Chabaud c. La Reine

Chabaud c. La Reine
Court (s) Database
Tax Court of Canada Judgments
Date
2011-09-20
Neutral citation
2011 TCC 438
File numbers
2010-3488(IT)I
Judges and Taxing Officers
Pierre Archambault
Subjects
Income Tax Act
Decision Content
Docket: 2010-3488(IT)I
BETWEEN:
Stéphane Chabaud,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
____________________________________________________________________
Appeal heard on May 18, 2011, at Quebec City, Quebec.
Before: The Honourable Justice Pierre Archambault
Appearances:
For the appellant:
The appellant himself
Counsel for the respondent:
Anne-Marie Boutin
___________________________________________________________________
JUDGMENT
The appeal from the reassessment made pursuant to the Income Tax Act for the 2008 taxation year is dismissed.
Signed at Ottawa, Canada, this 20th day of September 2011.
"Pierre Archambault"
Archambault J.
Translation certified true
on this 26th day of January 2012.
Erich Klein, Revisor
Citation 2011 TCC 438
Date: 20110920
Docket: 2010-3488(IT)I
BETWEEN:
Stéphane Chabaud,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Archambault J.
Staff, student or employee? The employment status of Canadian postdoctoral researchers remains unclear – many are struggling with the tax issues that arise from the ambiguity.[1]
[1] This citation partially summarizes the issue raised by the appeal of Stéphane Chabaud, Ph.D. A more complete way to state it is: Do the amounts Mr. Chabaud received as a postdoctoral fellow constitute salary, a bursary, scholarship or fellowship, or a research grant? If they are a bursary, scholarship or fellowship, do they give rise to the exemption provided for in paragraph 56(3)(a) of the Income Tax Act (Act)?
[2] The answer to these questions could have serious repercussions on the funding of university research.[2] Exceptionally, counsel for the respondent asked that the reasons for my decision be transmitted in writing since there are a number of cases of the same nature that are awaiting the result of this appeal. According to counsel for the respondent, it is the Court's first opportunity to consider the application of the paragraph 56(3)(a) exemption to postdoctoral fellows. Although, from a strictly legal standpoint, these reasons do not constitute a precedent since this is an appeal under the informal procedure,[3] I hope they may enlighten the tax authorities and Canadian taxpayers and contribute to the debate on the touchy issue raised by this appeal.
[3] Mr. Chabaud is appealing from an assessment made by the Minister of National Revenue (Minister) for the 2008 taxation year. The Minister added $36,101 to Mr. Chabaud's income as a bursary pursuant to paragraph 56(1)(n) of the Act. This amount represents the excess of the $36,601 Mr. Chabaud received over the amount of $500, as provided in that paragraph. At the hearing, the respondent indicated that she was amending the basis of the assessment, asserting that the entire amount of $36,601 should have been included in Mr. Chabaud's income as a research grant pursuant to paragraph 56(1)(o) of the Act. Although this provision does not provide for a $500 deduction, the respondent recognizes that the Court does not have the power to increase the tax established in the assessment. As a result, the amount that could be included in Mr. Chabaud's income cannot exceed $36,101. Alternatively, the respondent stated that if paragraph 56(1)(o) did not apply, she would again rely on paragraph 56(1)(n), and she argued that Mr. Chabaud was not entitled to the bursary exemption because he was not eligible for the education tax credit, notably because he was not a student and was not enrolled in any educational program.
[4] At the beginning of the hearing, I raised the possibility that the $36,601 might be considered as employment income under section 5 of the Act since the Minister had assumed as a fact that Mr. Chabaud had received $36,601 for his research work at the Laboratoire d’organogenèse expérimentale (Experimental Organogenesis Laboratory) (LOEX) at the Centre hospitalier affilié universitaire de Québec (CHA) research centre and that his research was done under the supervision of a researcher at that laboratory. Counsel for the respondent asked permission to provide written submissions regarding the application of section 5 of the Act, and I agreed. I also allowed Mr. Chabaud to provide his own written submissions in reply to those presented by counsel for the respondent.
[5] Mr. Chabaud considers himself a student even though he has a doctoral degree, and he believes that the work he performed for a period of around five years was university training. Moreover, the money he received was, in his opinion, a bursary or fellowship entitling him to the exemption provided for in paragraph 56(3)(a) of the Act.
[6] In making the assessment, the Minister relied on the following assumptions of fact set out in paragraph 6 of the Reply to the Notice of Appeal:
[translation]
6. In determining the tax payable by the appellant, the Minster relied on the following assumptions of fact:
(a) in 2005, the appellant obtained a doctoral degree in molecular biology from the Université de Montréal;
(b) in October 2005, the Laboratoire d’organogenèse expérimentale at the Centre hospitalier affilié universitaire de Québec research centre (LOEX) offered the appellant a position as postdoctoral researcher;
(c) during the taxation year in question, the appellant held this position of researcher at LOEX;
(d) during the taxation year in question, the appellant's research was related to cellular and molecular biology and was conducted under the supervision of Véronique Moulin, who was a professor at the surgical department of the Faculty of Medicine at the Université Laval and a researcher at LOEX;
(e) during the taxation year in question, to conduct her research, Véronique Moulin received "operating grants" from the Canadian Institutes of Health Research (CIHR);
(f) for his research work at LOEX during the taxation year in question, the appellant received a total of $36,601;
(g) this $36,601 came from the "operating grants" mentioned above.
[Emphasis added.]
[7] Mr. Chabaud admitted all these facts, with the following exceptions: regarding subparagraph (a), he stated that he earned his diploma in November 2004, not in 2005; regarding subparagraph (b), he described his position as that of a postdoctoral fellow rather than a researcher, which applies as well to subparagraph (c); finally, regarding subparagraph (f), Mr. Chabaud denies he received the amount of $36,601 for his research work.
[8] First, it would be useful to reproduce the English and French versions of the relevant provisions of the Act:
56(1)
Scholarships, bursaries, etc.
(n) the amount, if any, by which
(i) the total of all amounts (other than amounts described in paragraph 56(1)(q), amounts received in the course of business, and amounts received in respect of, in the course of or by virtue of an office or employment) received by the taxpayer in the year, each of which is an amount received by the taxpayer as or on account of a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer, other than a prescribed prize,
exceeds
(ii) the taxpayer’s scholarship exemption for the year computed under subsection (3);
. . .
Research grants
(o) the amount, if any, by which any grant received by the taxpayer in the year to enable the taxpayer to carry on research or any similar work exceeds the total of expenses incurred by the taxpayer in the year for the purpose of carrying on the work, other than
. . .
Exemption for scholarships, fellowships, bursaries and prizes
56(3) For the purpose of subparagraph (1)(n)(ii), a taxpayer’s scholarship exemption for a taxation year is the total of
(a) the total of all amounts each of which is the amount included under subparagraph (1)(n)(i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship or bursary received in connection with the taxpayer’s enrolment
(i) in an educational program in respect of which an amount may be deducted under subsection 118.6(2) in computing the taxpayer’s tax payable under this Part for the taxation year, for the immediately preceding taxation year or for the following taxation year, or
(ii) in an elementary or secondary school educational program,
(b) the total of all amounts each of which is the lesser of
(i) the amount included under subparagraph (1)(n)(i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship, bursary or prize that is to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work, and
(ii) the total of all amounts each of which is an expense incurred by the taxpayer in the taxation year for the purpose of fulfilling the conditions under which the amount described in subparagraph (i) was received, other than
(A) personal or living expenses of the taxpayer (except expenses in respect of travel, meals and lodging incurred by the taxpayer in the course of fulfilling those conditions and while absent from the taxpayer’s usual place of residence for the period to which the scholarship, fellowship, bursary or prize, as the case may be, relates),
(B) expenses for which the taxpayer is entitled to be reimbursed, and
(C) expenses that are otherwise deductible in computing the taxpayer’s income, and
(c) the lesser of $500 and the amount by which the total described in subparagraph (1)(n)(i) for the taxation year exceeds the total of the amounts determined under paragraphs (a) and (b).
