7 December 2004 External T.I. 2004-0086251E5 - Camp Fees as Child Care Expenses

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Do camp fees qualify as child care expenses?

Position: Question of fact. General comments provided.

Reasons: Insufficient facts provided

2004-008625
XXXXXXXXXX Allan Nelson, C.M.A
(613) 443-7253
December 7, 2004

Dear XXXXXXXXXX:

Re: Child Care Expense - XXXXXXXXXX
Technical Opinion Request

This is in reply to your July 9, 2004, letter and our telephone conversation on October 20, 2004 (Nelson/XXXXXXXXXX), where you requested a technical interpretation concerning the deductibility of certain fees as child care expenses.

Background

The relevant facts can generally be summarized as follows:

? each year, mainly through the assistance of volunteer staff, XXXXXXXXXX (the "Camp") provides 2 weeks of summer camping for children ages 7 to 16. One week is for pre-teens and the other week is for teenagers;

? the cost for each child to attend the Camp is $XXXXXXXXXX per week (referred to in this letter as the "Camp Fee") and that covers room, board and all activities for the week; and

? while at the Camp the children participate in various games and activities such as swimming, archery, obstacle course, canoes, XXXXXXXXXX, etcetera.

Your Question

You have asked whether the parents of the children campers can claim the Camp Fee as a child care expense, subject to the weekly limits applicable to overnight camps, when filing their income tax returns, and if the Camp needs to print its charitable registration number on the receipts.

Our Comments

Written confirmation of the tax implications of particular completed transactions should be submitted along with all relevant facts and documentation to your local Tax Services Office for their views. However, we are prepared to provide you with the following general comments, which may be of some assistance to you.

Section 63 of the Income Tax Act (the "Act") provides a deduction for amounts paid for child care expenses incurred for services rendered in the year in respect of an eligible child of the taxpayer. To qualify, child care expenses must be incurred in order to permit the taxpayer, or a particular supporting person of the child, to perform the duties of an office or employment, to carry on business or, in certain instances, to carry on research, or attend a designated educational institution or a secondary school. There are a number of other requirements that have to be met in order for a taxpayer to be entitled to deduct child care expenses and, accordingly, the deductibility of child care expenses for which a taxpayer gets a receipt would depend on the facts of each particular case. We will not discuss all of these requirements in this letter since you have advised us you are familiar with the relevant information on this topic contained in Interpretation Bulletin IT-495R2 Child Care Expenses and form T778 Child Care Expenses Deduction.

As alluded to in your letter, paragraph 63(3)(c) of the Act, at the definition of child care expense, limits the amount of child care expense in certain circumstances. These limits are discussed in Part A of form T778.

As stated in form T778 and paragraph 3 of Interpretation Bulletin IT-495R2, child care expenses do not include payments made that relate to education costs. Child care expenses also do not include fees paid for activities such as tennis lessons or the annual registration fees paid for Scouts.

However, it is possible for a child to participate in a particular program that involves elements of education, training and child care (e.g., certain sports camps). Some factors that would be considered to determine whether a particular program involves a sufficient degree of child care in order for the costs to qualify as child care expenses would be the age of the participating children, the qualifications of the instructors, the extent that progress is measured and goal-orientation is involved, the time devoted to the program by a participant, the duration of the program, and the training and educational facilities that are used. Using the sports camps example again, these camps for young children are generally not of an ongoing nature and it is generally recognized that there is a sufficient degree of child care, even though the program is enriched by sporting activities with instruction. On the other hand, older children may participate in a sports program that is ongoing for a lengthy period of time, the instructors have degrees or certificates in respect of physical education, progress is regularly monitored and is goal-oriented, and sophisticated training methods and facilities are used. In this type of scenario, it is our general view that education and training are essentially involved, as opposed to child care.

It remains a question of fact whether the Camp Fees incurred meet the requirements in order to be claimed as child care expenses (i.e., was the Camp providing a sufficient degree of child care services, the expenses in respect of which would otherwise be deductible, or whether a portion of the Camp Fees was for a program of training/education that would not be deductible?) From the limited facts you provided, it appears that the Camp Fees may be in respect of child care, even though it was enriched by certain activities. However, a review of all relevant details and documentation, including any promotional material, with respect to the program at the Camp would be required to provide definitive comments on this issue. If you require further assistance in this respect, all relevant information should be sent to your local Tax Services Office, as noted above.

Since the Camp Fees are not paid as charitable donations to the Camp, there would be no requirement that the Camp include its charitable registration number on receipts that could be issued for the Camp Fees. In addition, taxpayers making a child care expense claim would be subject to the above noted limits and would have to meet all the other requirements of section 63 of the Act to qualify for a child care expense deduction.

Additional Comments

In accordance with paragraph 22 of Information Circular 70-6R5, the above comments are only an expression of opinion, and as such should not be construed as an advance income tax ruling, nor are they binding on the Canada Revenue Agency.

We hope the above will be of assistance to you.

Yours truly,

Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch