Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 118500
September 13, 2011
Dear [Client]:
Subject:
GST/HST RULING
[...] [Eligibility to claim the 83% Public Service Body Rebate as a facility operator]
Thank you for your letter of September 2, 2009, concerning the eligibility of [...] (the Corporation) to claim an 83% public service body (PSB) rebate of the goods and services tax (GST) for non-creditable tax charged in respect of property and services acquired in the course of operating group homes in [...] [the Province] for individuals who have a developmental disability.
As of July 1, 2010, in addition to an 83% PSB rebate of the GST and the federal part of the harmonized sales tax (HST), a facility operator resident in [the Province] is also eligible to claim an [...]% PSB rebate of the provincial part of the HST for non-creditable tax charged in respect of property or services to the extent that the property or services are for consumption, use or supply in activities engaged in by the person in the course of operating a qualifying facility in [the Province]for use in making facility supplies.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.
Statement of Facts
We understand that:
1. Since [mm/dd/yyyy], the Corporation has been a registered charity for purposes of the Income Tax Act. Therefore it is a charity for purposes of the ETA.
2. You advised that the Corporation provides services under [...] [Legislation A of the Province], with funding from the Province [...] through the Ministry of [...]. This legislation authorizes the funding of [...], group homes, [...] and [...] for people with developmental disabilities.
3. [...] [Legislation B of the Province] was [...] and it replaced [Legislation A].
4. Section [...] of [Legislation B] provides that [...]
It is our understanding that the Corporation would now operate under the framework of this legislation.
5. [Legislation A] defines [...]. Section [...] of [Legislation B] describes a developmental disability as follows: [...]
6. Subsection [...] of [...] [the Regulation of the Province] made under [Legislation B] provides that for purposes of subsection [...] of the Act, a person has [...] if the person meets one of the following criteria: [...]
7. Subsection [...] of [the Regulation] contains the following definitions: [...]
8. Subsection [...] of [Legislation B] lists the services and supports to which it applies: [...]
9. Subsection [...] of [Legislation B] defines the services and supports for purposes of Act: [...]
10. A [...] is defined in section [...] of [Legislation B] as [...].
11. The methods of funding services and supports for persons with developmental disabilities are set out in sections [...] to [...] of [Legislation B] as follows: [...]
12. Pursuant to section [...] of [Legislation B] a person with a developmental disability who [...] Subsection [...] provides that: [...]
13. Section [...] of [the Regulation] made under [Legislation B] provides that for purposes of subsection [...] of the Act: [...]
14. According to the Website of the Ministry of [...] the type of services and supports that are to be provided in the various residences are: [...]
15. You provided a copy of an undated and unsigned service contract between the Corporation and the Province as represented by the Minister of [...] and [...]. Section [...] of the contract states that it will be in force from [mm/dd/yyyy], until it is superseded or replaced by a subsequent contract or until it is terminated in its entirety by either party. Under this contract, the Corporation has agreed to provide the social services described in the attached [...].
16. Pursuant to the contract with the Province, the Corporation provides [...] to adults aged 18 or older with a development disability as defined in [Legislation A] (which was replaced by [Legislation B]), [...] and to individuals with a developmental challenge who [...].
17. The services and programs provided by the Corporation are [...]
18. You advised that the Corporation provides residential support to [...]. The Corporation operates [...] group homes [...].
19. The activity for which you are requesting a ruling on the PSB rebate entitlements of the Corporation is the [...]. The [...] describes the services that the Province is funding for this activity as follows: [...]
20. Section [...] of [the Regulation] made under [Legislation B] defines [...]
21. According to the Corporation's website, all individuals who reside in its group homes [...]
22. You provided a copy of [...] Agreement dated [mm/dd/yyyy], from the Corporation regarding medical support for the fiscal year of [mm/dd/yyyy] to [mm/dd/yyyy]. The letter states [...]
Ruling Given
You would like to know if the Corporation is a "facility operator" in respect of its activities of operating the group homes under its contract with the Province and if the accommodation, meals, personal care and other services provided to the residents constitute a "facility supply" as defined in subsection 259(1) of the ETA; therefore entitling the Corporation to claim the 83% PSB rebate of the GST paid or payable on property and services it acquires in the course of operating the group homes in [the Province].
Ruling Given
Based on the facts set out above, we rule that the Corporation is not a "facility operator" making a "facility supply" as those expressions are defined in subsection 259(1) of the ETA in respect of its operation of the group homes under its contract with the Province. Therefore, the Corporation is not entitled to claim the 83% PSB rebate of the GST and the federal part of the HST and the [...]%PSB rebate of the provincial part of the HST for non-creditable tax charged in respect of property and services it acquires in the course of operating the group homes in [the Province].