118.6. Definitions
(1) For the purposes of sections 63 and 64 and this subdivision,
“designated educational institution” means
(a) an educational institution in Canada that is
(i) 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 Higher Education and Science of the Province of Quebec for the purposes of An Act respecting financial assistance for students of the Province of Quebec, or
. . .
“qualifying educational program” means a program of not less than three consecutive weeks duration that provides that each student taking the program spend not less than ten hours per week on courses or work in the program and, in respect of a program at an institution described in the definition “designated educational institution” (other than an institution described in subparagraph (a)(ii) of that definition), that is a program at a post-secondary school level but, in relation to any particular student, does not include a program if the student receives, from a person with whom the student is dealing at arm's length, any allowance, benefit, grant or reimbursement for expenses in respect of the program other than
(a) an amount received by the student as or on account of a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the student,
(b) a benefit, if any, received by the student because of a loan made to the student in accordance with the requirements of the Canada Student Loans Act or An Act respecting financial assistance for education expenses, R.S.Q., c. A-13.3, or because of financial assistance given to the student in accordance with the requirements of the Canada Student Financial Assistance Act, or
(c) an amount that is received by the student in the year under a program referred to in subparagraph 56(1)(r)(ii) or (iii), a program established under the authority of the Department of Human Resources and Skills Development Act or a prescribed program;
“specified educational program” means a program that would be a qualifying educational program if the definition “qualifying educational program” were read without reference to the words “that provides that each student taking the program spend not less than 10 hours per week on courses or work in the program”.
Education credit
(2) There may be deducted in computing an individual's tax payable under this Part for a taxation year the amount determined by the formula
A × B
where
A is the appropriate percentage for the year; and
B is the total of the products obtained when
(a) $400 is multiplied by the number of months in the year during which the individual is enrolled in a qualifying educational program as a full-time student at a designated educational institution, and
(b) $120 is multiplied by the number of months in the year (other than months described in paragraph (a)), each of which is a month during which the individual is enrolled at a designated educational institution 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,
if the enrolment is proven by filing with the Minister a certificate in prescribed form issued by the designated educational institution and containing prescribed information and, in respect of a designated educational institution described in subparagraph (a)(ii) of the definition “designated educational institution” in subsection (1), the individual has attained the age of 16 years before the end of the year and is enrolled in the program to obtain skills for, or improve the individual's skills in, an occupation.
Income from office or employment
5. (1) Subject to this Part, a taxpayer’s income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year.
56(1)
Bourses d’études, de perfectionnement, etc.
n) l’excédent éventuel :
(i) du total des sommes (à l’exclusion des sommes visées à l’alinéa q), des sommes reçues dans le cours des activités d’une entreprise et des sommes reçues au titre, dans l’occupation ou en vertu d’une charge ou d’un emploi) reçues au cours de l’année par le contribuable à titre de bourse d’études, de bourse de perfectionnement (fellowship) ou de récompense couronnant une oeuvre remarquable réalisée dans son domaine d’activité habituel, à l’exclusion d’une récompense visée par règlement,
sur :
(ii) l’exemption pour bourses d’études du contribuable pour l’année, calculée selon le paragraphe (3);
. . .
Subventions de recherches
o) l’excédent éventuel de toute subvention reçue au cours de l’année par le contribuable pour la poursuite de recherches ou de tous travaux similaires sur le total des dépenses qu’il a engagées pendant l’année dans le but de poursuivre ces travaux, à l’exception :
. . .
