The Eligible Educator School Supply Tax Credit, worth 15% on up to $1,000 of eligible supply expenses, has now become law. To mark the occasion, CRA has published a Question and Answer providing commentary on this new refundable tax credit available in 2016 and subsequent years. The credit is also referred to as the Teacher and Early Childhood Educator School Supply Tax Credit.
The new tax credit can only be claimed by an eligible teacher or early childhood educator employed at an elementary or secondary school or a regulated child care facility. The employee must either:
- hold a teacher’s certificatethat is valid in the province or territory in which they are employed (eligible teacher); or
- hold a certificate or diplomain early childhood education that is recognized in the province or territory in which the individual is employed (eligible early childhood educator).
What Expenditures Qualify?
An eligible supply expense is an amount paid in the year for supplies used or consumed in the school or regulated child care facility in the performance of the taxpayer’s employment. Supplies include:
- consumable goods such as construction paper, flashcards, items for science experiments, art supplies, and stationary items; and
- durable goods limited to games, puzzles, books, containers and educational support software. Computers, tablets and rugs (for kids to sit on) are provided as examples of expenses which are not eligible.
The expense must not be reimbursable, nor subject to an allowance or other form of assistance. As well, the credit cannot be claimed for an expense which is deducted by any person for the year. The credit is available for the year in which it was purchased rather than when it was used.
CRA may ask taxpayers to provide certification from their employer attesting to the eligible supplies expense. The certification should be a statement signed by the individual’s employer that attests that the supplies were used for the purpose of teaching or facilitating students’ learning, directly consumed in an appropriate facility in the performance of the individual’s employment duties, and amounts paid were not reimbursable or otherwise deducted in income calculation. Employers providing this certification should not also provide a T2200, Declaration of Conditions of Employment, in relation to those supplies.
Taxpayers should request the certification from their employer in a timely manner and keep it in their files, along with their receipts for the supplies.
Eligible Teachers and Educators – Keep receipts from the purchase of eligible supplies in the year.
CRA holds the authority to suspend receipting privileges and refuse or revoke the registration of a registered charitable organization when an “ineligible individual is a board member or controls or manages the organization”.
On March 17, 2016 CRA Guide CG-024, Ineligible Individuals, was updated. It provides 29 pages of description and implications of having ineligible individuals on boards and in management positions.
Generally, an individual is ineligible if he/she:
-has been convicted of an offence:
- related to financial dishonesty; or
- relevant to the operation of the organization; or
-was connected to an organization whose registration was revoked for a serious breach of the requirements for registration. Relevant connections could include:
- a director, trustee, officer, or like official;
- an individual in a position of management or control; or
- a promoter of a tax shelter, and participating in that tax shelter caused the revocation of an organization’s registration.
Individuals who manage a registered organization, directly or indirectly, include anyone who does one or more of the following:
- performs managerial (rather than only operational) duties;
- hires, disciplines and dismisses employees;
- prepares budgets within the organization; or
- varies staff assignments.
Individuals who have influence or the power to do one or more of the following would be considered to have control:
- change the board of directors or reverse its decisions;
- make alternative decisions concerning the actions of the organization;
- directly or indirectly end the organization; or
- appropriate the organization’s assets.
Review your charity’s current leadership for possible ineligible individuals. Also consider adjusting recruitment and engagement processes to detect such individuals.
In late September, CRA announced that the prescribed interest rates for the fourth calendar quarter of 2016 would stay unchanged from the third calendar quarter – with the exception of the corporate taxpayers’ pertinent loans or indebtedness, which has gone down to 4.49%.
For the current rates, see http://news.gc.ca/web/article-en.do?nid=1126999.
In the summer of 2016, CRA commenced a project to examine taxpayers holding expensive properties in Vancouver where only low amounts of income were reported. The goal of the project was to identify unreported worldwide income, property “flipping”, underreporting of capital gains on sales, and underreporting GST on sales of new homes. CRA has reported that they recovered more than $30 million as a result of this project.
For more information about this project and its result, see: http://www.cra-arc.gc.ca/gncy/cmplnc/rlstt/menu-eng.html.