Marino v. The Queen

Marino v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2020-07-10
Neutral citation
2020 TCC 50
File numbers
2018-3112(IT)I
Judges and Taxing Officers
Siobhan Monaghan
Subjects
Income Tax Act
Decision Content
Docket: 2018-3112(IT)I
BETWEEN:
ALEXANDER MARINO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on February 19, 2020 at Vancouver, British Columbia
Before: The Honourable Justice K.A. Siobhan Monaghan
Appearances:
Counsel for the Appellant:
Drew Gilmour
Darryl Way
Counsel for the Respondent:
Kieran Meehan
JUDGMENT
In accordance with the attached Reasons for Judgment:
The appeal from a reassessment made under the Income Tax Act for the Appellant’s 2012 taxation year is dismissed, without costs.
Signed at Ottawa, Canada, this 10th day of July 2020.
“K.A. Siobhan Monaghan”
Monaghan J.
Citation: 2020 TCC 50
Date: 20200710
Docket: 2018-3112(IT)I
BETWEEN:
ALEXANDER MARINO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Monaghan J.
I. BACKGROUND FACTS
[1] Mr. Marino is an individual who lives in Calgary, having immigrated to Canada from the United States on July 2, 2012. At least for the period from 2002 until he immigrated to Canada in 2012, Mr. Marino was not resident in Canada. Rather, during 2002 to 2011 was attending university on a full-time basis in the United States, starting with University of Pittsburgh; followed by Duquesne University and finally University of Florida. Mr. Marino paid tuition to these universities, totalling a little more than US$159,000 over the 2002 to 2011 period. The parties agree this is approximately $179,000. [1]
[2] The three US universities provided Mr. Marino with signed copies of the forms prescribed under Income Tax Act [2] (the “Act”) for purposes of the tuition and education tax credits found in sections 118.5 and 118.6 of the Act. The three universities are listed in Schedule VIII of the Income Tax Regulations [3] as that Schedule read in 2012. [4]
[3] After immigrating to Canada, Mr. Marino filed Canadian income tax returns for 2002 to 2011 under Part I of Act. Mr. Marino filed the 2009 to 2011 returns in 2013 and the 2002 to 2008 returns in early 2016. In other words, all of the returns were filed after Mr. Marino became a resident of Canada, but on the basis that he was neither a resident of Canada nor a deemed resident of Canada (i.e., Non-Resident – Section 115 Income Tax Returns) in those years. The 2002 to 2011 returns were assessed and reassessed on the basis that Mr. Marino had no tax payable under the Act.
[4] In his tax return for the 2012 taxation year, in computing his non-refundable tax credits, Mr. Marino claimed unused tuition tax credits carryforward based on tuition paid to the US universities in 2002 to 2011 when he was not a Canadian resident and had no source of income in Canada. The Minister reassessed Mr. Marino for his 2012 taxation year to disallow the claimed tuition tax credits and to reduce his tuition and education tax credit carryforward amount [5] to nil. On October 6, 2016, the Minister reassessed Mr. Marino’s 2012 taxation year to reduce any previously allowed tuition and education carryforward amounts to nil. [6] Mr. Marino objected to that reassessment but it was confirmed in 2018 and Mr. Marino filed this appeal.
[5] The parties agree that Mr. Marino was not required to file a Canadian income tax return for any of the 2002 to 2011 years. They also agree he had no taxable income earned in Canada and no taxes payable under the Act in those years.
II. OVERVIEW OF THE TUITION TAX CREDIT RULES
[6] Before I address the issue at the heart of this appeal, it is perhaps worth summarizing the relevant provisions. Subject to certain conditions, section 118.5 permits an individual to reduce the individual’s tax payable under Part I of the Act for a particular taxation year by deducting a portion of tuition paid to a post-secondary institution for that taxation year. (For simplicity, I am going to refer to this deduction in computing tax payable as the tuition tax credit.)
[7] Where the individual is not able to use the credit in the particular taxation year, again subject to certain conditions, the individual may transfer the credit to a common-law partner or spouse [7] or a parent or grandparent [8] (each a “designated person”) or may carry forward [9] the unused tuition tax credits [10] to be used by the individual in a future taxation year.
