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: Is the student attending a university outside Canada for the purposes of paragraph 118.5(1)(b) of the Income Tax Act (the "Act") in each of the four different scenarios?
Position: 1. Yes 2. No 3. Yes 4.Unable to confirm.
Reasons: The courts have held the view that a university is an institution of higher learning which confers degrees attesting to some definite proficiency, with the minimum requirement being the ability to confer a bachelor degree for purposes of 118.5(1)(b) of the Act.
February 3, 2011
Validation Policy and Procedures Section Income Tax Rulings
Directorate
Individual Returns Directorate Ontario Corporate Tax
Division
Nancy Shea-Farrow
Attention : Chris Ibbitson 905-721-5226 2008-030163
Tuition Tax Credit - "University Outside Canada"
This is in response to the informal discussion paper of August 2008 from your area on various issues. This memo will respond to the four scenarios as outlined by you below as to whether the student is attending a university outside Canada for the purposes of paragraph 118.5(1)(b) of the Income Tax Act (the "Act")
1. A student attends XXXXXXXXXX College XXXXXXXXXX which is identified as a XXXXXXXXXX "listed body" and the student is taking courses which will lead to a bachelor degree. XXXXXXXXXX College XXXXXXXXXX is not itself empowered to confer degrees, either in its own name or on behalf of the University of XXXXXXXXXX . The actual degree will be awarded by the University of XXXXXXXXXX which is identified as a "recognized body".
2. A student attends XXXXXXXXXX and is taking courses leading to a Masters in XXXXXXXXXX . The XXXXXXXXXX does not have degree granting powers and it is neither identified as a "recognized body" nor a "listed body". A relationship exists between this institution and the XXXXXXXXXX University which is identified as a "recognized body" such that the Master degree is validated and conferred by the XXXXXXXXXX University. Again, assume no courses are actually taken at the XXXXXXXXXX University.
3. A student attends the XXXXXXXXXX and is taking courses leading to a Bachelors degree. XXXXXXXXXX is a constituent institution of the XXXXXXXXXX that will award the degree for the courses that were taken at XXXXXXXXXX .
4. A student attends XXXXXXXXXX over the internet and obtains a MBA. XXXXXXXXXX is an online institution that offers education XXXXXXXXXX . Essentially they are offering various types of graduate business degrees although they also offer programs leading to certificates and diplomas. An entry level requirement is a Bachelors degree from a "recognized" university although that is not clearly defined. A degree is issued by XXXXXXXXXX which is recognized by the XXXXXXXXXX government's Ministry of Education in its ability to offer an MBA through distance learning.
OUR COMMENTS:
Generally, an individual that is in full-time attendance at a university outside Canada, in a course leading to a degree, may claim a tuition tax credit for any fees for the student's tuition that are paid in respect of the year to that university, provided that among other things, that the fees paid are in respect of a course that is at least 13 consecutive weeks in duration.
The term "university" is not defined in the Act. Paragraph 118.5(1)(b) of the Act refers to "a university outside Canada in a course leading to a degree". An educational institution located in a country outside Canada is presumed to qualify for purposes of paragraph 118.5(1)(b) if it is recognized by an accrediting body of that country as being an educational institution which confers degrees at least at the bachelor or equivalent level. We also accept that an institution that is listed in Schedule VIII of the Income Tax Regulations is recognized as satisfying the requirements of paragraph 118.5(1)(b). The fact that an educational institution is not on this list does not mean that the educational institution is not a university. An educational institution that is a member of the Association of Commonwealth Universities and confers degrees at least at the bachelor level or equivalent is considered a university for purposes of paragraph 118.5(1)(b).
The courts have held the view that a university is an institution of higher learning which confers degrees attesting to some definite proficiency, with the minimum requirement being the ability to confer a bachelor degree for purposes of 118.5(1)(b) of the Act.
XXXXXXXXXX
The University of XXXXXXXXXX website states that it has a federal structure and is comprised of XXXXXXXXXX colleges including XXXXXXXXXX College and over XXXXXXXXXX departments, faculties, schools and other institutions. XXXXXXXXXX , and it is the University of XXXXXXXXXX that awards degrees (bachelor and higher). The colleges are separate corporate bodies. Each has its own statutes, XXXXXXXXXX . The colleges play a central role, through the supervision system, in undergraduate teaching in the University of XXXXXXXXXX .
The Concise Canadian Oxford Dictionary states that a university is "an educational institution designed for instruction of students in many branches of advanced learning, conferring degrees in various faculties, and often embodying colleges and similar institutions ..." and further stating that it includes " the members of this collectively". Also by definition a college can be an institution within a university according to the definition in the Concise Canadian Oxford Dictionary.
It appears that XXXXXXXXXX College, is an integral part of the University of XXXXXXXXXX educational structure such that a student attending XXXXXXXXXX College is in effect also attending the University of XXXXXXXXXX . While XXXXXXXXXX College is not a university by itself it is a part of the University of XXXXXXXXXX in the collective sense and thus a student attending XXXXXXXXXX College will be considered to be attending a university outside Canada for the purposes of paragraph 118.5(1)(b) of the Act.
Your discussion paper stated that the role of the University of XXXXXXXXXX in awarding a degree is more symbolic or administrative in nature, we are unaware of the University of XXXXXXXXXX conferring symbolic degrees for those students completing the requirement for a bachelor degree while residing at one of the XXXXXXXXXX colleges.