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Tax status of supplies made by the Corporation
The Corporation is a charity as that expression is defined in subsection 123(1) of the ETA. Section 1 of Part V.1 of Schedule V exempts a supply made by a charity of any property or service, with certain exceptions listed under paragraphs (a) to (n) of that section. Accordingly, the services supplied by the Corporation may generally be exempt pursuant to this section.
We also note that the services the Corporation provides to residents with a developmental disability in the group homes it operates could also fall within the exemption of section 2 of Part IV of Schedule V. This section exempts a supply of a service of providing care, supervision and a place of residence to children, underprivileged individuals or individuals with a disability in an establishment operated by the supplier for the purpose of providing such a service.
Services supplied by the Corporation in its group homes could also fall within section 3 of Part IV of Schedule V, which exempts a supply of a service of providing care and supervision to an individual with limited physical or mental capacity for self-supervision and self-care due to an infirmity or disability rendered principally at an establishment of the supplier.
With respect to your view that section 2 of Part II of Schedule V applies to the services in question, we note that it is not necessary to determine whether this section would also apply to the supplies made by the Corporation for purposes of the PSB rebate. This section exempts a supply of an institutional health care service made by the operator of a health care facility and rendered to a patient or resident of the facility. This does not include cosmetic services as well as any separate supplies of property and services related to cosmetic service supplies. A cosmetic service supply is defined in section 1 of Part II of Schedule V as a supply of a property or a service that is made for cosmetic purposes and not for medical or reconstructive purposes.
Section 1 of Part II of Schedule V also defines the terms "health care facility" and "institutional health care service" for purposes of that Part. Generally, in order for care and supervision of residents to fall within the meaning of "institutional health care service", the ETA sets out the condition that care and supervision must first be provided in a "health care facility". If a facility is not a health care facility, then none of the activities undertaken in that facility are institutional health care services.
For purposes of Part II of Schedule V, a "health care facility" is defined to mean:
(a) a facility, or a part thereof, operated for the purpose of providing medical or hospital care, including acute, rehabilitative or chronic care;
(b) a hospital or institution primarily for individuals with a mental health disability; or
(c) a facility, or part thereof, operated for the purpose of providing residents of the facility who have limited physical or mental capacity for self-supervision and self-care with
i. nursing and personal care under the direction or supervision of qualified medical and nursing care staff or other personal and supervisory care (other than domestic services of an ordinary household nature) according to the individual requirements of the residents,
ii. assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the residents, and
iii. meals and accommodation.
You suggested that the group homes operated by the Corporation fall within paragraph (c) of the definition of "health care facility". To fall within this paragraph, all of the underlying elements set out in the paragraph must be present. This paragraph is describing a facility where the residents have demonstrated social and health needs due to, e.g., chronic diseases or a functional disability, and require continuous nursing and personal care under the direction or supervision of qualified medical and nursing care staff. Thus the essential criteria of this paragraph include both nursing care and personal care. These criteria are indicative of the operator's capacity to provide multi-levels of health and personal care according to the individual requirements of the residents. Nursing homes, which have registered nurses on staff to provide 24-hour nursing care to the residents, are the type of facilities that we consider to fall within paragraph (c) of the definition of "health care facility" in section 1 of Part II of Schedule V. In contrast, a facility operated to provide only support services and assistance with activities of daily living without nursing care would not meet the criteria of this paragraph.
The information suggests that the group homes operated by the Corporation to provide support services, care and supervision to adults with a developmental disability would not fall within the meaning of "health care facility" as defined in section 1 of Part II of Schedule V because the group homes are not operated for the purpose of providing multi-levels of health and personal care, including nursing care, to the residents. Therefore, the support services, care and supervision provided by the Corporation to the residents of the group homes it operates would not fall within the meaning of "institutional health care service" as defined in section 1 of Part II of Schedule V and thus section 2 of that Part would have no application to the supplies made by the Corporation.
Regardless of which exempting provision applies to the supplies made by the Corporation, we will explain the remaining requirements set out in section 259 that must be met with respect to a person's eligibility for the 83% PSB rebate of the GST and the federal part of the HST.
Facility operator and facility supplies
As your ruling request concerns the meaning of "facility operator" and whether the accommodation, supervision, care and support services the Corporation provides to residents in the group homes under its contract with the Province constitutes a "facility supply" as that expression is defined in subsection 259(1), our explanation is limited to the aspects of section 259 that are relevant to your query.
