Beginning January 1, 2007, the Government of Canada will allow a non-refundable tax credit on eligible amounts of up to $500 paid by parents to register a child (under the age of 16) in an eligible program of physical activity. The Government will introduce legislation that will define an eligible program, and there will be amendments to the Income Tax Act. Please note that Bill C28, a second Act to implement certain provisions of the budget tabled in Parliament on May 2, 2006, including the Children's Tax Credit, has received Royal Assent. This means that the Children's Fitness Tax Credit is now a legislated tax regulation. PRO will continue to monitor government websites for additional information regarding the implementation of the credit.

As of today, The Department of Finance has issued only guidelines for program eligibility, not a complete regulation. There are still many questions about what kinds of programs would be eligible, and what portion of membership fees would be eligible. PRO recommends that if there is a question about whether a program is eligible or not, members should wait for the final regulation to be issued by the Department of Finance before issuing receipts for income tax purposes. Please be sure to visit the Canada Revenue Agency page with detailed information for organizations.

Parks and Recreation Ontario continues to monitor releases from both the Department of Finance and Canada Revenue Agency. Here are answers to some of the most frequently asked questions about the credit.

PLEASE NOTE: The policies below have been legislated by the Federal Government. Parks and Recreation Ontario is not responsible for any decisions regarding eligibility or implementation of the Credit.

What amounts are eligible for the credit?
Up to $500 in eligible fees may be claimed, per child, to enrol the child in a qualifying program of sport or recreational activities, up to and including the year in which the child turns 16.

What special provisions are there for children with disabilities?
Some children with disabilities already benefit from the Disability Tax Credit (DTC). To recognize the particular challenges faced by those children, they will qualify for the Fitness Tax Credit up to the year in which they turn 18, consistent with other federal tax measures targeted to children with disabilities.
As well, the Income Tax Act will be amended to introduce an additional $500 nonrefundable amount for DTC-eligible children subject to spending a minimum of $100 on registration fees for an eligible program.
This additional non-itemizable amount recognizes the extra costs that children with disabilities may encounter in participating in programs of physical activity, notably with regard to specialized equipment, transportation and attendant care.

What is the credit worth?
The credit is calculated at the lowest tax rate on a maximum of $500 of fees. At the 2007 rate of 15.5%, this means a reduction at the federal level of up to $77.50 on federal taxes owing.
For DTC-eligible children, the credit would be worth 15.5% of fees, plus a 15.5% credit on an additional amount of $500, if the fees paid were at least $100. This means a maximum reduction, by virtue of the credit, on federal taxes owing, of up to $155.

Example 1:
A parent pays $200 to register a child in a qualifying sports program.
• The resulting tax credit is worth 15.5% X $200 = $31.00

Example 2:
A parent pays $600 to register a child in a qualifying sports program.
• The resulting tax credit is worth 15.5% X maximum of $500 = $77.50

Example 3:
A parent of a child also eligible for the disability tax credit (DTC) pays $100 to register the child in a qualifying sports program.
• The resulting tax credit is worth 15.5% X $100 = $15.50
• The additional amount for DTC-eligible children is $500 X 15.5% = $77.50
• The total credit for this DTC-eligible child = $93.00

What amounts do not count toward the credit?
The credit excludes that portion of registration or enrolment fees covering the acquisition of personal equipment for less than fair market value, or the cost of accommodation, travel, food and beverages.

Can a parent purchase equipment for a child and have those costs covered by the credit?
No. The credit essentially covers participation in a supervised program.

How can parents get more information about how to claim the credit?
Parents are being encouraged to keep ALL receipts for sport and recreation programs for 2007. The Government plans to release full guidelines for claiming the credit with the 2007 general tax and benefit guide.

What if a parent has prepaid fees for an eligible program taking place in 2007?
The Canada Revenue Agency states: "The year in which the tax credit can be claimed is determined by the date when the fees are paid, not when the activity takes place."

Example - Mary registered:

• her daughter Julie in an eligible physical activity program and paid the eligible fees of $750 on August 30, 2006.
  This program started on September 15, 2006, and ended on April 21, 2007
• her son Eric in an eligible physical activity program and paid the eligible fees of $750 on December 20, 2006.
  This program started on January 6, 2007, and ended on April 28, 2007
• her daughter Samantha in an eligible physical activity program and paid the eligible fees of $750 on January 2, 2007.
  This program started on January 6 and ended on April 28, 2007.
  
  On her 2007 income tax return, Mary will only be allowed to claim the maximum amount of $500 for Samantha's program because the other two were paid in 2006.

Many parents are displeased because fees paid in 2006 for eligible programs which take place in 2007 are not eligible for the new tax credit. This is the policy of the Federal Government. If parents wish to make a comment or complaint regarding this regulation, they may contact their local MP, The Federal Minister for Finance, The Minister of National Revenue and The Prime Minister to communicate their concerns.

You can find a Member of Parliament on the Government of Canada website at the following address: www.parl.gc.ca/information/about/people/house/PostalCode.asp?Source=SM

The Minister of Finance, The Honourable Jim Flaherty, can be reached via email at: jflaherty@fin.gc.ca
The Minister of National Revenue, The Honourable Carol Skelton, can be reached via email at: www.carolskelton.ca/craemail.html
The Prime Minister can be reached via email at: pm@pm.gc.ca

What kinds of programs are eligible for the credit?
The credit applies to supervised children’s programs that have a significant physical-activity component, where participation over time can be reasonably expected to result in improved fitness, particularly cardio-respiratory endurance, as well as muscular strength, muscular endurance, flexibility and balance. The Panel’s Report emphasizes cardio-respiratory endurance as essential for improving fitness in children.
Eligibility of a program would be based on the general nature of the activities, and the benefits of involvement over time. The definition will also take into account the average participants’ age, health, presence of a disability, skills, and other relevant factors.
The credit applies not only to sports programs that meet the above criteria, but also to other programs such as dance lessons or organized games that similarly ensure children are physically active.
Programs are eligible for the tax credit if they last at least eight weeks at a minimum of one session per week, or, in the case of children’s camps, five consecutive days—provided in the latter case that more than 50 per cent of the program time is devoted to physical activity.

What if children participate in two six-week programs in succession?
CRA has indicated that parents will be able to claim fees for programs (either consecutive or one single program) if the total length of participation is eight weeks.

Can Membership fees be claimed?
A child's full membership fee in a club or other organization for two months or more can qualify if:
more than 50% of the programs available to a qualifying child as a result of membership are eligible programs;
or more than 50% of available time is devoted to eligible programs for qualifying children.

Example: Membership in a local boys and girls club entitles each child to participate in a wide range of programs, some of which are eligible (biking club, weekend hip hop dances, open swim or gym, ski club) and some of which are not (career planning, board games, reading club). A receipt for the full amount of the annual membership cost can be issued if more than 50% of the programs qualify. A receipt for the full annual membership fee paid can also be issued if more than half of the club's scheduled time (i.e. total program hours) is devoted to eligible programs.
If neither of the 50% tests are met, a receipt can be issued for a pro-rated amount.
A portion of a family membership is also eligible, if the above criteria are also met.


Are fees for drop in programs or admission fees for public swim and skate programs eligible?
The language in the current definition states that programs must be supervised and that the supervisor present is sufficiently engaged to encourage active participation by the children. This means that traditional coaching or instruction is not mandatory, but leadership of some kind is required.

What kinds of programs are not covered by the credit?
Motorized sports will not qualify for the credit. This is consistent with Sport Canada guidelines and with the view of the Canadian Council of Provincial and Territorial Sports Federations. This restriction will not preclude eligibility of programs connected with sailing or equestrian sports.
As well, expenses relating to School physical activity programs that are part of the core curriculum will not be covered by the credit.

What information needs to be included on receipts?
Providers of eligible programs should issue a receipt for income tax purposes for amounts paid in 2007 only. Amounts paid in 2006 do not qualify even if all or part of the activity takes place in 2007.
A receipt should contain the following information:

• Organization's name and address
• Name of the eligible program or activity
• Total amount received, date received, and the amount that is eligible for the children's fitness tax credit
• Full name of the payer
• Name of the child and child's year of birth
• Authorized signature (unless the receipt is generated electronically)

Why is the Fitness Tax Credit limited to children?
The objective of the Children's Fitness Tax Credit proposed in Budget 2006 is to promote physical fitness among children because of the positive impact of physical activity on children's growth and healthy development.

What is a nonrefundable tax credit?
A nonrefundable tax credit means you must have income against which the credit can applied. If your income is $0, then you cannot claim this credit as part of a refund.

Parks and Recreation Ontario
Suite 406, 1185 Eglinton Avenue East
Toronto, Ontario M3C 3C6 
Tel : (416) 426-7142
Fax : (416) 426-7371  
E-mail : pro@prontario.org