Are Medical Residents Engaged in Full-Time Study?
Kansasamy v The Queen, 2014 TCC 47
This was an appeal by persons who had graduated from a Medical Doctor (MD) program and were registered as Post-Graduate Medical residents in Ontario. They claimed the Educational and Textbook tax credits under subsection 118.6(1) of the ITA for the period of time they were medical residents. This claim was denied by the CRA.
This is one of a number of recent reassessments by the CRA that target the tax treatment of individuals who are involved in higher education and training as graduate students, post-graduates, and others of the like.
Chief Justice Rip delivered this well-reasoned decision. The details of the post-graduate residency program are not provided here but are available in the decision.
FACTS
The taxpayers graduated from an MD program, and were required to register in a post-graduate program in order to qualify to practice medicine in Ontario. These post-graduate residency programs are administered through Faculties or Schools o Medicine at Canadian Universities in conjunction with teaching hospitals affiliated with those universities. The residents pay registration fees but not tuitions to the university.
The residents work 50+ hours per week for 2-7 years under the supervision of senior physicians who are appointed by the university, and must participate in 2-4 hours of academic courses per month in addition to the clinical portion. They were issued T2202A Forms from the universities and claimed the educational and textbook tax credits under subsection 118.6(1) of the Income Tax Act. The MNR denied these credits on the basis that the taxpayers were not enrolled in a “qualifying educational program” as full-time students in a “designated educational institution”.
ANALYSIS
Rip C.J. referred to Paris J.’s decision in Pan et al v The Queen, 2010 TCC 147, where the appeal of medical residents denied the same tax credits was allowed. In this case, however, the MNR argued that the appellants were in a program “carried on by a hospital, not a university”, and that the residents “spent less than ten hours a week on courses and are not full-time students at a university”.
The TCC reviewed the evidence as to the programs structure and administration, and distinguished the case at bar from that of Chabaud v. The Queen, 2011 TCC 438, and Mayo Foundation for Medical Education and Research et al. v. United States, 131 S Ct 704 (2011). See also Rizak v MNR, 2013 TCC 273.
In allowing the appeal, the TCC noted:
- The ITA does not define “full-time student”;
- The definition of “Full-Time student” in the regulations of the Canada Student Loan Act and the Canada Student Financial Aid Act are not stated to be for purposes of section 118.6 of the ITA;
- The residents were enrolled in a resident program at a university as full-time students;
- Though the program takes place in a Hospital, the universities are responsible for the resident programs, residents apply to universities to be admitted to the program, the university make the decision to accept or reject applicants, the Government of Ontario considers residents full-time students for purposes of grants to universities, the university considers the residents full-time students, the teachers are doctors appointed by the university to professor ranks, the university determines if the resident can advance, the university may discipline a resident and the decision is binding on the hospital, and the clinical portion (though the overwhelming portion) is carried out under the tutelage and umbrella of the university;
- a person can be both a full-time student and a full-time employee or carrying on a full-time business – this was noted to be a frequent decision persons are compelled to make;
- a “qualifying educational program” may be made up wholly of course work or wholly of work, or a combination of the two;
- Being paid for one’s work does not disqualify one from being a student at the same time;
For the reasons above the TCC held that the medical residents were entitled to claim the tax credits under subparagraph 118.6(1)(a)(I) and subsection 118.6(2) of the ITA. The court ended with this comment:
[57] […] Respondent’s counsel startled me when he suggested that it would not be reasonable or fair to articling students seeking to qualify for the Bar or accounting students who want to become Chartered Professional Accountants if I allowed residents to claim the education tax credit and not them. As I understand it, the courses offered to articling and accounting students in Ontario are not offered by a designated educational institution and this may be one reason they would not qualify. Taxpayers often complain of the unfairness of the Act and often their complaint is well founded. However, this is the first time in my 30 years as a judge that I heard the Crown suggest that it may be prejudiced because the Act may not be fair.
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