Exemption pour bourses d’études, bourses de perfectionnement (fellowships) ou récompenses
56(3) Pour l’application du sous-alinéa (1)n)(ii), l’exemption pour bourses d’études d’un contribuable pour une année d’imposition correspond au total des sommes suivantes :
a) le total des sommes représentant chacune la somme incluse en application du sous-alinéa (1)n)(i) dans le calcul du revenu du contribuable pour l’année au titre d’une bourse d’études ou d’une bourse de perfectionnement (fellowship) reçue relativement à son inscription :
(i) soit à un programme d’études pour lequel une somme est déductible en application du paragraphe 118.6(2) dans le calcul de l’impôt à payer par le contribuable en vertu de la présente partie pour l’année, pour l’année d’imposition précédente ou pour l’année d’imposition subséquente,
(ii) soit à un programme d’études d’une école primaire ou secondaire;
b) le total des sommes représentant chacune la moins élevée des sommes suivantes :
i) la somme incluse en application du sous-alinéa (1)n)(i) dans le calcul du revenu du contribuable pour l’année au titre d’une bourse d’études, d’une bourse de perfection-nement (fellowship) ou d’une récompense dont il doit se servir dans la production d’une oeuvre littéraire, dramatique, musicale ou artistique,
(ii) le total des sommes représentant chacune une dépense engagée par le contribuable au cours de l’année en vue de remplir les conditions aux termes desquelles la somme visée au sous-alinéa (i) a été reçue, à l’exception des dépenses suivantes :
(A) ses frais personnels ou de subsistance, sauf ses frais de déplacement, de repas et de logement engagés en vue de remplir ces conditions, pendant qu’il était absent de son lieu de résidence habituel pour la période visée par la bourse d’études, la bourse de perfectionnement (fellowship) ou la récompense,
(B) les dépenses qu’il peut se faire rembourser,
(C) les dépenses déductibles par ailleurs dans le calcul de son revenu;
c) 500 $ ou, s’il est moins élevé, l’excédent du total visé au sous-alinéa (1)n)(i) pour l’année sur le total des sommes déterminées selon les alinéas a) et b).
118.6. Définitions
(1) Les définitions qui suivent s'appliquent aux articles 63 et 64 et à la présente sous-section.
« établissement d'enseignement agréé »
a) Un des établissements d'enseignement suivants situés au Canada:
(i) université, collège ou autre établissement d'enseignement agréé soit par le lieutenant-gouverneur en conseil d'une province au titre de la Loi fédérale sur les prêts aux étudiants, soit par une autorité compétente en application de la Loi fédérale sur l'aide financière aux étudiants, ou désigné par le ministre de l'Enseignement supérieur et de la Science de la province de Québec pour l'application de la Loi sur l'aide financière aux étudiants de cette province,
. . .
« programme de formation admissible » Programme d'une durée minimale de trois semaines consécutives, aux cours ou aux travaux duquel l'étudiant doit consacrer dix heures par semaine au moins et qui, s'il s'agit d'un programme d'un établissement visé à la définition de « établissement d'enseignement agréé » (sauf un établissement visé au sous-alinéa a)(ii) de cette définition), est de niveau postsecondaire, à l'exclusion du programme au titre des frais duquel l'étudiant reçoit d'une personne avec laquelle il n'a aucun lien de dépendance une allocation, un avantage, une subvention ou un remboursement, qui n'est :
a) ni une somme reçue au titre d'une bourse d'études, d'une bourse de perfectionnement (fellowship) ou d'une récompense couronnant une oeuvre remarquable réalisée dans son domaine d'activité habituel;
b) ni un avantage reçu en raison d'un prêt consenti à l'étudiant conformément à la Loi fédérale sur les prêts aux étudiants ou à la Loi sur l'aide financière aux études, L.R.Q., ch. A-13.3, ou en raison d'une aide financière consentie à l'étudiant conformément à la Loi fédérale sur l'aide financière aux étudiants;
c) ni une somme que l'étudiant reçoit au cours de l'année dans le cadre d'un programme mentionné aux sous-alinéas 56(1)r)(ii) ou (iii), d'un programme établi sous le régime de la Loi sur le ministère des Ressources humaines et du Développement des compétences ou d'un programme visé par règlement.
« programme de formation déterminé » Programme qui serait un programme de formation admissible s'il n'était pas tenu compte du passage « au cours ou aux travaux duquel l'étudiant doit consacrer 10 heures par semaine au moins » dans la définition de « programme de formation admissible ».