[8] Mr. Marino relies on these provisions. To simplify his position, Mr. Marino paid tuition to universities in the US in respect of 2002 to 2011, that tuition entitled him to a tuition tax credit in each of 2002 to 2011, he was unable to use that credit in computing his tax payable under Part I of the Act in those years, he did not transfer the credits to a designated individual in any of those years, and accordingly he has unused tuition tax credits available to him in 2012.
III. ISSUES IN DISPUTE
[9] The parties filed an Agreed Statement of Facts. [11] No other evidence was tendered at the appeal. This appeal turns purely on a question of law: was Mr. Marino entitled to a tuition tax credit in each of 2002 to 2011 as a result of tuition paid to universities in the United States in those years, which credits result in Mr. Marino having an unused tuition tax credit balance at the end of 2011 that he is able to deduct in computing his tax payable in 2012 once he became resident in Canada.
[10] At the hearing, a second issue arose which might be described as procedural. Counsel for the Appellant sought to limit the arguments the Respondent could advance in support of the reassessment because of the manner in which the Reply was drafted. My reasons for disagreeing with Appellant’s counsel on this second issue follow my analysis of the main issue in dispute in this appeal: whether Mr. Marino is entitled to a tuition tax credit in each of 2002 to 2011.
IV. ISSUES NOT IN DISPUTE
[11] In addition to the facts agreed by the parties, the parties agree on several other matters relevant to this appeal.
[12] The parties agree that the 2012 taxation year, the taxation year in which Mr. Marino sought to apply the unused tuition tax credits, is the relevant taxation year for purposes of this appeal. In other words, notwithstanding that the Minister may have assessed and reassessed Mr. Marino’s tax returns for 2002 to 2011, and that those assessments and reassessments addressed unused tuition tax credits, the year in which the credits were sought to be applied to reduce tax payable is the only year properly the subject of appeal. [12]
[13] The parties also agree that the only part of section 118.5 that potentially applies to Mr. Marino is paragraph 118.5(1)(b). [13] It provides that where an individual was a student in full-time attendance at a university outside Canada in a course leading to a degree at any time during a taxation year, in computing tax payable by that individual for that taxation year, the individual may deduct a portion of the tuition paid to the university in respect of the year. [14] The parties agree that Mr. Marino was a student in full-time attendance at a university outside Canada in a course leading to a degree in each of 2002 to 2011.
[14] Finally, the parties agree that subsection 118.5(1), which deals with tuition tax credits in a particular taxation year, and section 118.61, which describes the computation of and use of unused tuition tax credits, may apply to non-residents.
V. POSITIONS OF THE PARTIES
[15] The disagreement in this case relates to whether subsection 118.5(1) and section 118.61 apply to all non-residents (the Appellant’s position) or only to those non-residents who are taxpayers in the years for which tuition is paid and for whom that year is a taxation year – in other words those non-residents who are subject to Part I of the Act in the year for which the tuition is paid (the Respondent’s position).
[16] The Respondent’s position is that where a non-resident individual is not required to file an income tax return under Part I of the Act for a particular year, because that individual was not employed in Canada, did not carry on business in Canada, and did not dispose of taxable Canadian property, that individual is not a taxpayer for purposes of the Act, and that year is not a taxation year of that individual. Moreover, such an individual is neither required nor able to compute tax payable under Part I. Therefore, the Respondent submits, even where the individual pays tuition to an eligible education institution for that year, such an individual has no tuition tax credit for that year under section 118.5 and no unused tuition tax credits at the end of that year under section 118.61 to carry forward.
[17] In other words, putting that in the context of Mr. Marino, because Mr. Marino did not earn income in Canada in any of 2002 to 2011, [15] none of 2002 to 2011 is a taxation year for Mr. Marino and filing a return for those years is not sufficient to constitute him a taxpayer. Therefore, Mr. Marino cannot compute tax payable under Part I of the Act for any of those years, and has no amount under section 118.5 for those years. If he has no amount under section 118.5 for those years, he has no amount to add to his unused tuition tax credit in any of those years and has no unused tuition tax credit balance at the end of 2011. To support this position, the Respondent relies heavily on Oceanspan Carriers Limited v. Canada. [16]
[18] Mr. Marino’s position is that each of 2002 to 2011 is a taxation year, the tuition tax credit provisions do not require him to be a taxpayer and the text, context and purpose of the legislation support his position that he had an unused tuition tax credit in each of 2002 to 2011, and a balance of unused tuition tax credits at the end of 2011. That balance is deductible by him in computing his tax payable in 2012 (and future taxation years) pursuant to section 118.61 of the Act. Nothing in the Act bars him from accumulating the credits and deducting them in 2012.
