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: Confirmation of the following statements is requested:
1. The provisions of subsections 118.6(2) and (2.1) of the Act will apply to the Residency Program such that the Residents participating therein will be entitled to the education credit provided by subsection 118.6(2) and the post-secondary textbook credit provided by subsection 118.6(2.1) so long as the relevant designated educational institution files with the Minister the form prescribed for that subsection in respect of such residents.
2. For the purposes of the education credit, the Residents participating in the Residency Program will be entitled to the credit in paragraph (a) of the definition of "B" in the formula in subsection 118.6(2) of the Act.
3. It would be appropriate for XXXXXXXXXX to file with the Minister the form prescribed by subsection 118.6(2) indicating that the Residents participation in the Residency Program qualifies for the education credit and post-secondary textbook credit.
Position: Confirmation is not given to any of the statements.
Reasons: A medical resident in a Residency Program is an employee in a training program and not a student in a qualifying educational program.
XXXXXXXXXX 2011-039660
N. Shea-Farrow
October 3, 2011
XXXXXXXXXX
Re: Technical Interpretation Request - Medical Resident
This is a response to your letter of February 17, 2011 regarding medical residents in which you requested confirmation of the following statements:
1. The provisions of subsections 118.6(2) and (2.1) of the Income Tax Act (the "Act") will apply to the Residency Program described below such that the Residents participating therein will be entitled to the education tax credit (ETC) provided by subsection 118.6(2) of the Act and the post-secondary textbook tax credit (PSTTC) provided by subsection 118.6(2.1) of the Act so long as the relevant designated educational institution files with the Minister the form prescribed for that subsection in respect of such residents.
2. For the purposes of the ETC, the Residents participating in the Residency Program will be entitled to the credit in paragraph (a) of the definition of "B" in the formula in subsection 118.6(2) of the Act.
3. It would be appropriate for XXXXXXXXXX to file with the Minister of National Revenue the form prescribed by subsection 118.6(2) of the Act indicating that the Residents participation in the Residency Program qualifies for the ETC and PSTTC.
The following are the facts as provided by you:
1. The XXXXXXXXXX administers a post-graduate medical school (the "Faculty of Medicine") for the education and training of individuals to become medical doctors and for the training of medical doctors in an area of specialty.
2. The Medical School includes a residency program (the "Residency Program"), which enables medical doctors to train in an area of specialty in a hospital setting.
3. Under the Residency Program, the Residents will be employed by hospitals to engage in clinical training and to provide clinical services to members of the public.
4. Under the Residency Program, the Residents will be both employees and students: they will be physicians employed by the hospitals and they will continue to be post-graduate medical trainees registered in the Faculty of Medicine.
5. The Residency Program ranges from two to seven years depending on the specialty of each Resident taking it. As a result, the Residency Program will be greater than three consecutive weeks in duration for every Resident.
6. The Residency Program provides that each Resident will spend more (often considerably more) than 40 hours per week fulfilling duties under the Residency Program. As a result, no Resident will spend less than ten hours per week on work in the program.
7. The Residents must pay a registration fee to XXXXXXXXXX as part of their participation in the Residency Program. The registration fee for 2010-2011 is $XXXXXXXXXX .
8. No tuition is payable in respect of the Residency Program. XXXXXXXXXX does not pay tuition for or on behalf of the Residents.
9. The Residents are not reimbursed by the hospital that employs them nor by XXXXXXXXXX in respect of the registration fee.
10. To the best of the knowledge of XXXXXXXXXX , none of the Residents will be reimbursed in respect of the registration fee by any person dealing at arm's length to a Resident.
11. To the best of the knowledge of XXXXXXXXXX , all of the Residents will be older than 16 years of age by the end of the year of their participation in the Residency Program.
12. XXXXXXXXXX is a university that has been designated by the Lieutenant Governor in Council of XXXXXXXXXX as a specified educational institution under the Canada Student Loans Act.
13. XXXXXXXXXX currently does not issue the form prescribed by subsection 118.6(2) of the Act (in this case form T2202A) to persons participating in the Residency Program indicating that the education credit applies to the months that such persons spend in the Residency Program. Administration of XXXXXXXXXX holds the view that it would be inappropriate to do so without clear guidance from the CRA.
14. Administration of XXXXXXXXXX has indicated to XXXXXXXXXX that it will issue the T2202A to the Residents participating in the Residency Program indicating that the months that the Residents spend in the Residency Program qualify for the education credit should the CRA provide clear guidance that it would be appropriate to do so.
15. A certain number of the Residents will participate in the Residency Program beginning XXXXXXXXXX , 2011.
The situation outlined in your letter appears to relate to a factual one, involving specific taxpayers. To obtain the Canada Revenue Agency's ("CRA") views on completed transactions involving specific taxpayers you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the CRA's website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.
Comments
The CRA's general view regarding the ETC is contained in Interpretation Bulletin IT-515R2 Education Tax Credit (IT- 515R2), which is also available on the CRA web site at www.cra-arc.gc.ca.
Pursuant to subsection 118.6(2) of the Act, a full-time student may claim an education amount of $400 for each month that the student is enrolled in a "qualifying educational program" as a" full-time student" at a "designated educational institution". A part-time student may claim an education amount of $120 for each month if he or she is enrolled in a "specified educational program" at a "designated educational institution" that provides that each student in the program spend not less than 12 hours in the month on courses in the program. These terms are defined in subsection 118.6(1) of the Act and are explained in more detail in IT-515R2. For each month that a student is able to claim an education amount, the student may claim a textbook amount of $65 for full-time students and $20 for part-time students pursuant to subsection 118.6(2.1) of the Act. The ETC and the PSTTC each equal the total of the respective education amounts and textbook amounts multiplied by the appropriate percentage which is currently 15%.
A designated educational institution includes an educational institution that is a university, college or other educational institution designated by the lieutenant governor in council of a province as a specified educational institution under the Canada Student Loans Act, designated by an appropriate authority under the Canada Student Financial Assistance Act, or designated by the Minister of Education of the Province of Quebec for the purposes of an Act respecting financial assistance for education expenses. The XXXXXXXXXX is therefore a designated educational institution.
The term "qualifying educational program" requires, in part, that the program run for at least 3 consecutive weeks and must provide that each student taking the program spend at least 10 hours per week on courses or work in the program and in respect of a program at a designated educational institution. The time spent related to an individual's employment as a Resident cannot be counted towards satisfying the hourly requirement for a qualifying educational program, even in circumstances where the educational institution recognizes the employment as a work term or internship. The reason for this is that the definition of qualifying educational program only includes hours that are spent on the program when the individuals are acting in the capacity as a student not as an employee. Definitions for apprentice, intern, student, resident and employee found in one or more of the following sources; the Concise Canadian Oxford Dictionary or the Act, the Canada Student Financial Assistance Act and/or Canada Student Financial Assistance Regulations and in the Canada Student Loans Act and/or Canada Student Loans Regulations and the XXXXXXXXXX provide evidence that residents in a hospital are employees, that is individuals that are paid for services rendered and not students. For example, according to article XXXXXXXXXX of the XXXXXXXXXX the definition, in part, of Resident is the following:
"The term Resident shall mean a doctor of medicine employed by the Hospital who is participating in a training Program approved by the Canadian Medical Association, the Royal College of Physicians and Surgeons of Canada, or the College of Family Physicians of Canada, and is registered with the College of Physicians and Surgeons of XXXXXXXXXX , or is a doctor of Dentistry or Podiatry appointed to a training Program offered by the Hospital. ...."
The Resident Program does not appear to be conducted at a designated educational institution. The Resident Program is administered or facilitated by the XXXXXXXXXX , for which it charges a registration fee to provide for this service. The Resident Program in our opinion seems to be more of a training program provided by the Resident's employer, the various hospitals in XXXXXXXXXX , where according to the information provided, the training and instruction seems to be provided, and designed so the doctors can prepare for examinations given by the Medical Council of Canada so they can be licensed by the College of Physicians & Surgeons of XXXXXXXXXX to practice medicine rather than, a qualifying educational program where a student is engaged in academic course study at a designated educational institution. The Resident Program is similar to an apprenticeship program for trades where apprentices are hired by employers and provided with on the job training that is designed to prepare the individuals so they can be certified or licensed in a trade.
Finally, if the student receives any benefit in respect of the program from a person with whom the student was dealing at arm's length (other than certain forms of financial assistance), the program is not a qualifying educational program.
The term "enrolled...as a full-time student" is not defined in the Act. It should be noted that the requirement for "full-time" enrolment is in paragraph (a) of variable B of subsection 118.6(2), and not in the definition of "qualifying educational program". As indicated in paragraph 5 of IT-515R2 the requirement for enrolment as a full-time student at a designated educational institution is a separate test over and above the requirement respecting "qualifying educational program". While in many instances meeting the minimum requirements of a "qualifying educational program" may result in the student also meeting the educational institution's requirements for full-time enrolment, these tests remain, as explained above, distinct and are not necessarily the same. For example, in certain instances, institutions establish full-time enrolment based on a minimum amount of credits, whereas a qualifying educational program requires a minimum amount of hours (10 hours per week) on courses or work in the program, which may include both lecturing time and a reasonable estimate of time for work assignments. As indicated in paragraph 7 of IT-515R2 a student in co-operative courses are not regarded as being enrolled as a full-time student during the months in which university is not attended. According to the information provided the Residency Program is conducted at a hospital, the Resident's employer and therefore in our opinion the Residents are not full-time students and in our opinion the Residents are not students for purposes of the Act.
A student may meet the requirements of a "qualifying educational program" and still not qualify for enrolment as a full-time student at the educational institution. The requirement for enrolment as a full-time student at a designated educational institution must ultimately be met on the basis of the facts of each case. Thus, the CRA must generally rely on the institution's determination as to whether an individual is registered as a full-time student.
Where the student is enrolled at a designated educational institution but does not qualify as a full-time student, the student may still qualify for the part-time ETC. To qualify, the student must be enrolled in a "specified educational program" that provides that each student in the program spend not less than 12 hours in the month on courses in the program. A specified educational program means a program that would be a qualifying educational program if the definition for that term were read without reference to the 10 hours per week.
A designated educational institution may issue a T2202 or T2202A to a full-time student enrolled in a "qualifying education program" or to a part-time student enrolled in a "specified educational program". If the institution offering the program satisfies itself that it meets the definition of a designated educational institution and that the student is enrolled in a program that meets the above noted criteria for either a qualifying educational program or a specified educational program, the institution may issue a T2202 or T2202A to the student.
However, the receipt of a T2202 or T2202A from an institution does not guarantee that the student will qualify for the ETC. Eligibility for the ETC is determined on a case-by-case basis. The student must satisfy all the conditions of subsection 118.6(2) in order to qualify. The CRA can only determine whether the student has met these requirements after the student's specific fact situation is reviewed. However, based on our understanding of the Resident Program the Residents are employees in a training program conducted by their employer and not students enrolled in a qualifying educational program or a specified educational program at a designated educational institution and in our opinion it would not be appropriate for the XXXXXXXXXX to issue a T2202 or T2202A to the Residents.
We trust our comments will be of assistance.
Sharmini Ratnasingham
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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