20 February 2012 External T.I. 2011-0421581E5 - Payments to Day Homeshare Providers & 81(1)(h)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether the per diem payments received by the "day" homeshare providers fall under paragraph 81(1)(h) income tax exemption.

Position: No

Reasons: Subparagraph 81(1)(h)(ii)

XXXXXXXXXX
				2011-042158
				Ananthy Mahendran

February 20, 2012

Dear XXXXXXXXXX :

Re: Tax Treatment of Per Diem Payments to Day Homeshare Providers

We are writing in response to your correspondence dated September 12, 2011, concerning the tax treatment of per diem payments received by the day homeshare providers.

The facts, as we understand it, are as follows:

A charitable organization has a homeshare program where adults with intellectual disabilities live in a foster home arrangement with families in the community. The organization receives the funding from various sources and in turn pays a per diem rate to the foster parents who provide a home, meals and supervision to the supported individuals. The organization also provides a "day" program for the supported individuals which enables foster parents to hold their jobs if they wish. Some supported individuals have complex needs and/or behavioural problems that make them inappropriate for the day program. These individuals spend their daytime with one of the homeshare families who receive a per diem payment for the "day" portion of their care. The care of the supported individuals is thus shared by two homeshare families - one family in the daytime and the other in the evening and night.

You would like to know whether the per diem payments received by the "day" homeshare family fall under paragraph 81(1)(h) income tax exemption.

Our Comments:

Paragraph 81(1)(h) of the Income Tax Act (the "Act") states:

"where the taxpayer is an individual (other than a trust), a social assistance payment (other than a prescribed payment) ordinarily made on the basis of a means, needs or income test under a program provided for by an Act of Parliament or a law of a province, to the extent that it is received directly or indirectly by the taxpayer for the benefit of another individual (other than the taxpayer's spouse or common-law partner or a person who is related to the taxpayer or to the taxpayer's spouse or common-law partner), if

(i) no family allowance under the Family Allowances Act or any similar allowance under a law of a province that provides for payment of an allowance similar to the family allowance provided under that Act is payable in respect of the other individual for the period in respect of which the social assistance payment is made, and

(ii) the other individual resides in the taxpayer's principal place of residence, or the taxpayer's principal place of residence is maintained for use as the residence of that other individual, throughout the period referred to in subparagraph (i);"

Generally, paragraph 81(1)(h) of the Act permits a taxpayer, who is an individual, an exclusion from income if the taxpayer is in receipt of a social assistance payment for the benefit of a cared-for individual (except a spouse, common-law partner or related person) providing all of the conditions set out in the paragraph are met. A primary requirement under subparagraph 81(1)(h)(ii) of the Act is the cared-for individual must "reside" in the taxpayer's principal place of residence, or the taxpayer's principal place of residence must be maintained for use as the residence of that cared-for individual, during the period for which the payment is made.

In order to determine whether the cared-for individual "resided" with the "day" homeshare family for the purposes of the application of paragraph 81(1)(h), a review of the meaning of the term "reside" in the context of paragraph 81(1)(h) is required. The term "reside" is not defined in the ITA. The leading authority on the meaning of the expression "ordinarily reside" is the Supreme Court decision in Thomson v. M.N.R., 2 DTC 812 (SCC). In that case, Estey, J. concluded that ". . . one is ordinarily resident in the place where, in the settled routine of his life he regularly, normally or customarily lives".

Also, the CRA's policy with respect to the determination of one's principal place of residence for the purposes of the application of paragraph 81(1)(h) is found in Income Tax Technical News No. 31R2, which reads as follows:

"An individual's "principal place of residence" is the place where the individual regularly, normally or customarily lives. In our view, the place where the individual normally sleeps is a significant factor in making this determination."

Based on the above analysis, the income exclusion provided under paragraph 81(1)(h) would not apply to the per diem payments received by the "day" homeshare family, where the cared-for individual did not reside in the day homeshare family's principal place of residence.

We trust that these comments will be of assistance.

Yours truly,

Sharmini Ratnasingham
Assistant Director
Financial Industries Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch