18 December 2007 GST/HST Ruling 95842 - XXXXX

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.

Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5	XXXXX XXXXX XXXXX
XXXXX XXXXX XXXXX	Case Number: 95842
	December 18, 2007

Dear XXXXX:

Subject:

GST/HST RULING XXXXX – Eligibility of the XXXXX to claim the 83% public service body rebate

Thank you for your letter of XXXXX, concerning the eligibility of the XXXXX to claim the 83% public service body (PSB) rebate. In your letter, you provided additional information to support your view that XXXXX qualifies for the 83% PSB rebate of the Goods and Services Tax (GST) and the federal component of the Harmonized Sales Tax (HST) that became payable on or after January 1, 2005, for property and services acquired in the course of operating the XXXXX and in its provision of supplies to residents residing there. We apologize for the delay in providing this response.

XXXXX.

All legislative references are to the Excise Tax Act (ETA) and the regulations thereunder, unless otherwise specified.

Statement of Facts

We understand that:

1. XXXXX is a registered charity under section 248 of the Income Tax Act and is therefore a charity for purposes of the ETA. XXXXX is not a GST/HST registrant.

2. XXXXX holds a licence XXXXX issued under the XXXXX to establish, operate and maintain a nursing home at XXXXX.

3. The XXXXX specify the conditions of licencing as a nursing home. The XXXXX also requires a nursing home licensee to abide with the standards, guidelines and expectations described in XXXXX.

4. According to its website XXXXX, the programs offered by XXXXX are described as follows:

XXXXX

Ruling Requested

You would like to know whether XXXXX is a facility operator making facility supplies and therefore entitled to claim the 83% PSB rebate under section 259 of the non-creditable tax charged on property and services acquired by XXXXX in the course of operating the XXXXX.

Ruling Given

Based on the facts set out above, we rule that XXXXX is not a facility operator making facility supplies and is therefore not entitled to claim the 83% PSB rebate under section 259 of the non-creditable tax charged on property and services acquired by XXXXX in the course of operating the XXXXX.

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

To be eligible for the 83% PSB rebate available under section 259, an entity must be a "hospital authority", an "external supplier" or a "facility operator", as these terms are defined below. Eligible entities are entitled to claim the 83% PSB rebate of the non-creditable tax charged on supplies acquired in the course of operating a facility that constitutes a qualifying facility, or of making certain defined supplies.

XXXXX is not a facility operator making facility supplies because any exempt supplies it makes as part of a medically necessary process of health care for residents at the XXXXX are not reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician, as required by the definition of "facility supply". Please note, unless otherwise indicated, the definition of each term referenced below as well as those found in the attached Appendix are from subsection 259(1).

Hospital authority

A "hospital authority" is defined in subsection 123(1) as "an organization that operates a public hospital and that is designated by the Minister as a hospital authority for the purposes of Part IX of the ETA.

As XXXXX is not a "hospital authority", it must meet the definition of "external supplier" or "facility operator" to be entitled to the 83% PSB rebate.

External supplier

An "external supplier" means 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.

XXXXX is not an external supplier because it operates its own facility, XXXXX. It does not make an "ancillary supply" or a "home medical supply", as these terms are defined.

Facility operator

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.

The first requirement that XXXXX must meet to be a facility operator is that it must be a charity, a public institution or a qualifying non-profit organization (other than a hospital authority).

A "charity" is defined in subsection 123(1) as a registered charity within the meaning of section 248 of the Income Tax Act. As XXXXX is a charity, it meets this first requirement.

To meet the second requirement, XXXXX must operate a qualifying facility.

Qualifying facility

Subsection 259(2.1) sets out the criteria that must be met in order 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, as follows:

(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 of that term 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.

The first criterion requires that the 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 of that term in subsection (1) to "public hospital or qualifying facility" were references to the facility or part.

Facility supply

A "facility supply" 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 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 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 in respect of the supply.

To be a "facility supply" the supply must be an exempt supply (other than a prescribed supply).

Section 2 of Part II of Schedule V exempts a supply of an institutional health care service made by the operator of a health care facility if the service is rendered to a patient or resident of the facility, but not including a supply of a service related to the provision of a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes. Section 1 of Part II of Schedule V defines "institutional health care service" and "health care facility".

Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity, unless specifically excluded under paragraph (a) to (n) of that section.

As XXXXX is a charity for GST/HST purposes, its supplies of property and services would generally fall within section 2 of Part II or section 1 of Part V.1 of Schedule V.

The definition of "facility supply" requires that the exempt property made available or the exempt service rendered at the public hospital or qualifying facility be part of a medically necessary process of health care for the individual. This process must be undertaken in whole or in part in the public hospital or qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).

In the case where the medically necessary process of health care for the individual is a process of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, the process must require, or reasonably be expected to require, the additional elements of health care also described in the definition of "facility supply".

Among those elements, in addition to meeting the other requirements is that a registered nurse must be at the public hospital or qualifying facility 24 hours a day; a physician must be at, or on call 24 hours a day at the public hospital or qualifying facility when the individual is there and the individual must be subject to medical management and receive a range of therapeutic health care services, including registered nursing care, for at least 10% of each day while the individual is at the public hospital or qualifying facility.

Where a health care process involves chronic care, each and every one of the elements described in the definition of "facility supply", as described above must be met. An entity that does not meet all of these requirements will not be considered to be making facility supplies and therefore would not qualify as a "facility operator".

XXXXX offers a variety of programs to residents at the XXXXX. To that end, it has entered into a number of agreements/contracts for this purpose. While other physician services XXXXX may be rendered to these residents, the agreements most relevant in determining whether the supplies made by XXXXX in these circumstances meet the requirements described in the definition of "facility supply" are those entered into with XXXXX the physician who, in the capacity as both Medical Director and Attending Physician provides health care to XXXXX residents at the XXXXX.

XXXXX. To the extent that XXXXX pays a fee to XXXXX for the administrative services XXXXX renders as Medical Director, the supply of these services would not constitute a facility supply. These services are administrative in nature and are not supplied as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability or providing palliative health care as required in the definition of "facility supply".

As stated in your facsimile transmission XXXXX residents at the XXXXX have XXXXX as their attending physician. In XXXXX capacity as attending physician, XXXXX bills XXXXX for the services XXXXX renders to these residents. In XXXXX only those services that constitute medically necessary physician services are billable by physicians to XXXXX. Accordingly, to the extent that XXXXX bills XXXXX for the provision of XXXXX professional services to residents at the XXXXX, whether it be in the capacity as Medical Director or Attending Physician, any exempt supplies made by XXXXX to residents at the XXXXX under the direction or supervision, or with the involvement, of XXXXX would be part of a medically necessary process of health care for the resident.

While any exempt supplies made by XXXXX in the circumstances described above may be part of a medically necessary process of health care, the definition of "facility supply" imposes the requirement that the health care process be reasonably expected to take place under the "active direction or supervision, or with the active involvement" of a physician.

Although there is no question that the medical problems of residents (e.g., physically frail) at the XXXXX and the level of care they need requires the involvement of XXXXX in the process of health care, they are not medical problems that warrant XXXXX active involvement in the process. This involvement of a physician in the health care process, even if comparable to that provided by a physician to a client in the community is not sufficient for purposes of meeting the requirements imposed under the definition of "facility supply".

The services rendered by XXXXX to the residents at the XXXXX are usually rendered to residents on an as-need basis, in accordance with requirements set out in the Medical Director and Attending Physician Agreements or in response to the requirements imposed on XXXXX by the XXXXX

XXXXX involvement in the health care process for residents in XXXXX is not provided to the same extent as that contemplated by the use of the phrase "active direction or supervision, or active involvement, of a physician". XXXXX.

Prior to the amendments made to section 259, hospital authorities were generally entitled to claim the 83% PSB rebate incurred in respect of property or services used to operate a public hospital. The amendments made to section 259 extended the application of the 83% PSB rebate to public institutions, such as hospital authorities and to charities and qualifying non-profit organizations providing certain health care services traditionally performed in hospitals like those provided in cancer clinics, day surgery clinics, community health centres that render primary care services, and facilities that offer high-level therapeutic care. As in the case of public hospitals, physicians in these facilities 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 radiation treatment; actively monitoring the individual's condition) because the medical conditions and the level of care required of individuals in these situations call for it.

XXXXX has indicated that the residents at the XXXXX are of the same type as those in a nearby chronic hospital. XXXXX.

XXXXX is licenced as a nursing home by XXXXX. In those instances where it can be established that the nature of the care provided in a facility is such that it requires medical and surgical equipment with active physician involvement, for example as in the case of a nursing home that is recognized provincially as a hospital because of the high level of chronic care it provides, the high level chronic care facility would likely qualify for the 83% PSB rebate.

The determination of whether an entity, including a municipally-owned nursing home, qualifies as a facility operator making facility supplies is made on a case-by-case basis.

To summarize, while any exempt supplies made by XXXXX to residents at the XXXXX may be part of a medically necessary process of health care, they are not facility supplies because they are not reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician, in accordance with the definition of "facility supply".

As XXXXX does not make any supplies that would constitute a "facility supply", it does not meet the definition of "facility operator". As such, it is not entitled to the 83% PSB rebate of the non-creditable tax charged under section 259 in respect of property and services acquired by XXXXX in the course of operating the XXXXX and in its provision of supplies to residents residing there. As a registered charity however, XXXXX is entitled to claim a PSB rebate of 50% of the non-creditable tax charged under this provision.

Since XXXXX does not make facility supplies, the facts respecting the receipt of government funding have not been considered for purposes of determining whether it meets the other requirements with respect to qualifying facilities.

I regret that a more favourable response could not be provided in regards to this matter. If you require clarification on any of the issues discussed in this letter, please call Chantal Desrosiers, Manager, Municipalities and Health Care Services Unit at 613-941-3268.

Yours truly,

Danielle Laflèche
Director
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

Appendix

Defined terms in the Excise Tax Act

Ancillary supply

An 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.

Home medical supply

A 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 or diagnosing or treating an injury, illness or disability or providing palliative health care, and

(ii) after a physician acting in the course of the practise 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 practise of medicine, or a prescribed person acting in prescribed circumstances,

(c) all or substantially all of which is of the 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.

Medical funding

Medical funding of a supplier in respect of a supply means an amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the supplier in respect of health care services for the purpose of financially assisting the supplier in making the supply or as consideration for the supply by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.

Qualifying funding

Qualifying funding of the operator of a facility for all or part of a fiscal year of the operator means a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property that are made available, or services that are rendered, at the facility during the fiscal year or part and is paid or payable by

(a) a government, or

(b) a person that is a charity, a public institution or a qualifying non-profit organization

(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and

(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person that are in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.

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