Crédit d'impôt pour études
(2) Le montant obtenu par la formule suivante est déductible dans le calcul de l'impôt payable par un particulier en vertu de la présente partie pour une année d'imposition:
A × B
où:
A représente le taux de base pour l'année;
B la somme des produits suivants:
a) 400 $ multipliés par le nombre de mois de l'année pendant lesquels le particulier est inscrit à un programme de formation admissible comme étudiant à temps plein d'un établissement d'enseignement agréé,
b) 120 $ multipliés par le nombre de mois de l'année (sauf ceux visés à l'alinéa a)) dont chacun est un mois pendant lequel le particulier est inscrit à un programme de formation déterminé d'un établissement d'enseignement agréé, aux cours duquel l'étudiant doit consacrer au moins 12 heures par mois.
Pour que le montant soit déductible, l'inscription du particulier doit être attestée par un certificat délivré par l'établissement — sur le formulaire prescrit contenant les renseignements prescrits — et présenté au ministre et, s'il s'agit d'un établissement d'enseignement agréé visé au sous-alinéa a)(ii) de la définition de cette expression au paragraphe (1), le particulier doit avoir atteint l'âge de 16 ans avant la fin de l'année et être inscrit au programme en vue d'acquérir ou d'améliorer sa compétence à exercer une activité professionnelle.
Revenu tiré d’une charge ou d’un emploi
5. (1) Sous réserve des autres dispositions de la présente partie, le revenu d’un contribuable, pour une année d’imposition, tiré d’une charge ou d’un emploi est le traitement, le salaire et toute autre rémunération, y compris les gratifications, que le contribuable a reçus au cours de l’année.
[Emphasis added.]
Historical evolution of the legislative provisions
[9] To properly understand the context in which the debate herein is taking place, it is useful to remind ourselves of the legislative evolution of the relevant provisions, namely, paragraph 56(1)(n) and subsection 56(3) of the Act.
[10] A first relevant amendment replaced the expression "bourse de recherches" used as the French equivalent of "fellowship" in paragraph 56(1)(n) with "bourse de perfectionnement" in 1979.[4] Another amendment is that described by Associate Chief Justice Rossiter in Dimaria:[5]
30 Paragraph 56(1)(n) of the Act states as follows:
. . .
(n) scholarships, bursaries, etc. -- the amount, if any, by which
(i) the total of all amounts (other than … amounts received in respect of, in the course of or by virtue of an office or employment) received by the taxpayer in the year, each of which is an amount received by the taxpayer as or on account of a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer (other than a prescribed prize),
. . .
32 The Supreme Court of Canada had occasion to consider the interplay between section 6 and paragraph 56(1)(n) in its 1986 [actually, 1983] decision, R. v. Savage. [6] Subparagraph 56(1)(n)(i) was amended to include the underlined portion in 1986, as a direct result of that decision.
[11] The technical interpretation[7] that supports this statement reads as follows:
Paragraph 56(1)(n) includes in the income of a taxpayer for a year certain scholarships, bursaries and prizes for achievement to the extent that the total of such amounts exceeds $500. Some employers give awards, prizes or similar payments to their employees in the course of their employment. Generally, these payments represent taxable benefits to the employee and are intended to be fully included in income. However, a recent court decision indicated that certain of these awards might qualify for the $500 exemption. This amendment, which applies to amounts received after May 23, 1985, clarifies that work-related and business-related awards, prizes and similar payments do not qualify for the $500 exemption.
[Emphasis added.]
[12] Subsection 56(3), which creates the bursary exemption, was added by S.C. 2001, c. 17, subs. 39(2), and applies to the 2000 and subsequent taxation years. Essentially, the exemption was increased from $500 to $3,000 for bursaries received for registration in an educational program for which an amount was deductible under subsection 118.6(2) in the calculation of tax payable.[8]
[13] As of 2006, the exemption became full (S.C. 2007, c. 2, subs. 6(3)). As of 2007, new conditions were added to improve the exemption (S.C. 2007, c. 35, subs. 17(1)). These conditions are not relevant for the purposes of the debate herein.
[14] In the Notice of Ways and Means Motion to Amend the Income Tax Act and Income Tax Regulations, dated March 4, 2010, the Minister of Finance announced certain measures to amend the bursaries exemption scheme and the education credit. In particular, the exemption would be limited to tuition fees and the cost of materials related to an educational program in the case of full-time students. However, the most relevant measure for the purposes of the issue raised by this case is that announced at paragraph 17, which states:
(17) That, for the 2010 and subsequent taxation years, a program at a post-secondary school level referred to in the definition "qualifying education program" in subsection 118.6(1) of the Act does not include a program that consists primarily of research, unless the program leads to a diploma from a college or a Collège d'enseignement général et professionnel (CEGEP), or a bachelor, masters or doctoral degree (or an equivalent degree).
[Emphasis added.]
[15] Clarifications are provided in the supplementary information found with the March 4, 2010, federal budget:
Budget 2010 proposes to clarify that a post-secondary program that consists principally of research will be eligible for the Education Tax Credit, and the scholarship exemption, only if it leads to a college or CEGEP diploma, or a bachelor, masters or doctoral degree (or an equivalent degree). Accordingly, post-doctoral fellowships will be taxable.
[Emphasis added.]
[16] In the House, the Minister of Finance repeated the government's position that this budgetary measure was not intended to change Canada's tax policy with respect to postdoctoral research fellowships:
40 :3 Hansard – 15 (2010/3/23)
(1440)
[English]
Hon. Jim Flaherty (Minister of Finance, CPC):
Mr. Speaker, there has been no change in the tax policy in Canada with respect to post-doctoral fellowships. It is exactly the tax policy that was followed by the Liberal government.
We made a big change several budgets ago and that is with regard to scholarships. Pure scholarships are not taxable in Canada. However as we know, post-doctoral fellows work. Just as the Liberal government recognized, they are going to be paid through the fellowships, $70,000 a year. As I said earlier, they should pay their fair share of taxes in Canada.
[Emphasis added.]
[17] On June 8, 2010, the Minister of Finance also wrote to the president of the Canadian Association of Postdoctoral Scholars, Marianne Stanford. In his letter, the Minister explained the government's position regarding its budgetary measure. He wrote in particular:
Unlike post-secondary students enrolled in courses and pursuing a degree or diploma, post-doctoral fellows can be compared to a number of other professionals, such as lawyers, medical residents and accountants, where there is a period of paid training at the beginning of their careers. Similar to those other professionals, the compensation received by post-doctoral fellows is taxable.
[Emphasis added.]
[18] The Minister of Finance also reminds Ms. Stanford of the tax policies the Canadian government adopted to fund science and technology initiatives. He notes, in particular, that between 2005 and 2010, the government provided $2.2 billion in funding for this purpose. He adds, at page 2 of his letter:
Budget 2010 continues this momentum by providing additional new funding in support of post-secondary education, research and innovation. Notably, $45 million over five years will be provided to the granting councils to establish and administer the Canada Postdoctoral Fellowships Program. When fully implemented, the program will annually fund 140 new taxable two-year post-doctoral fellowships valued at $ 70,000 each per year. Other support includes the following . . . .
[Emphasis added.]
[19] At the time of writing these reasons, the Act had not yet been amended to give effect to the March 4, 2010, Notice of Ways and Means setting out the measures to amend the bursary exemption and education tax credit scheme.
Administrative interpretation of the bursary exemption
[20] The Commissioner of the Canada Revenue Agency (CRA), William V. Baker, wrote to Danielle Morin and Louise Dandurand of the Conférence des recteurs et des principaux des universités du Québec (CREPUQ) on June 24, 2008, to inform them that the CRA did not consider postdoctoral fellows as students and that they should not be issued a T2202A. In his letter, he states, at pages 1, 2 and 3:
[TRANSLATION]
Dear Ms. Morin and Ms. Dandurand:
This is further to your May 15, 2008, letter regarding the taxation of certain amounts paid to postdoctoral fellows. You stated that some officers of the Canada Revenue Agency indicated that these amounts are taxable wages while other officers feel they are non-taxable bursaries. Moreover, you indicated that the status of fellow results in a T2202A Tuition, Education, and Textbook Amounts Certificate being issued. You note that Quebec's universities consider postdoctoral fellows at their institutions to be students in training and that they should be treated as such in tax matters. You asked us to determine whether postdoctoral fellows are students for the purposes of the Income Tax Act (the Act).
. . .