[19] Mr. Marino’s position is that he did not need to be a taxpayer in 2002 to 2011 because section 118.5 refers to an individual, not a taxpayer. Furthermore, he argues that, notwithstanding Oceanspan, each of 2002 to 2011 are taxation years for him by virtue of section 250.1. Counsel for Mr. Marino suggests that section 250.1 deems a non-resident person to have a taxation year and thus, he submits, each of 2002 to 2011 are taxation years for Mr. Marino even if he was not then a taxpayer. Accordingly, Mr. Marino meets the requirements of section 118.5 in each of 2002 to 2011. Mr. Marino has unused tuition tax credits at the end of each of 2002 to 2011, and those unused tuition tax credits are added in computing his unused tuition tax credits at the end of each of those years so that he has unused tuition tax credits at the end of 2011. Mr. Marino may use part of his unused tuition tax credits to reduce his tax payable in 2012, when he is subject to Canadian income tax.
[20] Mr. Marino asserts that no provision in the Act precludes him from accruing tuition tax credits when he is non-resident or from deducting the unused tuition tax credits in 2012. He suggests that sections 118.5 and 118.61, interpreted textually, contextually and purposively, support his position.
VI. PRINCIPLES OF STATUTORY INTERPRETATION
[21] In this case there is no dispute regarding the facts. Rather, this appeal turns on the interpretation of the relevant statutory provisions, subsections 118.5(1) and 118.61(1). As noted, the parties disagree on the meaning to be given to these provisions.
[22] There is no doubt that the provisions in the Act must be interpreted using the textual, contextual and purposive principle described by the Supreme Court of Canada in Canada Trustco Mortgage Co. v. Canada [17] as follows:
It has been long established as a matter of statutory interpretation that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: see 65302 British Columbia Ltd. v. Canada, [1999] 3 S.C.R. 804, at para. 50. The interpretation of a statutory provision must be made according to a textual, contextual and purposive analysis to find a meaning that is harmonious with the Act as a whole. When the words of a provision are precise and unequivocal, the ordinary meaning of the words play [sic] a dominant role in the interpretive process. On the other hand, where the words can support more than one reasonable meaning, the ordinary meaning of the words plays a lesser role. The relative effects of ordinary meaning, context and purpose on the interpretive process may vary, but in all cases the court must seek to read the provisions of an Act as a harmonious whole. [18]
[Emphasis added.]
[23] Thus, the language of a statutory provision is to be interpreted alongside its context and legislative purpose. [19] Where the words used are capable of more than one meaning, the ordinary meaning of the words, while relevant, will play a lesser role in the interpretive process than the context and purpose of the statutory provisions. The context includes not only the surrounding language (i.e., the language of the specific provision) but also the broader context of the related provisions and the Act as a whole.
VII. STATUTORY LANGUAGE TO BE INTERPRETED
[24] Subsection 118.5(1) provides in part as follows:
Subject to subsection (1.2), for the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted,
Subsection 118.61(1) provides in part as follows:
In this section, an individual’s unused tuition, textbook and education tax credits at the end of a taxation year is the amount determined by the formula A + (B-C) – (D+E)
where
A. is the amount determined under this subsection in respect of the individual at the end of the preceding taxation year;
B. is the total of all amounts each of which may be deducted under section 188.5 or 118.6 in computing the individual’s tax payable under this Part for the year; . . .
[25] Two terms used in these provisions that the parties focused on were "taxation year” and “individual”.
(a) Taxation Year: Can Mr. Marino have a taxation year in a period when he is a non-resident who is not subject to Part I?
[26] Subsection 118.5(1) is concerned with an individual who is enrolled at an educational institution during a taxation year and has paid tuition in respect of that taxation year. [20] Because “taxation year” is defined in the Act, [21] the statutory meaning must be used. In the context of an individual, in 2002 to 2012 the definition read as follows:
In this Act, except as expressly otherwise provided, a “taxation year” is
. . .
(b) in the case of an individual (other than a testamentary trust), a calendar year.
[27] Taxpayer is defined as including any person whether or not liable to pay tax. [22]
[28] Read literally, then, one might argue that Mr. Marino is a taxpayer and that each of 2002 to 2011 is a calendar year and so a taxation year for him.
[29] However, in Oceanspan, the Court determined that a non-resident with no source of income in Canada, was not a “taxpayer” and therefore did not have a taxation year. In asserting that Mr. Marino does not have a taxation year, and so is not within subsection 118.5(1), the Respondent relies on Oceanspan.
[30] Oceanspan bears some similarity to this appeal. The appellant corporation sought to deduct non-capital losses incurred before it became a resident of Canada, and during a period when it carried on no business in Canada. The appellant corporation argued that non-capital losses incurred before it became resident in Canada were deductible against income it earned after it became resident, because although not taxable in Canada before it became resident, in those years it nonetheless was a taxpayer as defined in the Act which had a taxation year. Taxpayer was defined in the Act then, as it is now, as any person whether or not liable to pay tax. [23] In the case of a corporation, taxation year was defined in the Act then, as it is now: a taxation year in the case of a corporation is a fiscal period. The appellant corporation argued it had a taxation year because it had a fiscal period, and it was a taxpayer notwithstanding that it was not liable to pay tax in Canada.
[31] The Federal Court (Appeals Division) disagreed, concluding that the appellant corporation was not a taxpayer and therefore could not have a taxation year. Because it had no income derived from Canadian sources in those years, it was not required to compute its taxable income, and was not “liable to pay tax in Canada”. [24] Urie, J. went on to state the following:
. . .The definition of “taxpayer”, properly understood in its context in the whole of the scheme of the Act, shows, indisputably in my view, that it refers to resident individuals or corporations who may be liable to pay tax at some time whether or not they are, at any given time, liable therefor. A non-resident without income from Canadian sources can never be liable to pay tax under the Act on its foreign income. It is not, therefore, a corporation contemplated by the definition of “taxpayer” in the Act. By the same token, as a non-resident corporation, any losses which it may have incurred as a result of its business activities outside of Canada are irrelevant under the Act . . .
I find further support for this view in the following. Until it becomes a “taxpayer” a non-resident corporation does not have “[f]or purpose of this Act”, a “taxation year” within the meaning of paragraph 249(1)(a) of the Act, supra. When it becomes a resident, the Act becomes applicable to it because it becomes liable to pay tax. It is then that it becomes a “taxpayer” by definition. Before that, that term had no application to it. Consequently, until then, the definition of “taxation year” was inapplicable to it.
. . . a non-resident not carrying on business in Canada cannot have a taxation year for Canadian tax purposes. I fail to understand how it can be given one retroactively. The appellant’s contention, thus, cannot withstand analysis. [25]
[Emphasis added.]
[32] Put simply, counsel for the Respondent argues that none of 2002 to 2011, the only years in respect of which Mr. Marino paid tuition, were taxation years for Mr. Marino. Because an individual may have an amount described in paragraph 118.5(1)(b) only where the individual has paid tuition in respect of a taxation year, Mr. Marino has no unused tuition tax credits to carry forward from any of 2002 to 2011.
[33] In contrast, counsel for Mr. Marino submits that section 250.1 has expanded the definition of taxation year and deems a non-resident to have a taxation year. Thus, he submits, section 250.1 overrules Oceanspan insofar as that case stands for the proposition that a year in which a non-resident is neither liable nor potentially liable to tax in Canada is not a taxation year. Accordingly, each of 2002 to 2011 is a taxation year for Mr. Marino, notwithstanding that he was not a resident of Canada and had no income earned in or taxable income earned in Canada in any of those years.
[34] Section 250.1, added to the Act with effect from December 17, 1999, states:
For greater certainty, unless the context requires otherwise,
a) a taxation year of a non-resident person shall be determined, except as otherwise permitted by the Minister, in the same manner as the taxation year of a person resident in Canada; and
b) a person for whom income for a taxation year is determined in accordance with the Act includes a non-resident person.
