Date:
20120711
Docket:
T-586-11
Citation:
2012 FC 876
Ottawa, Ontario, July 11, 2012
PRESENT: The Honourable Mr. Justice Near
BETWEEN:
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DAN FANNON
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Applicant
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and
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REVENUE CANADA AGENCY
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Respondent
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REASONS FOR
JUDGMENT AND JUDGMENT
[1]
The
Applicant, Daniel Lawrence Fannon, seeks judicial review of a decision by the
Minister of National Revenue (Minister) that he was unable to deduct child
care expenses under subsection 63(3) of the Income Tax Act, RSC 1985, c
1 (5th Supp) (the Act) because his son did not reside with him during the
relevant taxation years.
[2]
For
the reasons set out below, I am dismissing his application.
I. Background
[3]
The
Applicant made various requests to the Canada Revenue Agency (CRA) to allow the
deduction of his child care expenses under the Act in the interests of
fairness.
[4]
In
a letter dated June 23, 2010, the CRA advised him that he was not entitled to
claim child care expenses because his son did not reside with him from 2001 to
2008 as required by subsection 63(3). His 2007 and 2008 years would be
readjusted to disallow child care expenses; however, the CRA was statute barred
from reassessing the 2006 income tax year.
[5]
Shortly
thereafter, the Applicant requested a response to a previous request. The CRA
sent another letter dated July 7, 2010 reiterating its position by stating:
As you were advised in
our letter dated June 23, 2010 your claim for child care expenses is not
allowable as your son did not reside with you. Therefore, your request for
child care expenses for the 2001-2005 taxation years cannot [sic]
accepted under the taxpayer relief provisions.
[6]
The
Applicant applied to this Court for judicial review of the CRA’s decisions. On
consent, the Minister reconsidered the decisions not to allow the deduction of
child care expenses.
[7]
On
March 14, 2011, the Applicant was informed of the subsequent denial of his
request. The letter confirmed the following:
To qualify for the
child care expense deduction, the child must have resided with you at the time
the expenses were incurred.
Our review indicates that your son did not reside
with you during the 2001 to 2008 tax years. Furthermore, you do not have a
shared custody agreement in place. Consequently, are not entitled to claim the
deduction for child care expenses at this time.
[…]
When we initially assessed your 2007 and 2008 tax
returns you received a refund. Subsequently, your returns were reassessed to
correct the child care deductions claim, resulting in a balance owing. When we
issue a refund that is more than the amount you are entitled to receive, you
have to repay the extra amount, plus any credit interest that we allowed on it.
[8]
The
Applicant now challenges this decision seeking taxpayer relief for child care
expenses in the years 2001 to 2005.
II. Issues
[9]
The
issues raised by this application include:
(a) Is the Minister’s
decision to deny the deduction of child care expenses reasonable?
(b) Does
the definition of child care expense in subsection 63(3) of the Act violate
section 15(1) of the Canadian Charter of Rights and Freedoms?
III. Analysis
A. Is
the Minister’s Decision to Deny the Deduction of Child Care Expenses
Reasonable?
[10]
Discretionary
decisions of the Minister under the Act are afforded deference based on the
reasonableness standard of review (see Barron v Canada (Minister of National
Revenue – MNR) (1997), 209 NR 392, [1997] FCJ no 175 at para 5; Dunsmuir
v New Brunswick, 2008 SCC 9, [2008] 1 SCR 190 at para 51).
[11]
Applying
this standard, I consider the Minister’s decision not to allow the Applicant to
deduct child care expenses since his son did not reside with him an acceptable
outcome (see Dunsmuir, above at para 47).
[12]
The
definition of child care expense under subsection 63(3) clearly relates to a
taxpayer, or supporting person, “who resided with the child at the time the
expense was incurred.” More generally, the provision reads:
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“child
care expense” means an expense incurred in a taxation year for the purpose of
providing in Canada, for an eligible child of a taxpayer, child care services
including baby sitting services, day nursery services or services provided at
a boarding school or camp if the services were provided
(a)
to enable the taxpayer, or the supporting person of the child for the year,
who resided with the child at the time the expense was incurred,
(i)
to perform the duties of an office or employment,
(ii)
to carry on a business either alone or as a partner actively engaged in the
business,
(iii)
[Repealed, 1996, c. 23, s. 173(1)]
(iv)
to carry on research or any similar work in respect of which the taxpayer or
supporting person received a grant, or
(v)
to attend a designated educational institution or a secondary school, where
the taxpayer is enrolled in a program of the institution or school of not
less than three consecutive weeks duration that provides that each student in
the program spend not less than
(A)
10 hours per week on courses or
work
in the program, or
(B)
12 hours per month on courses in the program, and
(b)
by a resident of Canada other than a person
(i)
who is the father or the mother of the child,
(ii)
who is a supporting person of the child or is under 18 years of age and
related to the taxpayer, or
(iii)
in respect of whom an amount is deducted under section 118 in computing the
tax payable under this Part for the year by the taxpayer or by a supporting
person of the child,
[…]
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«
frais de garde d’enfants » Frais engagés au cours d’une année d’imposition
dans le but de faire assurer au Canada la garde de tout enfant admissible du
contribuable, en le confiant à des services de garde d’enfants, y compris des
services de gardienne d’enfants ou de garderie ou des services assurés dans
un pensionnat ou dans une colonie de vacances, si les services étaient
assurés :
a) d’une part, pour permettre au
contribuable, ou à la personne assumant les frais d’entretien de l’enfant
pour l’année, qui résidait avec l’enfant au moment où les frais ont été
engagés d’exercer l’une des activités suivantes :
(i) remplir les fonctions d’une
charge ou d’un emploi,
(ii) exploiter une entreprise,
soit seul, soit comme associé participant activement à l’exploitation de
l’entreprise,
(iii) [Abrogé, 1996, ch. 23,
art. 173(1)]
(iv) mener des recherches ou
des travaux similaires relativement auxquels il a reçu une subvention;
(v) fréquenter un établissement
d’enseignement agréé ou une école secondaire où il est inscrit à un programme
d’une durée d’au moins trois semaines consécutives, selon le cas:
(A) aux cours ou aux travaux
duquel chaque
étudiant doit consacrer au
moins dix heures par semaine,
(B) aux cours duquel chaque
étudiant doit consacrer au moins douze heures par mois;
b) d’autre part, par une personne
résidant au Canada autre qu’une personne :
(i) soit qui est le père ou la
mère de l’enfant,
(ii) soit qui est la personne
assumant les frais d’entretien de l’enfant ou était âgée de moins de 18 ans
et liée au contribuable,
(iii) soit pour laquelle un
montant est déduit en application de l’article 118 dans le calcul de l’impôt
payable en vertu de la présente partie pour l’année par le contribuable ou
par la personne assumant les frais d’entretien de l’enfant;
[…]
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[13]
There
is no dispute that the Applicant’s son did not reside with him at the time
child care expenses were incurred. As a consequence, he cannot be granted
taxpayer relief for the daycare payments under the circumstances. The
Applicant refers to a court order that he was to pay a portion of his son’s
daycare costs, but this does not address the relevant issue of the child’s
residency in subsection 63(3).
[14]
Having
found that the Minister applied the law as it stands to the Applicant’s
circumstances in a reasonable manner, I am left with his contention that
subsection 63(3) discriminates against non-custodial parents by disallowing the
deduction of daycare expenses.
B. Does
the Definition of Child Care Expense in Subsection 63(3) of the Act Violate
Section 15(1) of the Canadian Charter of Rights and Freedoms?
[15]
The
Applicant argues that subsection 63(3) denies him equal benefit of the law as
guaranteed by the Charter. As a non-custodial parent, he remains financially
responsible for paying a portion of his son’s daycare costs, but unlike a
custodial parent, he is precluded from the benefit of a tax deduction.
[16]
The
Supreme Court identified the two-step test that the Applicant would have to
satisfy in establishing a violation of his equality rights under section 15(1).
It consists of two questions: (1) does the law (in this instance subsection
63(3) of the Act) create a distinction based on an enumerated or analogous
ground? (2) does the distinction create a disadvantage by perpetuating
prejudice or stereotyping? (R v Kapp, 2008 SCC 41, [2008] 2 S.C.R. 483 at para
17).
[17]
I
am not convinced that the Applicant’s critique of the legislation would meet
this test. To do so, he would first have to present evidence, or a proper
factual foundation as it is referred to in the relevant jurisprudence, in
support of his claim (see Williams v Canada (Minister of National Revenue –
MNR), 2011 FC 766, [2011] FCJ no 959; MacKay v Manitoba, [1989] 2
SCR 357, [1989] SCJ no 88). His affidavit does not address whether subsection
63(3) creates a disadvantage by perpetuating prejudice or stereotypes. He
merely asserts that he is denied a tax benefit given to custodial parents.
