Act favours border- town residents

Tax case invites Charter argument on validity of commuter test today

For

students in a financial crunch,

the concept of earning a degree online makes eminent sense. Although students of so- called “ distance learning” programs still have to come up with course fees and cost of books, most or all of their study can be done from home, sparing them the burden of covering room and board at or near the university or college campus.

But here is the financial downside. Although the Income Tax Act provides some relief for students who face high tuition fees, the Act has failed to keep pace with technology and does not generally permit tuition credits for distancecourses taken over the Internet, even if they are associated with accredited universities, colleges and programs.

Take, for example, a recent Tax Court of Canada case decision last month involving tuition fees paid to a U.S. institution — a case that may ultimately involve a fundamental challenge to the Canadian Charter of Rights and Freedoms.

The story began in 2002 when Theresa Yankson applied to the Bachelor of Midwifery program at the University of British Columbia, one of only three such programs in Canada.

That year, UBC’s midwifery program had space for only 15 new students and it received more than 300 applications. The other programs have similar acceptanceratios.

Ms. Yankson applied to both UBC and McMaster’s program, but was not accepted at either, so she applied and was accepted into a program at the Seattle Midwifery School ( also known as SMS) located in Washington state. Ms. Yankson, who lived in Calgary, began the program in 2003 and received a diploma in midwifery in February of this year.

The program at SMS is described as a “low-residency” or “distance-learning program,” requiring minimal physical attendance at the school in Seattle. Much of the academic work is to be done online, while taking part in practical clinical training opportunities with midwives and other heath- care providers in Alberta and British Columbia.

Originally, Ms. Yankson had to be in Seattle for five days a month, but as the course progressed her monthly required attendance in Seattle was reduced to two days a month. Other work and exams were completed online.

Under the Canada Tax Act, students can claim a tax credit for tuition fees paid to a university, college or other educational institution in Canada. However, if the university is outside Canada, the tuition fees only qualify if the student enrols in a full- time course leading to a degree.

Also, if a Canadian resides throughout the year in Canada “ near the boundary between Canada and the United States” and commutes to a U.S. educational institution, such tuition fees would also be eligible for credit, even if the program does not lead to a degree.

Since Ms. Yankson’s SMS midwifery program did not lead to a degree, but rather to a diploma, the only way she was going to be able to get tax relief for more than $18,000 of tuition fees paid was to qualify under the commuter test.

While the judge ruled Ms. Yankson did, indeed, “ commute” between Calgary and Seattle, since she did not reside near the Canada- United States border ( Calgary being at least 330 km away from the closest border crossing) her tuition credit claim must be denied.

The judge went on to invite Ms. Yankson to bring a Charter argument as to whether or not the Tax Act discriminates against students who do not live near the border. As the judge asked, “ Why should a person residing in Calgary, Saskatoon, Thompson, Sudbury or Chicoutimi not have the same tax advantage as someone in Vancouver or Windsor, Ont.?”

With the advent of computers and the Internet, physical attendance at a U. S. institution is no longer as important as it may have been when the commuter test was introduced back in 1972.

“ The importance of residing near the border, presumably to facilitate attendance at the educational institution is no longer valid.”

As the judge observed: “ The world has changed. Technology keeps on advancing. There are new ways of delivering education. In the meantime, many provisions of the Income Tax Act remain static, if not stagnant.”

The taxpayer has until the end of the month to file her Charter argument.