[Emphasis added.]
[35] I do not agree that section 250.1 has the effect of deeming every non-resident person to have a taxation year. First, the provision does not deem a taxation year to exist. When Parliament wishes to deem something in the Act, it uses that language, [26] including in the context of the meaning of “taxation year.” For example, the Act deems a taxation year of a corporation to end where a corporation becomes or ceases to be a Canadian-controlled private corporation, [27] or becomes or ceases to be resident in Canada. [28] The Act deems the taxation year of a corporation to end on the last day of a calendar year if the corporation would not otherwise have a taxation year in a calendar year because its fiscal period exceeds 365 days. [29] An individual is deemed to have a taxation year that ends immediately before the day the individual became a bankrupt. [30]
[36] Secondly, section 250.1 does not say what Mr. Marino suggests it means; that is, it does not say that “every non-resident person has a taxation year which shall be determined”, language that might suggest universal application to non-residents. It says “a taxation year of a non-resident shall be determined”.
[37] So what is the meaning and purpose of that language? In my view, the language used conveys the limits of the provision’s application. When a taxation year of a non-resident must be identified for some reason mandated by the Act, but that non-resident would otherwise not have a taxation year by virtue of the Oceanspan principle, paragraph 250.1(a) tells us how to determine what that taxation year is for that purpose.
[38] If the non-resident is liable to Canadian tax in the year, the rules in the Act dealing with taxation years apply and section 250.1 serves no purpose. In other words, paragraph 250.1(a) applies only to those non-residents for whom a taxation year must be identified for a purpose mandated by the Act (including for the purpose identified in paragraph 250.1(b)) but who are not taxpayers and therefore would not otherwise have a taxation year for purposes of the Act. It applies where a non-resident must have a taxation year if a provision of the Act is to operate as it is intended to operate, including in respect of another taxpayer. It does not operate to give every non-resident a taxation year thereby allowing every non‑resident to bring themselves within the scope of the Act.
[39] A good example of when section 250.1 operates is subsection 104(13). [31] It provides that in computing income for a taxation year a beneficiary of a trust must include that portion of the trust’s income for the trust’s taxation year that ends in the beneficiary’s taxation year. This provision may apply to a resident beneficiary of a non-resident trust. Under the Act, income is computed for a taxation year. However, but for section 250.1, the taxation year of a non-resident trust that is not a taxpayer (because it does not carry on business in Canada and does not dispose of taxable Canadian property) would be unclear. Yet, identifying a taxation year for the non-resident trust is necessary in order to compute its income, a mandatory step to be taken in the determination of the amount to be added to the resident beneficiary’s income.
[40] But I do not agree that section 250.1 gives every non-resident a taxation year merely so any provision of the Act can apply to that non-resident. Thus, while a non-resident must have a taxation year to be within section 118.5, nothing in section 118.5 requires that it apply to a non-resident who does not otherwise have a taxation year. Section 250.1 does not in my view fill that gap to bring every non-resident within section 118.5.
[41] In conclusion, because section 118.5 requires an individual to be a student during a taxation year and for tuition to have been paid in respect of that taxation year, a student is not entitled to a tuition tax credit in any year that is not a taxation year. I agree with counsel for the Respondent that because Mr. Marino was not a taxpayer under the Oceanspan interpretation of that term in any of 2002 to 2011, none of those years was a taxation year for him. Accordingly, section 118.5 does not apply to him in any of 2002 to 2011. Because Mr. Marino had no tuition tax credits in any of 2002 to 2011, he had no unused tuition tax credits at the end of 2011 available for deduction in computing his tax payable in 2012. This is sufficient to dismiss the appeal.
(b) Individual: Is Mr. Marino an individual within the meaning of subsection 118.5(1)?
[42] However, even if my conclusion regarding the scope and effect of section 250.1 is incorrect, and each of 2002 to 2011 is a taxation year of Mr. Marino, I nonetheless would dismiss the appeal. Applying the principles of statutory interpretation, section 118.5 does not apply to any non-resident individual, but rather is limited to (resident or) non-resident individuals who are potentially liable to Canadian tax in the taxation year (i.e., are taxpayers within the Oceanspan meaning of that term in the relevant year). Let me explain my reasons for that conclusion.
