ("eligible expense") incurred in 2007. If the taxpayer's child opts out of the program and the organization issues a partial refund in 2008, you wish to know how to treat that refund for purposes of the CFTC.
Unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act (the "Act").
Under subsection 118.03(2), an individual may claim the CFTC if the individual pays an amount to an organization that is an eligible expense. The organization must then issue a receipt to the individual reflecting the amount of that expense. However, the description of D in subsection 118.03(2) requires that the amount of the eligible expense be reduced by any reimbursement, allowance or any other form of assistance received by the taxpayer in respect of the eligible expense, unless that assistance, reimbursement or allowance is included in the taxpayer's income for the year.
Thus, where an organization issues a reimbursement for an eligible expense that was incurred in the previous taxation year, the Canada Revenue Agency is of the view that that reimbursement reduces the amount of the eligible expense and that a receipt must be issued accordingly for the year in which the expense was incurred. If a receipt was previously issued for the original amount of the eligible expense, an amended receipt will be required to be issued.
Best regards,
Randy Hewlett
Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.