Principal Issues: Is a non-refundable tax credit under the new transit pass credit initiative used to reduce tax payable before applying the tuition and education tax credits?
Position: Yes.
Reasons: There is consequential amendment to section 118.92 of the Act which will ensure that the tax credit available to an individual who acquires an eligible public transit pass will be applied to reduce tax payable before the tuition and education tax credits.
October 20, 2006
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your correspondence received on September 19, 2006, concerning the 2006 Federal Budget proposal to provide a non-refundable tax credit for public transit passes. In particular, you are concerned about students who acquire an eligible public transit pass being able to use this credit to reduce tax payable before applying the tuition and education tax credits.
On August 31, 2006, the Honourable James M. Flaherty, Minister of Finance, released the legislative proposals to implement some of the 2006 Federal Budget proposals, including the proposal with respect to the public transit pass tax credit in draft section 118.02 of the Income Tax Act. These legislative proposals also include a consequential amendment to section 118.92, the provision of the Act requiring tax credits to be applied in a specific order when computing an individual's tax payable for a tax year. I am pleased to inform you that the proposed amendment to section 118.92 of the Act ensures that the tax credit available to an individual who acquires an eligible public transit pass will be applied to reduce tax payable before the tuition and education tax credits. This will ensure that a student's unused tuition and education tax credits will be available to carry forward to another tax year or to transfer to the student's spouse, common-law partner, parent, or grandparent.
Thank you again for having taken the time to write.
Sincerely,
The Honourable Carol Skelton, P.C., M.P.
Randy Hewlett
613-957-2049
October 2, 2006
2006-020736