Principal Issues: Clarification of issues concerning the education tax credit
Position: General comments provided
Reasons: General interpretation of the Income Tax Act
2006-017901 XXXXXXXXXX Kimberly Duval, CA (613) 599-6054 May 29, 2006
Dear XXXXXXXXXX:
Re: Education Tax Credit
This is in reply to your letter of March 28, 2006, wherein you requested clarification with respect to certain aspects of claiming the education tax credit under section 118.6 of the Income Tax Act (the "Act"). Further to your telephone conversation with Kim Duval of this office on April 6, 2006, you requested our written comments in response to these three specific questions concerning the education tax credit:
1. Is a student required to have a T2202A or equivalent form issued by the qualifying institution in order to make a claim for the education tax credit?
Pursuant to subsection 118.6(2) of the Act, a student may make a claim for the full-time or part-time education tax credit if the enrolment is proven by filing with the Minister (upon request) a certificate in prescribed form issued by the designated educational institution, which contains information concerning the number of months of enrolment. The authorized forms accepted by the Minister for purposes of subsection 118.6(2) of the Act are: the T2202 "Education Amount Certificate", the T2202A, "Tuition and Education Amounts Certificate, and the TL11A, "Tuition Fees Certificate - University Outside Canada".
2. Why does the CRA not provide a web-based site, similar to the one provided for Canadian charities, containing a list of all educational institutions in Canada that would meet the definition of a "designated educational institution" for purposes of the education tax credit?
Unlike Canadian registered charities, educational institutions are not required to register or obtain federal approval from the CRA for purposes of its educational programs offered to students. Education is a provincial initiative that is administered and regulated by each province, therefore, it is not feasible to assume that the CRA would be able to maintain such a list of all qualifying educational facilities in Canada.
3. It is correct that in order for a student to currently benefit from the greater scholarship exemption amount of up to $3,000, the student must also be eligible for the education tax credit?
Your interpretation is correct that in order for a student to be eligible for the greater scholarship exemption amount pursuant to subsection 56(3) of the Act, the student must be eligible to claim the education tax credit under subsection 118.6(2) of the Act. Although the recent Federal Budget that was announced on May 2, 2006 proposed the elimination of this $3,000 scholarship exemption limit, the Department of Finance has yet to release any specific details of this change. Therefore, until such time, please refer to paragraph 43 of Interpretation Bulletin IT-75R4 Scholarships, Fellowships, Bursaries, Prizes, Research Grants and Financial Assistance (available on the CRA website at http://www.cra.gc.ca), which states in part:
Under subsection 56(3), the scholarship exemption represents the greater of:
- $500; or
- $3,000 when the amounts included under subparagraph 56(1)(n)(i) are in respect of a scholarship, fellowship or bursary received in connection with the taxpayer's enrolment in an educational program for which he or she may claim an education tax credit for the year...
As stated in our response to question 1 above, for purposes of claiming the education tax credit, the student must be able to provide the Minister a certificate in prescribed form issued by the designated educational institution confirming the number of months of full-time or part-time enrolment with the institution.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch