Determining eligibility for course-related expenses is complex.
IN the wonderful world of income tax, interpretation plays a very big role. For example, up until 2011, subparagraph 118.5(1)(b)(i) of the Income Tax Act permitted a student enrolled in a post-secondary institution outside of Canada to claim tuition fees provided they were in respect of a course leading to a degree and not less than 13 weeks duration. This raised the question—what constitutes a course of not less than 13 weeks duration? Is it the whole curriculum or is it the individual modules that make up the curriculum? This was the question faced by the Tax Court of Canada in the case May Abdalla v. Her Majesty the Queen [2010-3792(IT)I].
In 2008, the appellant’s spouse was enrolled in courses through the University of Phoenix, which he took online. He claimed the tuition and education deduction on his return, and pursuant to Sections 118.8 and 118.81 of the Act, transferred $5,000 to the appellant. The Minister disallowed $3,154 of the amount transferred relating to the University of Phoenix on the grounds that the appellant’s spouse was not registered in a qualifying education program because the individual modules were only six to eight weeks long. Ms. Abdalla appealed to the Tax Court of Canada.
At trial, the respondent indicated that there was no issue concerning whether the appellant’s spouse was in full-time attendance at the University of Phoenix, only the duration of the courses taken. The appellant relied on the decision of Justice Little in Cammidge v. the Queen [2011 TCC 172], in which the court concluded that because the University of Phoenix had two locations in Canada in 2008, the taxpayer could claim the amount paid for tuition under paragraph 118.5(1)(a) of the Act, which does not restrict the duration of the courses.
In a prior case, Robinson v. the Queen [2006 TCC 664], Justice Beaubier concluded that, since the University of Phoenix had a campus in Canada in 2004, the tuition paid by the taxpayer in that case qualified for a credit under paragraph 118.5(1)(a). However, in Faint v. the Queen [2011 TCC 260], Justice Margeson held that the taxpayer who took courses online from the University of Phoenix was not enrolled at an educational institution in Canada because the taxpayer did not attend any classes at the Canadian campus and had no connection to the Canadian campus.
The court concluded that the appellant’s spouse was not enrolled in an education institution in Canada. This left the issue of whether the courses qualified under the 13 weeks rule. The court looked at the decision of Justice Paris in Ferre v. the Queen [2010 TCC 593], in which the justice held that the modules were less than 13 weeks duration and therefore did not qualify. This contrasted with a more recent decision of Justice Bowie in Siddell v. the Queen [2011 TCC 250], in which the court held that the word “course” in the context does not mean individual modules, but the entire curriculum pursued throughout the entire year.
Abdalla’s appeal was allowed. The court agreed with the conclusion of Justice Bowie in Siddell that the word “course” should be taken to mean the entire curriculum taken for the year. This was backed up by Subsection 33(2) of the Interpretation Act, which provided that “Words in the singular include the plural, and words in the plural include the singular.”
What I find interesting is the contrary interpretations given by the courts to the same question—what constitutes a course. I believe that the decision in the Abdalla case was the correct one. For example, based on the law in effect in 2010, would Tax 2 of the CGA program be considered a “course” on its own, or would the CGA program of studies constitute the “course”? Justice Paris, who ruled that a course is the individual module, would disagree with Justice Bowie, who ruled that the overall course is what matters, not the individual modules.
All the cases cited involved the University of Phoenix. It is well known that the vast majority of tax disputes do not reach the courts, so it could be assumed that there were many more University of Phoenix students who were denied the deduction by the Minister. It would be interesting to know why the Minister seems to have targeted the University of Phoenix.
Parliament must have recognized the confusing interpretations of the legislation, because in 2011, the 13-week requirement was dropped to three weeks.
