NO.: IC75-23
DATE : September 29, 1975
SUBJECT: Tuition Fees and Charitable Donations Paid to Privately
Supported Secular and Religious Schools
1. Tuition fees paid to an educational institution in Canada are deductible
by the student in accordance with subsection 60(f) of the Income Tax Act. Such
fees are not considered charitable donations and official receipts designed for
charitable donations may not be issued for such tuition fees even though the
educational institution may be a registered Canadian charitable organization as
defined in paragraph 110(8)(c) of the Act.
2. The purpose of this circular is to explain two exceptions to the above
rule where a portion or all of an amount paid to a school, other than a
post-secondary institution or a designated educational institution (see Appendix
A), may be considered as a donation. The two types of such schools which give
rise to these special circumstances are:
(a) those which teach exclusively religion, and
(b) those which operate in a dual capacity providing both secular (academic)
and religious education.
Religious Schools
3. If such a school teaches exclusively religion and thereby operates solely
for the advancement of religion, payments for students attending that school are
not considered to be tuition fees but will be considered as valid donations and,
providing the school is a registered Canadian charitable organization, official
receipts for charitable donations may be issued for such payments.
Secular Schools
4. The provisions of the Income Tax Act do not permit a deduction, as a
charitable donation, of an mount paid to a school for academic tuition, whether
the amount was paid for set fees or was a voluntary contribution. A gift, to be
allowable within the concept of paragraph 110(1)(a) of the Act, must be a
voluntary transference of property without consideration. The consideration here
is the academic training received by the children attending the school. On the
other hand religious training is not viewed as consideration for purposes of the
definition of a gift.
5. School fees are normally based on the costs of operation. However, there
are some schools in Canada, usually connected with a church, which do not levy
set fees and operate solely through contributions of parents or guardians and
other members of the church. These schools, which are subject to the inspection
of provincial educational authorities, operate in a dual capacity providing both
secular and religious education.
6. Under certain circumstances receipts for charitable donations may be
issued for a portion of an amount paid to attend schools, other than
post-secondary institutions or designated educational institutions, which
operate in this dual capacity. There are two methods of calculating the donation
portion of amounts paid, depending on how the school maintains its accounting
records.
7. The most favourable treatment will be received where the school can and
does segregate the cost of operating the secular portion of the school and the
cost of providing religious training. Under this method, the net cost of
operating the secular portion of the school is to be pro-rated over the number
of pupils enrolled during the school year to determine a "cost per pupil" for
the secular training. An official donation receipt can be issued for that
portion of a payment which is in excess of the pro-rated "cost per pupil" for
academic training. If a taxpayer has more than one child in attendance at the
school, the amount to be deducted from his total payment, to determine the
donation portion, is the "cost per pupil" for academic training multiplied by
the number of his children enrolled during the school year.
8. The net cost of operating the secular portion of the school will be
determined to be the total operating costs of that portion of the school for a
school year (excluding capital expenditures and depreciation) less miscellaneous
income, grants received and donations received from persons with no children in
attendance, unless such grants or donations were designated for a capital
purpose. "Cost per pupil" would be the above described cost divided by the
number of students enrolled during the school year.
9. Where such a school which operates in a dual capacity does not or cannot
segregate the cost of operating the secular portion of the school and the cost
of providing religious training, a donation receipt can be issued only for that
part of the payment which is in excess of the net operating "cost per pupil" of
the whole school for a school year. The net operating cost of the whole school
in this case will be the total operating costs of the school including both
secular and religious education (excluding capital expenditures and
depreciation) less miscellaneous income, grants and donations from persons with
no children in attendance, unless such grants or donations were designated for
capital purposes. "Cost per pupil" will be the above described cost divided by
the number of students enrolled during the school year. For taxpayers with more
than one child in attendance, the rule in the last sentence of paragraph 7 above
will apply using the "cost per pupil" of the whole school.
10. For purposes of either of the above methods, where a payment has been
made to a school before December 31st of a school year and the school must issue
an official donation receipt for taxation purposes before the "cost per pupil"
for the school year can be determined, the school may use the "cost per pupil"
of the previous school year, if the school operated in that previous year.
11. The school must be prepared to substantiate that the "cost per pupil" for
a school year has been determined from the books and records of the school in
accordance with the above policy.
12. A payment to such a school by a person who is neither the parents or
guardian of a pupil who attends such a school and for which no benefit is
derived qualifies in full as a donation.
APPENDIX A
Section 110(9)
"For the purposes of paragraphs 1(g) and (h),
(a) "designated educational institution" means
(i) an educational institution in Canada that is
(A) 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 or recognized by the Minister of
Education of the Province of Quebec for the purposes of the Students Loans and
Scholarships Act of the Province of Quebec, or
(B) certified by the Minister of Manpower and Immigration to be an
educational institution by which courses are conducted that provide or improve
the qualifications of a person for employment or for the carrying on of a
business or profession,
(ii) a university outside Canada at which the student referred to in
paragraph (1)(g) or (h), as the case may be, was enrolled in a course, of not
less than 13 consecutive weeks duration, leading to a degree, or
(iii) if the student referred to in paragraph (1)(g) or (h), as the case may
be, resided, during the whole of the year referred to therein, in Canada near
the boundary between Canada and the United States, an educational institution in
the United States to which he commuted that is a university, college or other
educational institution providing courses at a post-secondary school
level;"
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