[18]
In
addition, while on its face the provision creates a distinction between those
parents who have a child living with them and those who live apart but
otherwise incur child care expenses; it is not clear that this would relate to
an enumerated or analogous ground. In this regard, I see no reason to depart
from the decision of Justice Webb of the Tax Court as it addressed the issue at
the urging of the Applicant in the context of an appeal of his reassessments (Fannon
v Canada, 2011 TCC 503, [2011] TCJ no 408). Justice Webb concluded:
13 Therefore, the first step will be to
determine whether the provisions of subsection 63(3) of the Act
"create a distinction that is based on an enumerated or analogous
ground". It appears that the Appellant has suggested that his group is
comprised of parents who do not have custody but who are paying for daycare
expenses and who were required to do so as a result of a Court Order (or an
agreement). The comparative group that he appears to be suggesting is one
comprised of parents who have custody and who are paying for daycare expenses
as a result of an agreement with the daycare facility. However, the provisions
of the Act related to child care expenses are not based on who has
custody of the child but rather on the person with whom the child resides.
While as a result of the definition of "eligible child" in subsection
63(3) of the Act, it is also possible that someone who is not a parent
may be able to claim child care expenses, it is not entirely clear whether a
person who is not a parent could be ordered to pay daycare expenses. Therefore
based on the provisions of the Act which the Appellant is challenging
and the groups as proposed by the Appellant, the Appellant's group would be
parents who pay for daycare expenses as a result of a Court Order (or an
agreement) but with whom a child does not reside and the appropriate comparator
group must be parents who pay child care expenses (as a result of an agreement
with the daycare facility) and with whom the child does reside. The relevant
distinction created by the Act is based on whether the child resides
with the person or not. Clearly this is not one of the enumerated grounds in
subsection 15(1) of the Charter.
[…]
15 Whether a child is residing with one person
or another is not a characteristic that is immutable or changeable only at an
unacceptable cost to personal identity. A child who is residing with one parent
could start to reside with the other parent. If a child should commence to
reside with the other parent, this would not be at an unacceptable cost to
personal identity of either the first parent or the second parent. As a result
it seems to me that it is not an analogous ground and the provisions of
subsection 15(1) of the Charter are not applicable to the provisions of
the definition of child care expenses in subsection 63(3) of the Act.
[19]
In
addition, the Applicant cannot demonstrate that this distinction is
discriminatory in accordance with the second step of the test. Relevant
factors in that step of the analysis include a pre-existing disadvantage,
correspondence with actual characteristics and the nature of the interest affected
(see Withler v Canada (Attorney General), 2011 SCC 12, [2011] 1 SCJ no 12
at para 66; Law v Canada (Minister of Employment and Immigration),
[1999] 1 S.C.R. 497, [1999] SCJ no 12).
[20]
There
is no pre-existing disadvantage for those non-custodial parents paying child
care expenses. They are not “disadvantaged” in the sense of being vulnerable,
prejudiced or facing a negative social characterization (Kapp, above at
para 55).
[21]
Similarly,
any correspondence between the distinction made in the provision and the Applicant’s
actual characteristics or circumstances is not established in this case. From Withler,
above at para 67 it is clear:
[…] the contextual inquiry at the second step of the
s. 15(1) analysis will typically focus on the purpose of the provision that is
alleged to discriminate, viewed in the broader context of the scheme as a
whole. Whom did the legislature intend to benefit and why? In determining
whether the distinction perpetuates prejudice or stereotypes a particular
group, the court will take into account the fact that such programs are
designed to benefit a number of different groups and necessarily draw lines on
factors like age. It will ask whether the lines drawn are generally
appropriate, having regard to the circumstances of the persons impacted and the
objects of the scheme. Perfect correspondence between a benefit program and the
actual needs and circumstances of the claimant group is not required.
Allocation of resources and particular policy goals that the legislature may be
seeking to achieve may also be considered.
[22]
The
purpose of subsection 63(3) of the Act is to allow a tax deduction for those
incurring child care expenses to carry on employment, a business, research or
attend an educational institution. The Applicant did not directly incur
expenses to engage in these activities as his son was not residing with him
during the relevant period. I accept the position of the Respondent that the
Applicant’s situation is not reflective of the purpose for which the provision
was intended. As in Withler, above at para 38, “the ameliorative effect
of the law on others and the multiplicity of interests it attempts to balance
will also colour the discrimination analysis.”
[23]
The
nature of the Applicant’s interest in this matter is financial as he is unable
to deduct child care expenses. The Supreme Court made clear in, for example, Granovsky
v Canada (Minister of Employment), 2000 SCC 28, [2000] 1 S.C.R. 703 at para 58
that “it is not just whether the appellant has suffered the deprivation of a
financial benefit” and that something more is required to establish a violation
of section 15(1) of the Charter.
IV. Conclusion
[24]
It
was reasonable for the Minister to deny the Applicant child care expense
deductions based on the requirements of subsection 63(3) of the Act. His
section 15(1) Charter claim must also fail. The application for judicial
review is dismissed.
JUDGMENT
THIS
COURT’S JUDGMENT is that this
application for judicial review is dismissed.
“
D. G. Near ”
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