Between 2008 and 2010 the CAPS/ACSP Executive (along with other groups) sought to clarify the status of postdocs in Canada with respect to taxation of income, particularly for postdocs on fellowships/scholarships.
This post reviews the timeline of issues and changes in taxation of postdocs during that period, the end result of which was the current state of affairs in Canada: all postdoctoral income (including scholarships, fellowships, and other awards) is treated as taxable income.
December 2008
The 2006 Federal budget included a change that allowed fellowships and scholarships obtained during the course of registration in an educational program to be tax exempt. It was uncertain whether postdoctoral scholars were eligible for this tax benefit, as the change was intended for undergraduate and graduate students and it was not clarified whether this applied to postdocs or not.
The Canada Revenue Agency (CRA) was asked to clarify this point and this called into question the exact nature of postdoctoral training; in particular, whether the role is an educational one (that of a trainee enrolled in an educational program), or that of an apprenticeship to enhance skills.
At the time, some universities (Dalhousie, UOttawa, and Western) had set up educational programs that appeared to qualify those postdocs who enroll to be eligible for the tax exemption. These “academic track” postdocs paid a fee for enrollment in a training / professional development program and received a T4A code 05 and a T2202A tax form. While the institutions did not formally request a ruling from the CRA on this issue, the CRA seemed content with this arrangement as postdocs in these programs were successful in obtaining the tax benefit .
Quebec postdocs, particularly those at McGill and the University of Montreal, had been receiving T2202A forms for some time at this point, but the CRA questioned whether Quebec’s definition of postdocs as “students” was sufficient evidence of enrolment in an educational program, so it remained unclear whether these postdocs could claim the federal tax benefit.
The University of Toronto implemented changes in the way it processes registration of postdoctoral fellows, and instituted a mandatory postdoctoral training program. However, when they submitted an inquiry to the CRA asking whether their training program for postdocs satisfied the intent of the law, they were informed that the CRA would not be prepared to make a judgement on this matter until they completed an ongoing review of the income tax status of postdocs.
At this point, the CAPS Executive decided to weigh in on this matter on behalf of Canadian postdocs and request clarification from the CRA directly.
January 2009
The CAPS Executive submitted a letter to the CRA and the Ministry of Finance requesting that the CRA use existing guidelines for determining employment status (applied to EI/CPP Rulings) to determine whether a postdoc should be granted ‘student/trainee’ status and thus be eligible for the tax exemption.
February 2010
Over a year later, the CRA and the Minister of Finance had still failed to respond to CAPS letter. To assist postdocs who planned to claim the fellowship/scholarship tax exemption on their 2009 taxes the CAPS Executive drafted a template letter for postdocs to personalize and include in their 2009 tax filings, which provided arguments for why an individual should be eligible for the tax exemption.
March 2010
The 2010 Federal Budget finally clarified this matter by clearly stating that all postdoctoral fellowships are taxable and not eligible for the scholarship exemption (see page 349 of http://www.budget.gc.ca/2010/plan/toc-tdm-eng.html).
In response, the CAPS Executive released the following statement and launched an online petition to inform the Federal Government of the disincentives their decision placed on the career progression of postdocs and provide recommendations for improvements to postdoctoral funding and training in Canada.
In addition, the Executive encouraged individual postdocs to communicate directly with their Members of Parliament regarding this issue and provided a FAQ and a template letter for those who wanted some guidance regarding what to say to their MP.
For a view of these events from the perspective of an administrator at the time, read the following blog post that was written by the Associate Dean in charge of Postdoctoral Fellows at Dalhousie University.
April 2010
The CRA finally sent a response to CAPS’ letter from Jan 2009, clarifying what was already made quite clear in the budget and indicating that they will be applying this approach to postdoctoral taxes retroactively from 2006 onward. A copy of this letter can be viewed here.
June 2010
The CAPS Executive received a formal response from the Ministry of Finance regarding their letter protesting the taxation of postdoctoral fellows in the 2010 federal budget.
Nov 2010 to April 2011
CAPS fought back, particularly against the retroactive taxation of postdocs by the CRA, joining forces with the Conseil national des cycles supérieurs de la Fédération étudiante universitaire du Québec (CNCS-FEUQ) on a press release in Nov 2010 and in organizing a press conference in Montreal on April 4th 2011 with another press release on the subject.
June 2011
Dr. Lucie Low (CAPS Vice-Chair Finance) published an article in Nature on how the 2010 tax law changes hurt Canadian Postdocs. “Oh, Canada…” (Nature, 2011; Volume:474, Page:533; doi:10.1038/nj7352-533a). Dr. Low was one of 6 selected columnists (out of 300 entries) as part of an international contest held by Nature looking for essayists who could discuss the challenges of graduate studies and postdoctoral fellowships.