22 April 2005 GST/HST Interpretation 59102 - PROPOSED LAW/REGULATION Entitlement by the XXXXX to an 83% public service body rebate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX concerning amendments to the Excise Tax Act (ETA) proposed in the Federal Budget tabled on February 23, 2005. These amendments provide that government funded charities, public institutions and qualifying non-profit organizations may apply for an 83% public service body rebate of the Goods and Services Tax (GST) and the federal component of the Harmonized Sales Tax (HST) for expenses incurred in providing certain health care services and in the operation of certain facilities in which health care services are provided.

All legislative references are to the ETA and the regulations therein, unless otherwise specified.

Interpretation Requested

You have requested an application ruling for the XXXXX to determine if this organization is entitled to apply for the proposed 83% public service body rebate. The Canada Revenue Agency does not provide GST/HST rulings on proposed legislation or draft regulations that are not yet law; however, the following interpretation of the relevant provisions is provided for your information.

Interpretation Given

We understand from the information provided in your letter that the XXXXX operates XXXXX a residential treatment facility for individuals suffering from alcohol, drug and gambling addictions. XXXXX.

From the information provided on the XXXXX website, we understand that the XXXXX provides XXXXX recovery programs in a residential environment to adults with drug, alcohol and/or gambling addictions XXXXX.

XXXXX.

XXXXX.

XXXXX. Referrals for treatment are made through hospitals, detox centres, addiction agencies, XXXXX, Social Services, the legal system, EAP programs and self-referral. Anyone eighteen years of age or older who meets admission criteria may enter the XXXXX program. XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

Proposed amendments to the ETA introduced in the Notice of Ways and Means Motion of March 21, 2005, provide an 83% public service body rebate to government funded charities, public institutions and qualifying non-profit organizations for the GST and the federal component of the HST paid on expenses incurred in providing certain health care services and in the operation of certain facilities providing health care services.

To be eligible for this rebate, an entity must meet the definition of a hospital authority, a facility operator or an external supplier and it must provide certain supplies as described below.

The XXXXX is a charity for purposes of the GST/HST. It has not been designated as a hospital authority by the Minister of National Revenue; therefore, it is necessary to establish whether it is entitled to an 83% rebate as either a facility operator or an external supplier.

Facility Operator

Proposed clause 259(4.1)(b)(iii)(C) of the ETA provides that a person acting in the person's capacity as a facility operator may claim a rebate of 83% of non-creditable tax charged on its purchases to the extent that it intended to consume, use or supply the property or services in activities engaged in by the person in the course of operating a qualifying facility for use in making facility supplies, or of making facility supplies, ancillary supplies or home medical supplies.

A facility operator is a charity, a public institution or a qualifying non-profit organization (other than a hospital authority) that operates a qualifying facility. As a charity, the XXXXX meets part of this definition.

Qualifying facility

Proposed subsection 259(2.1) reads: For the purposes of this section, a facility, or part of a facility, other than a public hospital, is a qualifying facility for a fiscal year, or any part of a fiscal year, of the operator of the facility or part, if

(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part 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, licence or other authorization that is recognized or provided for 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.

Facility supplies

"facility supply" in subsection 259(1) means 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 practice of medicine,

(B) a midwife acting in the course of the practice 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 practice of a nurse practitioner, or

(D) a prescribed person acting in prescribed circumstances (footnote 1), 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 expected 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;

Paragraph (a) of this definition provides that property must be made available or services rendered to an individual at the 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 care.

Subparagraph (a)(i) requires that the medically necessary process for which goods and services are being provided take place in whole or in part at the XXXXX facility. Subparagraph (a)(ii) further requires that the medically necessary process be reasonably expected to take place under the active direction or supervision, or with the active involvement of, a physician acting the course of the practice of medicine (or by a nurse practitioner or a prescribed person in prescribed circumstances).

As the XXXXX is a charity, counselling and other services provided to its clients will generally be exempt under section 1 of Part V.1 of Schedule V to the ETA.

The XXXXX website describes the XXXXX as a non-medical facility that provides supervision by trained personnel. We have not been provided with information about the qualifications of personnel employed by the XXXXX at the XXXXX, or about the specific supplies made to clients of the XXXXX.

The website also states that clients admitted to the XXXXX may be required to have a medical examination. XXXXX. However, it is not evident that goods and services provided by the XXXXX are rendered to individuals at its facility as part of a medically necessary process of health care for that individual and that this process is reasonably expected to take place under the active direction, supervision, or with the active involvement of a physician.

Subparagraph (a)(iii) of the definition of "facility supply" does not apply to the XXXXX as individuals admitted for overnight care at the XXXXX must be receiving goods and services provided as part of a medically necessary process of chronic care that requires, or is reasonably expect to require, that a registered nurse be at the facility at all times, that a physician (or a nurse practitioner, if a physician is not reasonably accessible in the geographic area) be at the facility or be on-call to attend at the facility at all times when the individual is there and that the individual be subject to medical management and receive a range of therapeutic health care services, including registered nursing care throughout all, or substantially all, of each calendar day.

From the information provided, the clients at the XXXXX do not receive chronic care that meets all the requirements of subparagraph (a)(iii).

Therefore, is not evident that the XXXXX makes facility supplies. As it does not make facility supplies, the XXXXX is not a qualifying facility as that term is defined in subsection 259(2.1).

As the XXXXX does not operate a qualifying facility, it does not meet the definition of a facility operator and is not entitled to the 83% rebate available to these entities.

External supplier

Proposed clause 259(4.1)(b)(iii)(D) provides that a person acting in the person's capacity as an external supplier may claim a rebate of 83% of the non-creditable tax charged to the extent that it intended to consume, use or supply the property or services in activities engaged in by the person in the course of making ancillary supplies, facility supplies or home medical supplies.

An "external supplier" is a charity, a public institution or a qualifying non-profit organization (other than a hospital authority or a facility operator) that makes ancillary supplies, facility supplies or home medical supplies.

The XXXXX is a charity so that part of the definition of external supplier is met. As it does not make facility supplies, it is necessary to determine whether it makes ancillary supplies or home medical supplies.

Ancillary supplies

"ancillary supply" means

(a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or

(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent to which the property or service is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding;

Based on the information provided, the XXXXX carries on its own activities and does not organize or coordinate the making of facility supplies or home medical supplies by other parties. There is also no indication that it provides exempt property or services that are reasonably expected to be consumed or used in making a facility supply.

As such, it does not make ancillary supplies.

Home medical supplies

"home medical supply" means an exempt supply (other than a facility supply or a prescribed supply) of property or a service

(a) that is made

(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, and

(ii) after a physician acting in the course of the practice of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual's place of residence or lodging (other than a public hospital or a qualifying facility),

(b) in respect of which the property is made available, or the service is rendered, to the individual at the individual's place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practice of medicine, or a prescribed person acting in prescribed circumstances,

(c) all or substantially all of which is of property or a service other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and

(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier;

It is not clear that the XXXXX provides exempt goods and services in a individual's place of residence or lodging that are part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care. There is also no indication that a physician has identified or confirmed that it is appropriate that a medically necessary process of which the XXXXX supplies are a part, take place at the individual's place of residence or lodging.

Further, to be a home medical supply, these goods and services must be provided on the authorization of a person responsible for coordinating the health care process to the individual client and it must be reasonable to expect that the person will carry out his or her responsibilities in consultation with, or with ongoing reference to instructions for the process given by a physician acting in the course of the practice of medicine.

Based on the information available, supplies by the XXXXX would not meet the definition of home medical supplies.

As the XXXXX does not make ancillary supplies, facility supplies or home medical supplies, it does not meet the definition of an "external suppler".

Accordingly, the XXXXX is not entitled to the 83% rebate of its non-creditable tax charged. As the XXXXX is a charity, it continues to be entitled to claim a 50% rebate in respect of its activities.

The foregoing comments represent our general views with respect to the proposed amendments to the ETA as they relate to the subject matter of your request. Any change to the wording of these proposed amendments or any future proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax Rulings, do not bind the Canada Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Goods and Services Tax Rulings.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-9590.

Yours truly,

Elaine Bonnah
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

FOOTNOTE:

1. As there are currently no regulations setting out what constitutes a "prescribed person", "prescribed circumstances", or a "prescribed supply", references to these terms have no application to the present situation.

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