The XXXXXXXXXX
The XXXXXXXXXX is not listed as a "recognised body" for XXXXXXXXXX . A "recognized body" means that it is authorized to grant degrees. It is also not list in the Association of Commonwealth Universities. The XXXXXXXXXX University is on the list of recognized bodies for XXXXXXXXXX .
The website for the XXXXXXXXXX states that all master's courses at the school are validated by the XXXXXXXXXX University. Under the undergraduate programs it lists a XXXXXXXXXX Diploma.
In Klassen v. Her Majesty the Queen, 2007 DTC 5612, decided at the federal court of appeal, a taxpayer attended Minot State University-Bottineau (MSUB), which is an educational institution, accredited by the American Council on Education, which offers students a two-year associate degree as well as other technical programs. The taxpayer was denied the tuition and education tax credit, by the Minister of National Revenue, on the basis that the institution attended did not qualify as a "university outside Canada" or a "designated educational institution" within the meaning of section 118.5 and 118.6 of the Act.
In the decision of the federal court of appeal in Klassen, Justice Marc Noel stated:
I therefore conclude that the expression "university outside Canada" refers to an educational institution which confers degrees usually granted by universities, that is a doctorate degree, a master degree or at minimum degrees atthe baccalaureate level or its equivalent. The degree granted by MSU-Bottineau in this case (i.e., the "associate degree") attests to the successful completion of a two year undergraduate program. As this is the highest degree which MSU-Bottineau can confer, it does not qualify as a "university outside Canada". The fact that MSU-Bottineau calls itself a university cannot alter this conclusion.
In the federal court of appeal counsel for the Appellant argued that MSUB is by name a university and that it does grant an associate degree. Alternatively, counsel for the Appellant argued that if MSUB does not qualify because it does not itself confer a bachelor degree, it should be considered as an extension of MSU, which does qualify as a university outside Canada.
As mentioned in the Klassen case,
The question that arises in this case is whether the "bachelor degree or equivalent level" minimum requirement adopted by the Tax Court and applied by the Minister in determining entitlement to the credits properly flows from the expression "university outside Canada" as it appears in paragraphs 118.5(1)(b) and 118.6(1)(b) of the ITA.
The expression "university outside Canada" must be read in context, according to its ordinary sense, harmoniously with the scheme of the ITA, its object and the intention of Parliament. At the same time, it is important to pay particular attention to the textual meaning of the words when attempting to construe detailed provisions of the ITA such as the ones here in issue....
The federal court of appeal noted that the type of institution that is eligible for the tuition and education tax credit for foreign institutions is more restrictive than for domestic institutions. This was done to exercise some measure of control over the type and level of education supported by the credits. The court stated that the common feature of all the definitions examined is that a university is an institution of higher learning which confers degrees attesting to some definite proficiency. The court noted that a bachelor degree is generally recognized as a minimum requirement for the pursuit of graduate studies. The court stated that it could not think of any other reliable or objectively ascertainable criteria on which to distinguish a university from another institution of higher learning than the type of degree which a university grants and in particular the bachelor degree. Therefore the court ruled that since the highest degree MSUB granted was a two year degree, an associate degree, it does not qualify as a university outside Canada. The court also stated that MSUB might be viewed as an extension of MSU, but the tuition was not paid to the university, MSU, it was paid to MSUB so the facts do not meet the provisions of the Act.
Therefore the institution at which the student is in full time attendance in a course leading to a degree must be able to confer at least a bachelor degree or equivalent to meet the definition of a "university" for the purposes of paragraph 118.5(1)(b) of the Act. The XXXXXXXXXX does not appear to meet this definition and it is therefore not a "university" for the purposes of paragraph 118.5(1)(b) of the Act.
XXXXXXXXXX
According to XXXXXXXXXX website the XXXXXXXXXX , is XXXXXXXXXX and it provides degrees at Bachelor's, Diploma, Master's and Doctoral level in a broad range of subjects.
XXXXXXXXXX
The Department of XXXXXXXXXX has a list of providers of higher education in XXXXXXXXXX that lists the XXXXXXXXXX under the heading of "Universities".
It appears that the XXXXXXXXXX has authority to grant degrees pursuant to section XXXXXXXXXX of the XXXXXXXXXX and according to their website, confers degrees at least at a bachelor level and therefore is a university for the purposes of paragraph 118.5(1)(b) of the Act.
XXXXXXXXXX
For a case such as that described in scenario 4 it is not clear if the institution attended is nationally recognized as being an educational institution which confers degrees at least at the bachelor of equivalent level and therefore we can not confirm that the institution is a university for purposes of paragraph 118.5(1)(b) of the Act. We also have concerns about whether a national government regulates the virtual university.
In conclusion, we would like to emphasize, that the decision in the Klassen case was at the federal court of appeal level and therefore has precedent setting value. This decision reflects the Canada Revenue Agency's (CRA) current and long standing view of the requirements that are required to be met for an educational institution to be considered a "university outside Canada" for the purposes of paragraph 118.5(1)(b) of the Act . Additionally, the analysis provided in this case confirms our understanding and accurately reflects our tax policy with respect to the type of foreign educational institutions that are eligible for the tuition tax credit.
We trust that these comments will be of assistance to you.
Sharmini Ratnasingham
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
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