[43] Let’s assume for purposes of this analysis that by virtue of section 250.1 each of 2002 to 2011 is a taxation year of Mr. Marino. Mr. Marino then argues that because the preamble of subsection 118.5(1) uses the term “individual”, rather than taxpayer, that provision applies to him in each of 2002 to 2011 so that he has a tuition tax credit in each of 2002 to 2011. Moreover, Mr. Marino argues, section 118.61 refers to an individual’s unused tuition tax credits so Mr. Marino, as an individual, has unused tuition tax credits at the end of 2011, being the total of the credits accumulated in 2002 to 2011.
[44] In my view, the reference to an “individual” rather than a “taxpayer” in sections 118.5 and 118.61 does not mean that the tuition tax credit is available to any individual who otherwise meets the relevant conditions (e.g., type of post-secondary institution and nature of the program).
[45] Where the application of a provision is limited to a particular kind of taxpayer that is readily identified by another term (individual, trust, or corporation), the choice to use that other term may reflect nothing more than what might be termed sensible drafting; the limited application of the provision is evident from the use of a more specific term. The Act is replete with provisions that do not use the term taxpayer, but clearly apply and are relevant only to taxpayers. This is in part due to the structure or architecture of the Act.
[46] In the case of section 118.5, it is found in subdivision a of Division E of Part I. The title of Division E is “Computation of Tax” and the title of subdivision a is “Rules Applicable to Individuals”. [32] Not surprisingly, the provisions in that subdivision use the term individual rather than taxpayer. Similarly, the provisions in subdivision b, titled “Rules Applicable to Corporations,” use corporation rather than taxpayer. In contrast, in subdivision c, titled “Rules Applicable to All Taxpayers” the term taxpayer tends to be used. The context in which the word is used is important.
[47] Moreover, the meaning to be given to the word “individual” as it is used in subsection 118.5(1) must be determined by considering the purpose for which it is used and the surrounding language. The first question to be asked is whether the word “individual” in these provisions has any ambiguity. Must it mean any individual or might it mean only a subset of individuals? In considering this question my first observation is that “individual” is not used as the subject of section 118.5. Subsection 118.5(1) does not say, for example, “an individual has a tuition tax credit” or even “the tuition tax credit of an individual at the end of a taxation year is.” [33] Rather the word individual is used to modify the purpose for which subsection 118.5(1) is applicable.
[48] Subsection 118.5(1) applies for one purpose only: “for the purpose of computing the tax payable by an individual for a taxation year.” This expression of purpose is key; in my view, it informs the meaning to be given to “individual” in subsection 118.5(1). Which individuals is subsection 118.5(1) concerned with? Not all individuals; only those individuals who are captured by Part I of the Act in the taxation year and thus are capable of computing tax payable under Part I for the taxation year. [34]
[49] Division A of Part I of the Act identifies who is required to compute tax payable; it describes the universe of persons who are potentially liable to pay tax under Part I.
[50] Subsection 2(1) provides that income tax shall be paid on the taxable income for each taxation year of every person resident in Canada at any time in the year. Thus, every individual resident in Canada at any time in the year is potentially liable to pay income tax and so must compute his or her tax payable under Part I. [35] He or she is an individual to whom the Act applies every year.
[51] Subsection 2(3) states that where a person not taxable under subsection 2(1) for a taxation year, was employed in Canada, carried on business in Canada or disposed of taxable Canadian property at any time in the year or in a prior year, an income tax shall be paid on the person’s taxable income earned in Canada for the year determined in accordance with Division D. While subsection 2(3) does not expressly state it applies to non-residents, it is clear that it applies only to non‑residents because subsection 2(1) applies to every person resident in Canada. However, unlike subsection 2(1), which applies to every resident, subsection 2(3) applies to only a subset of non-residents: those who were employed in Canada, carried on business in Canada, or disposed of taxable Canadian property in the year or in a previous year. Only those non-residents are potentially liable to tax under Part I and only those non-residents may compute their tax payable under Part I. [36] Only those non-residents are persons to whom Part I of the Act applies in the relevant year.
[52] This analysis was applied in Oceanspan:
. . . it is necessary to revert to first principles as disclosed by the schemed of Divisions A to D inclusive, of the Act, the most basic of which is that both residents and non-residents are liable to pay tax on income earned from a source inside Canada. A non-resident who has no income from any source in Canada is not liable to pay tax in Canada. Both residents and non-residents who derive income from Canadian source are included, by definition, in the term “taxpayer”, whether liable to pay tax or not. Their income is computed in accordance with Division B. By virtue of subsection 2(2) to ascertain their “taxable income” they are entitled to deductions and exemptions referred to in the Division C. It is only at the conclusion of that exercise that it is determined whether or not they are “liable to pay tax”. It follows that a corporate non-resident which has no income derived from Canadian sources, is not required to compute its taxable income . . . and thus, has no need to utilize the deductions permitted by Division C . . . Such a corporation is not “liable to pay tax”. [37]
[53] In other words, a person will not be an individual for purposes of section 118.5 in a particular year unless that individual is a taxpayer in that year because the individual is described in subsection 2(1) or 2(3) and is potentially liable to tax in Canada under Part I. In simple terms, individual in section 118.5 means an individual who is a taxpayer because only a taxpayer computes tax payable under Part I.
[54] This view is reinforced by subsection 117(2), also found in subdivision a of Division E. It states:
The tax payable under this Part by an individual on the individual’s taxable income or taxable income earned in Canada, as the case may be (in this subdivision referred to as the “amount taxable”) for a taxation year is. . .
[55] This language identifies which individuals may have a “tax payable under Part I”. It is the same individuals identified by subsections 2(1) and 2(3): every individual resident in Canada in a taxation year computes tax payable on the individual’s taxable income in that year but only those non-resident individuals who were employed in Canada, carried on business in Canada or disposed of taxable Canadian property in a year compute tax payable on their taxable income earned in Canada for the year. In other words, unless a non-resident individual is described in subsection 2(3), none of Part I applies to the individual. That individual has nothing to compute under subsection 117(2).
[56] For the above reasons, the only individuals who potentially qualify for a tuition tax credit in a particular year are those individuals who are subject to Part I in the year – that is, individuals who are resident in Canada or who are obliged to determine their taxable income earned in Canada under Division D because subsection 2(3) requires them to do so. Only those individuals compute their tax payable under Part I by virtue of subsection 117(2) and so only those individuals may be eligible to deduct an amount under subsection 118.5(1). [38]
[57] Thus, regardless of whether section 250.1 has the effect of treating 2002 to 2011 as taxation years for Mr. Marino, in my view subsection 118.5(1) nonetheless does not apply to him in any of those years. A non-resident individual will be an individual to whom subsection 118.5(1) may apply in a taxation year only where that individual is an individual described in subsection 2(3) (i.e., is a taxpayer) in that year. Mr. Marino was not such an individual in any of 2002 to 2011.
(c) “Taxation year” and “individual” in the context of subsection 118.61(1)
[58] Where a tuition tax credit is not deductible in the year it arises, it may be carried forward and deducted in a future taxation year. Subsection 118.61(1) describes an individual’s unused tuition tax credits at the end of a taxation year. Mr. Marino asserts this provision gives him unused tuition tax credits at the end of 2011 that he may carry forward and deduct in computing his tax payable in the 2012 taxation year when he was resident in Canada.
[59] In the preamble of subsection 118.61(1), “individual” modifies the phrase “unused tuition tax credits at the end of a taxation year.” At first blush, this may suggest any individual who has a taxation year may have an unused tuition tax credits balance at the end of that year. But, read in context, it is clear that is not the case.
[60] An individual’s unused tuition tax credits are computed only at the end of a taxation year and according to a formula: A + (B-C) - (D + E). In simple terms, an individual’s unused tuition tax credits at the end of a particular taxation year are the unused tuition tax credits at the end of the preceding taxation year, increased by the individual’s tuition tax credit for the particular taxation year, and decreased by the total of the tuition tax credits deducted by the individual in the particular taxation year or transferred in that year by the individual to a designated person.
[61] The formula for computing an individual’s unused tuition tax credits provides that the maximum amount that may be added to increase an individual’s unused tuition tax credits at the end of a particular taxation year is:
B the total of all amounts each of which may be deducted under section 118.5 or 118.6 in computing the individual’s tax payable under this Part [Part I] for the year.
[62] The year referred to in B is the particular taxation year. Mr. Marino argues he is able to add an amount in accordance with B for each of 2002 to 2011 because they are taxation years and section 118.5 applied to him in each of those years.
[63] I have already concluded that none of 2002 to 2011 were taxation years for Mr. Marino. But, even if they were, for the reasons I have already given, section 118.5 did not apply to Mr. Marino in any of 2002 to 2011. The amount added to an individual’s unused tuition tax credit in a particular taxation year is entirely dependent on an amount being computed under section 118.5 for that year for that individual. But, Mr. Marino had no such amounts in those years and so no amount for B in the formula for any of those years.
VIII. CONTEXT: OTHER RELATED PROVISIONS OF THE ACT
[64] In coming to my view of the proper interpretation to be placed on sections 118.5 and 118.61 as they apply to Mr. Marino, and to determine whether my interpretation is consistent with the principles of statutory interpretation, I also have considered related provisions. Although many of these provisions do not apply to Mr. Marino, they are relevant to the textual, contextual and purposive analysis of the tuition tax credit provisions that Mr. Marino seeks to rely on. For the reasons described below, in my view those provisions support my conclusion.
(a) Section 118.94
[65] Section 118.94 precludes non-resident individuals from claiming certain tax credits provided by the Act unless all or substantially all of their income for the year is included in computing their taxable income earned in Canada. Counsel for Mr. Marino points out that section 118.94 does not refer to sections 118.5 or 118.61 and accordingly does not limit Mr. Marino’s ability to claim the credits.
[66] In particular, he argues that the limitations on the credit for tuition paid to foreign institutions together with the exclusion of section 118.5 from section 118.94 indicate that Parliament chose to permit non-residents, in Mr. Marino’s circumstances, to accumulate credits and carry them forward until such time as they have Canadian source income. As I understood this argument, neither paragraph 118.5(1)(a) nor (c) could apply to a non-resident [39] so that extending the most restrictive tuition tax credit provision (i.e., paragraph 118.5(1)(b)) to non-residents is consistent with what counsel describes as Parliament’s choice to permit non-residents who have no connection to Canada in the tuition year to earn and carry forward tuition tax credits until such time if, as and when they become resident in Canada and have income earned in Canada.
[67] I agree that paragraph 118.5(1)(b) is the most restrictive of the tuition tax credit provisions: it is available only where the foreign institution is a university; only when the course leads to a degree; only where attendance is full-time and, in the years relevant to this appeal, only where the course was at least 13 consecutive weeks in duration. But, with respect, I do not see anything in the language that supports his position. Paragraph 118.5(1)(b) applies to residents, so the restrictions are not limited to non-residents. Secondly, paragraph 118(1)(a) is not exclusively available to residents of Canada. That is, nothing precludes a non-resident individual who attends an educational institution in Canada in that year from claiming the tuition tax credit made available under paragraph 118.5(1)(a) if the non-resident meets the qualifications for that credit and is an individual described in subsection 2(3) in the relevant year. [40]
[68] Interestingly, when section 118.94 was first enacted, it applied to the tuition tax credit but that changed effective with the date that section 118.94 came into force. That history is worth reviewing.
[69] Before the tax reform that occurred in 1987-1988, tuition paid to a post-secondary institution was deductible in computing income. The relevant provisions were found in section 60 of the Act, in subdivision e of Division B of Part I. Paragraph 60(1)(e) of the pre-1988 Act was concerned with tuition paid to universities outside Canada – and so corresponds to paragraph 118.5(1)(b). Paragraph 60(1)(f) of the pre-1988 Act was concerned with tuition paid to Canadian post-secondary institutions – and so corresponds to paragraph 118.5(1)(a). Paragraph 60(1)(g) was concerned with persons deemed resident in Canada – and so corresponds to paragraph 118.5(1)(c).
[70] Non-residents who are (potentially if not actually) liable to tax under Part I of the Act must compute their taxable income ea