A "facility operator" means a charity, a public institution or a qualifying non-profit organization (other than a hospital authority) that operates a qualifying facility. For purposes of the rebate in section 259, subsection 259(2.1) sets out the criteria for a facility or part of a facility, other than a public hospital, to be a qualifying facility for a fiscal year or any part of a fiscal year, of the operator of the facility or part:
(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part at the facility would be facility supplies if the references in the definition "facility supply" in subsection (1) to "public hospital or qualifying facility" were references to the facility or part;
(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and
(c) an accreditation, license or other authorization that is recognized or provided under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.
A "facility supply" is defined in subsection 259(1) to mean an exempt supply (other than a prescribed supply) of property or a service in respect of which
(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process
(i) is undertaken in whole or in part at the public hospital or qualifying facility,
(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of
(A) a physician acting in the course of the practise of medicine,
(B) a midwife acting in the course of the practise of midwifery,
(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or
(D) a prescribed person acting in prescribed circumstances, and
(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expect to require that
(A) a registered nurse be at the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,
(B) a physician, or if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,
(C) throughout the process, the individual be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care, and
(D) it not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services referred to in clause (C), and
(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.
Essentially, section 259 provides for an 83% PSB rebate of the GST and the federal part of the HST to charities, public institutions and qualifying non-profit organizations providing to the general public certain high level medical care traditionally performed in hospitals. Accordingly, facility supplies for purposes of this rebate means that, as in the case of hospitals, physicians are actively involved in the process of health care for the individual, e.g., diagnosing and treating an injury, illness or disability, performing surgery, providing treatment, ordering treatment, and actively monitoring the individual's condition. The medical condition and level of care required of individuals must be such that it calls for active physician involvement to respond to their health care needs. Examples of facilities where such care is rendered are cancer clinics, day surgery clinics, and community health centres that render primary care services to the public.
Generally, residential facilities such as group homes are not qualifying facilities for purposes of the 83% PSB rebate for the GST or the federal part of the HST. The services provided in a residential facility are typically limited to property and services provided with residential accommodation, such as meals, nutritional services, housekeeping, security, monitoring, scheduled transportation, social services, recreational services, supervision, and support with activities of daily living.
Groups homes operated by the Corporation
Based on the information provided, the Corporation provides community-based residential accommodation and supervision, care and support to adults living in group home settings and day support to other individuals in the community who have a developmental disability as defined by [Legislation B] and [the Regulation]. This is the legislative and regulatory framework pursuant to which the Corporation operates the group homes and provides services pursuant to its agreement with the Province. It is our view that the group homes operated by the Corporation do not meet the criteria set out in subsection 259(2.1) to be qualifying facilities and that any supplies made by the Corporation in the course of operating the group homes are not facility supplies.
According to [Legislation B] and [the Regulation], the residents have be assessed and determined to have a developmental disability by a psychologist or a psychological associate in order to receive services from the Corporation under the funding agreement with the Province. For purposes of this legislation and regulation, a person with a developmental disability has [...], the criteria of which are noted in Facts 5, 6, 7 and 13 of the Statement of Facts in this letter.
We recognize that the residents and other individuals served by the Corporation have a developmental disability and need extra support to deal with mental health issues and behaviours that may affect their quality of life. However, the services they receive from the Corporation are not reasonably expected to take place under the active direction or supervision, or with the active involvement of, a physician as part of a medically necessary process of health care provided for the purpose of maintaining health, preventing disease, or diagnosing or treating an injury, illness or disability in accordance with the definition of "facility supply" in subsection 259(1). Rather, the purpose of the services is to give on-going life skills training and life-long learning and support in the development of skills the residents and other individuals need to be able to live a harmonious life with each other. The individuals are assessed by psychologists or psychological associates as to whether they have a developmental disability and the services may be provided by certified developmental services workers as well as staff in the fields of social services, nursing, and psychology.
We note that some of the residents may receive medical services from a physician. However, the Corporation's role with respect to the medical services is to coordinate the medical appointments of the residents, who visit the physician at the physician's office which is located offsite. There is no information to suggest that the support and services the residents receive in the group homes are provided under the active direction, supervision or involvement of the physician for the purpose of maintaining health, preventing disease, or diagnosing or treating an injury, illness or disability as set out in the definition of "facility supply".
In conclusion, because the services in question are not facility supplies, the group homes operated by the Corporation are not qualifying facilities for use in making facility supplies for purposes of section 259. As the Corporation does not make any supplies that would constitute a "facility supply", it does not operate a qualifying facility and it is not a "facility operator" as defined in the ETA.
Since the Corporation does not make facility supplies, the facts respecting the receipt of government funding or the nature of the accreditation, licence, or other authorization of the group homes have not been considered for purposes of determining whether it meets the other requirements set out in subsection 259(2.1) for qualifying facilities.
If you require clarification on any of the issues discussed in this letter, I can be contacted at 613-952-6761.
Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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