In regard to postdoctoral fellows' status as students, we feel that, when a postdoctoral fellow participates in an internship for the purpose of acquiring research expertise that is more specialized or complementary, the postdoctoral fellow is not a student for the purposes of the Act. No T2202A should be issued to a person who is not a student enrolled in an educational program covered by the Act. The fact that a postdoctoral fellow receives a bursary is not a determining factor regarding the relevance of issuing a T2202A.
[Emphasis added.]
[21] In his letter, the CRA Commissioner defines "scholarship", "fellowship", "research grant" and "salary" as follows:
[translation]
Scholarships are amounts granted to students to allow them to continue their studies. They usually help the student continue studies for the purpose of obtaining a university degree, diploma or certificate.
Fellowships are similar to scholarships, in that they are amounts granted to people to allow them to continue their studies. However, the recipient is usually a graduate student and the payor, a university, charitable organization or similar organization. Generally, fellowships are awarded for doctoral studies or for postdoctoral work.
An amount received as a fellowship is usually included as such in the recipient's income, but it can sometimes be included as a research grant. The treatment depends on the main purpose for granting the fellowship, determined based on the terms and conditions of the fellowship.
If the main purpose of the fellowship is for the recipient to continue his or her studies and training, for himself or herself, for example, if he or she is studying to obtain a doctoral degree, the bursary is included in income as a fellowship, even if the research is conducted in order to achieve this goal. However, if the main purpose of the fellowship is to conduct research for his or her own benefit, for example, to increase knowledge in a particular field by making a discovery or finding a new interpretation for known facts, the fellowship is a research grant for the purposes of the Act.
The amounts granted to postdoctoral fellows could also be considered salary if there is an employment relationship between the payor and the fellow. The issue of whether a relationship between two parties is an employment relationship remains a question of fact that depends on the analysis of the circumstances of each case. A number of factors must be considered to resolve this issue. One is to establish whether the person who was hired to perform the services does so as an employee or in some other capacity. The level of control the payor has over the worker's activities is also considered and the opportunity the worker has to profit from the performance of his or her duties. All other relevant factors must also be considered.[9]
[Emphasis added.]
Reaction from academia to the administrative interpretation and treatment of fellows in the education environment in Quebec
[22] Despite the position expressed by the CRA Commissioner, the members of CREPUQ decided to disregard it and to continue to issue T2202As. The members relied on opinions contrary to those of the CRA to justify their interpretation. In particular, this is what the Université Laval,[10] through its director of Financial Services and its dean of the Faculty of Graduate Studies, wrote to postdoctoral fellows on February 20, 2009 (Exhibit A-16):
[translation]
The Université Laval is hereby issuing the T2202A–Tuition, Education, and Textbook Amounts Certificate, for the months in 2008 during which you received postdoctoral training.
We consider it very important to let you know that this decision goes against the public position issued by the Legislative Policy and Regulatory Affairs Branch of the Canada Revenue Agency (hereinafter the CRA). According to the CRA, fellows receiving postdoctoral training are not students and therefore not eligible for this tax credit.
The Université Laval and the entire Quebec university network obtained opinions from their tax advisors that were contrary to that issued by the CRA. Moreover, the matter of student status for postdoctoral fellows has not yet been the subject of a decision by a tribunal competent in tax matters. There is therefore significant uncertainty regarding the issue.
Despite this controversy, Quebec universities have unanimously decided to issue the T2202A to their fellows in postdoctoral training. To ensure that its fellows are treated fairly, the Université Laval is conforming to the decision to issue the T2202A for 2008.
The Université Laval must remind you, however, that it is possible, should you use this form when filing your income tax return for 2008, that the tax authorities will make corrections to your tax return, in accordance with their public position. These corrections may lead to additional taxes and interest. Moreover, any challenge to the CRA decisions will have to be made by you personally.
[Emphasis added.]
[23] To improve the position of postdoctoral fellows, some institutions implemented additional measures. In particular, the following is what the Assistant to the Science Director and Director of Graduate Studies at the INRS wrote (Exhibit A‑11):
[translation]
The INRS is working on developing operating procedures for registering postdoctoral fellows that, we hope, may allow them to be considered students for tax purposes. In a few weeks, you will be informed of the simple procedures we will implement in order to improve the student records of postdoctoral fellows so they meet as fully as possible the definition of student for tax purposes. We will also inform you of the possible ways to proceed, regarding source deductions for 2009.
[Emphasis added.]
[24] Mr. Goutier, an official from the Ministère de l’Éducation, du Loisir et du Sport of Quebec (MEQ), gave his department's position on the status of postdoctoral fellows. He indicated that fellows are considered researchers in a university institution. They are neither employees[11] nor students. However, he recognized that, even if the fellows may not be considered university employees, there could still be a contract of employment, an employer-employee relationship between a university and a fellow. He justified this statement by noting that there is a service rendered, remuneration paid and a relationship of subordination between the university and the fellow. However, such a relationship does not exist when the postdoctoral fellow obtains a grant directly from a research institute. In such cases, the amount would be a bursary, not salary. He did mention, however, that the nature of the contractual relationship with the postdoctoral fellow was irrelevant for the MEQ's administrative purposes.
[25] In either case, the fellow is not considered a "student". This is true even if the holder of a doctoral degree can increase his or her knowledge by participating in postdoctoral training. For Mr. Goutier, a student is a person involved in university training that leads to a degree, which is not the case with postdoctoral fellows. The difference between a master's or doctoral student who participates in a research project and a fellow is that the student spends a significant amount of time on his or her thesis. Moreover, Mr. Goutier clearly stated that postdoctoral training is not considered a 4th level of university education.
[26] The MEQ adopted this approach in its administration of education in Quebec. Grants are based on the number of students registered in various programs. Since postdoctoral fellows are not considered students, they are not taken into consideration when setting the amount of the operating grants to Quebec's universities. However, for capital grants, that is, the amounts given to universities to fund maintenance and construction of the buildings they need, the postdoctoral fellows are taken into account, as are employees and students. This is why it is useful for the Université Laval to provide the number of postdoctoral fellows to the MEQ.
[27] Among his duties, Mr. Goutier is program secretary for the MEQ. At articles 183 to 186 of the Université Laval’s Règlement des études (Student Regulations) is a description of the three categories of students at the university (Exhibit I-7). They are: students registered in a program,[12] non-program students and auditors. Non-program students are those registered in one or more learning activities per session but not in a program; they are evaluated. Visiting students are non-program students. They are authorized to register in learning activities while still being registered at their home institution. Auditors are registered in one or more learning activities per session but are not entitled to evaluations.
[28] Under article 187 of the Student Regulations, a student is considered a full‑time student when registered in learning activities worth 12 credits or more per session, and a part-time student when registered in learning activities worth fewer than 12 credits per session. According to Mr. Goutier, postdoctoral fellows are not covered by these categories of students. Another witness, the registrar of the Université Laval, confirmed this interpretation: postdoctoral fellows are not included in the categories of students described at articles 183 to 186 of the Université Laval’s Student Regulations.
[29] The MEQ set up in 1992 a focus group, composed of six academics, that considered the issue of postdoctoral training. In October 1994, the group presented a report (Report on Postdoctoral Fellows) that summarized the consensus points, the issues to be resolved and the possible solutions regarding receiving postdoctoral fellows in Quebec. This is how postdoctoral training is defined at pages 1 and 2 of this report:
[translation]
2. Meaning of postdoctoral training
Postdoctoral training allows research expertise to be developed in a complementary or more specialized field. At the same time, it allows the evaluation of the fellow's ability to become an independent and high-level researcher. In many fields, without being a guarantee, postdoctoral training has become, in practice, a condition for obtaining a teaching position at a university or even a position as a researcher in some companies.
. . .
With particular regard to the natural and biomedical sciences, postdoctoral fellows are an integral part of the carrying out and development of research activities in universities. They provide a significant contribution to the development of knowledge and to the training of researchers. They contribute to the expansion of research teams’ influence and their presence stimulates the circulation of new ideas.
In light of this, postdoctoral fellows should be considered researchers whose employment status is temporary.[13]
[Em