8 June 2015 External T.I. 2014-0529851E5 F - Frais payés à une maison de santé ou de repos -- translation

Principal Issues: Several questions regarding the medical expense tax credit.

Position: See document.

Reasons: See document.

XXXXXXXXXX 2014-052985
Sophie Lambert, CPA, CMA, DESS. FISC.

June 8, 2015

Dear Sir,

Subject: Fees paid to a nursing home

This letter is in response to your request sent on May 1, 2014 in which you asked various questions regarding the tax treatment to be given to expenses paid to a nursing home for the purposes of the medical expenses tax credit in section 118.2 of the Income Tax Act (the "Act"). Unless otherwise stated, all statutory references herein are references to the provisions of the Act.

Your questions and our comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.

Question 1

Paragraphs 29 and 30 of Interpretation Bulletin IT-519R2, Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction (Cancelled), indicated that the fees paid to a nursing home could qualify as eligible medical expenses under paragraph 118.2(2)(e). Paragraphs 1.57 and 1.63 of the Income Tax Folio S1-F1-C1 – Medical Expenses Tax credit ("Folio"), however, no longer refer to nursing home fees as expenses that may qualify for eligible medical expenses under paragraph 118.2(2)(e).

Following this change, you wish to know if the positions set out in technical interpretations 2005-0155731E5 and 2008-0293121I7 remain valid.

Our Comments

The 2005-0155731E5 and 2008-0293121I7 technical interpretations no longer represent the position of the CRA to the extent that both tax credits could simultaneously be claimed if the costs referred to in those letters were living expenses for stays in a nursing home. Indeed, the tax credit described in section 118.3 may not be claimed where accommodation expenses for a nursing home are claimed as medical expenses, regardless of under which paragraph in subsection 118.2(2) the medical expenses tax credit has been claimed, with the exception of paragraph 118.2(2)(b.1) in respect of remuneration for attendant care for an individual.

Question 2

In practice, some retirement homes may have a dual purpose. Some floors of the retirement home may be reserved for independent and semi-independent seniors, while other floors are reserved exclusively for dependent seniors, for example, for people with Alzheimer's disease at a stage requiring help from others for their needs and personal care. Thus, the services offered on the floors for independent and semi-independent seniors are not the same as those offered on the floors for dependent seniors. In the latter case, the patients are unable to care for themselves, require ongoing supervision and the benefit of nursing care 24 hours a day.

You wish to know if accommodation expenses paid to a retirement home for a patient with Alzheimer's disease at a stage requiring the help of others for needs and personal care and who is on a floor for dependent seniors can qualify as expenses of full time care in a nursing home for the purposes of paragraph 118.2(2)(d).

Our Comments

The term "nursing home" is not defined in the Act. Paragraph 1.33 of the Folio sets the CRA position on the meaning of that term. That paragraph reads as follows:

"A nursing home is generally considered to be an establishment that provides full–time maintenance or nursing home care for patients who are unable to care for themselves. While a particular place need not be a licensed nursing home, it must have the equivalent features and characteristics of a nursing home. For example, a nursing home is normally a facility of a public character which offers 24-hour nursing care to patients who are not related to the facility owner/operator. The use of the expression full–time care in a nursing home is not intended to place a requirement of a minimum time spent caring for a patient but rather implies the constant care and attendance required by the patient by reason of an injury, illness or disability of the patient. The CRA is generally of the view that a retirement home does not provide the care required to be classified as a nursing home."

The question of whether an institution can be defined as a nursing home is a question that must be resolved in the light of all relevant facts. Each situation must therefore be examined on a case by case basis on its own facts.

The fact that a person lives in a retirement residence and has Alzheimer's disease at a stage requiring the help of others for personal needs and care may be an element that helps leads to a determination that the person lives in a nursing home, but this does not automatically qualify the residence as a nursing home. In addition, other criteria such as the number of staff at the facility, their skills and the equipment available in order to provide nursing care to patients 24 hours a day are elements that may be considered to establish if a retirement residence is a nursing home. To the extent that the floor where this person lives meets the above criteria, we believe that the residence can qualify as a nursing home with respect to that floor. Accordingly, the expenses of full-time care in respect of that floor could qualify for the tax credit under subsection 118.2(2)(d) if the other conditions therein provided are satisfied.

Question 3

Paragraph 1.33 of Folio provides details on nursing homes. You wish to know if we can further specify the criteria used to determine whether the fees paid to a particular institution correspond to full time care in a nursing home for purposes of paragraphs 118.2(2)(b) and (d).

Our Comments

We cannot further specify the criteria used to determine whether living expenses are paid to a nursing home.

This question is essentially one of fact and the criteria to be considered in a specific situation depend on that situation.

Question 4

You wish to know what documents, records, letters or certificates are necessary to facilitate the acceptance of fees by the CRA.

Our Comments

The question you ask is a question of application or administration of the Act which is not within our purview since it is not a question of interpretation of the Act.

Therefore, apart from what is specifically provided for in the Act (footnote 1), we cannot specify what documents, evidence, or letters may be requested during an audit or in making an assessment.

Question 5

You wish to know if there is an official list of retirement homes or nursing homes on which the CRA officials rely to accept or reject living expenses for a nursing home paid to such establishments as medical expenses.

Our Comments

There is no official list of the names of nursing or retirement homes recognized by the CRA for the medical expenses tax credit.

Question 6

You referred to subsection 118.2(1) which sets out certain conditions to be respected so that the medical expenses in respect of an individual, the individual’s spouse or common-law partner or a child of the individual who has not attained the age of 18 years before the end of the taxation year, can be considered as eligible expenses for the medical expense tax credit.

You presented the following hypothetical scenario: an individual paid $2,000 per month to a nursing home for the whole year of 2013, representing a total amount of $24,000 for 2013. You assume that these expenses qualify as medical expenses. When the tax return was filed, it was noted that only $10,000 of medical expenses was needed to eliminate the tax liability.

According to your understanding, the individual could choose, for the 2013 taxation year, a period of 12 months beginning on January 1, 2013 and ending on December 31, 2013, to report the amount of $10,000 for medical expenses even if a total of $24,000 has been paid during the 12-month period. In your view, the individual does not seem to be required to include all fees paid during the 12 month period in calculating medical expenses for the tax credit in reporting income for the 2013 taxation year.

In addition, for the 2014 taxation year, by choosing a 12-month period beginning June 1, 2013 and ending May 31, 2014, the individual could, in your opinion, claim the $14,000 fee paid to a retirement home for the months from June 2013 to December 2013 which were not included in the calculation of the tax credit for medical expenses in 2013 and which were not, by the same token, claimed in 2013.

Moreover, in another scenario, if the cost of $24,000 instead came from being hospitalized in July 2013, it seems, in your view, that the individual could claim a portion of this amount in 2013 (for example, $10,000), by choosing a 12 month period from January 1, 2013 to December 31, 2013 and claim the other portion of $14,000 by choosing a period of 12 months from July 1, 2013 to June 30, 2014. You consider that these costs qualify as medical expenses.

Your conclusions are based on a CRA publication available on the website:
http://www.cra-arc.gc.ca/gncy/bdgt/2011/qa07a-eng.html. In your view, your conclusions are supported by paragraph 118.2(1)(b) limiting allowable charges to amounts "that were not included in determining an amount under this subsection, section 64 or subsection 122.51(2), for a previous taxation year. "

You wish to know whether we agree with your comments.

Our Comments

The 12-month period chosen by the taxpayer for a taxation year is not required to be retained for subsequent taxation years. Therefore, claims in 2013 may include fees paid between January 1, 2013 and December 31, 2013 and an application in 2014 for the same taxpayer may include fees paid between June 1, 2013 and May 31, 2014 or any other such 12 month period ending in 2014, provided no expenses are taken into account twice in the calculation of the medical expenses tax credit.

We trust that these comments will be of assistance.

Michel Lambert, CPA, CA, M. Fisc.
Manager
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy
and Regulatory Affairs Branch

FOOTNOTES

Due to our system requriements, the footnotes contained in the original document are reproduced below:

1 For example, the prescribed form T2201 for purposes of paragraph 118.3(1)b).