J.D. Jones (613) 957-2104
NOV 10 1988
Dear Sirs:
Re: Request for Technical Interpretation of Tuition Fee Rebates
This is in reply to your letter of September 15, 1988, wherein you requested a technical interpretation of paragraphs 6(1)(a), 56(1)(n), 60(f) and subsection 56(2) of the Income Tax Act (the "Act") in addition to section 118.5 of the Act which received Royal Assent on September 13, 1988 as they relate to an employer-sponsored tuition fee rebate plan to certain dependents of employees.
As we understand it, the tuition fee rebate plan as negotiated in a collective agreement between a university in Canada and the bargaining agent for members of the faculty of the University may be summarized as follows:
An "eligible student" is a person who, on the official date for the commencement of classes in any course or courses of an undergraduate degree program at the University, is a child of, and dependent on, a member of the bargaining unit and is under the age of 25 years. A person who is an "eligible student" shall be eligible to receive a rebate of tuition fees paid in respect of his or her enrollment in the course or courses of an undergraduate degree program at the University provided he or she successfully completes the course or courses. Rebates may not be granted in respect or more than 60 units of course work in undergraduate degree programmes. The tuition fees are paid in the normal manner by the student and a rebate must be claimed, at the latest, by October 1 following the Winter, Spring or Summer sessions in which the courses were taken. This rebate in [sic] payable to the student once a copy of the student's transcript has been submitted.
Based on the above, you have requested an interpretation from the Department that the payments made by the University to the children of faculty members in respect of tuition fees for courses successfully completed will not be taxable to the faculty member under paragraph 6(1)(a) or subsection 56(2) or under any other provision of the Act, but will be taxable in the hands of the student under paragraph 56(1)(n) of the Act. In addition, you have requested our interpretation that those students who have qualified for and received tuition fee rebates in accordance with the collective agreement in respect of courses taken in 1987 qualify for a deduction under paragraph 60(f) of the Act for the tuition fees paid and that those students who have qualified for and received such tuition fee rebates in respect of courses taken in 1988 qualify for a tax credit pursuant to section 118.5 of the Act for the tuition fees paid.
In our view, payments made by the University to the dependents of faculty members pursuant to the collective agreement as tuition fee rebates in the above situation cannot be considered to be a scholarship or bursuary and income of the student under paragraph 56(1)(n) of the Act, but are properly considered to be employment income of the employee by virtue of subsection 56(2) and paragraph 6(1)(a) of the Act. In the above situation, the tuition fee rebates paid by the University to dependents of the University's employees are not selected on the basis of their scholastic records or other achievements or qualities, but are paid pursuant to a collective bargaining agreement of one group of the University's employees provided the students successfully complete the eligible course or courses. As a result, it is our view that the above agreement does not meet the conditions outlined in paragraph 6 of IT-75R2 .
In our view, students who have qualified for and received tuition fee rebates in accordance with the collective agreement in respect of courses taken in 1987 to qualify for a deduction under paragraph 60(f) of the Act for tuition fees paid provided they otherwise qualify. In addition, students who have qualified for and received tuition fee rebates in accordance with the collective agreement in respect of courses taken in 1988 would qualify for a tax credit under section 118.5 of the Act in respect of the tuition fees paid provided they otherwise qualify.
We trust our comments will be of assistance.
Yours truly,
ORIGINAL SIGNED BY
P.D. Fuoco for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch