15 April 2005 GST/HST Interpretation 59054 - 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 (with attachments) concerning proposed amendments to the Excise Tax Act (the ETA) introduced in the Notice of Ways and Means motion of March 21, 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 instead of its current 50% 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, brochure and website that XXXXX focus is to provide services to individuals with serious XXXXX. It works in partnership with each client and his or her case manager to develop a rehabilitation plan to meet the client's needs. XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX.

XXXXX is a charity for purposes of the ETA. It has not been designated by the Minister of National Revenue to be a hospital authority. As a charity, XXXXX is entitled to claim a 50% public service body rebate of the GST/HST paid on purchases for which no input tax credit may be claimed, such as purchases used to provide tax exempt goods and services.

The proposed amendments to the ETA provide that an entity that meets the definition of a "facility operator" or an "external supplier" may claim an 83% public service body rebate in respect of certain defined activities.

Facility Operator

The amendments provide that a facility operator may claim an 83% rebate of non-creditable tax charged to the extent that it intended to consume, use or supply 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 defined as a charity, a public institution or a qualifying non-profit organization (other than a hospital authority) that operates a "qualifying facility".

XXXXX. However, it is not clear that the facilities operated by XXXXX would meet the definition of a qualifying facility.

The proposed amendments provide that 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.

Therefore, the first requirement of this definition is that the operator of a facility must make facility supplies.

Facility Supplies

A "facility supply" means an exempt 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 (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.

As there is no indication from the information provided that XXXXX provides chronic care in a facility that requires that the individual stay overnight, subparagraph (a)(iii) of the definition of facility supply will not apply. Further, as there is no indication that XXXXX does not operate its own facility or facilities, paragraph (b) does not apply. Therefore, to be making facility supplies, XXXXX must provide an exempt supply of property or a service that meets the requirements of subparagraphs (a)(i) and (ii) of this definition.

Paragraph (a) provides that the exempt property must be made available, or the exempt 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.

XXXXX. As XXXXX is a charity, the counselling and support services it provides would generally be exempt under section 1 of Part V.1 of Schedule V to the ETA.

However, it will be a question of fact as to whether XXXXX provides supplies in its facilities to individuals as part of a medically necessary process of health care for those individuals.

XXXXX.

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 XXXXX facility. Subparagraph (a)(ii) 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 in the course of the practice of medicine (or a midwife, nurse practitioner or a prescribed person in prescribed circumstances which is not relevant to this situation). However, there is no indication that a physician plays an active role in the services provided by XXXXX to its clients.

XXXXX. However there is no indication that the person's physician oversees or directs the provision of goods or services by XXXXX to the individual as part of a medically necessary process.

Based on the foregoing, XXXXX provides certain exempt services that are undertaken to help individuals XXXXX, however, there is no indication that its services are provided as part of a medically necessary process that can reasonably be expected to take place under the active direction, supervision or involvement of a physician.

It is not clear therefore, that XXXXX is making facility supplies. If it does not make facility supplies, then its facilities are not qualifying facilities as that term is defined in the proposed legislation. That is, if XXXXX is not making facility supplies, it is not necessary to establish whether XXXXX facilities meet the other requirements of being a qualifying facility, such as whether it receives amounts that meet the definition of qualifying funding or if an accreditation, licence or other authorization has been provided in respect of the facilities for the provision of health care services.

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

External Supplier

The proposed legislation also provides that a person acting 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.

It is not clear that XXXXX makes facility supplies; therefore, to establish whether it meets the definition of an external supplier, it must provide ancillary supplies or home medical supplies.

Ancillary Supply

The proposed legislation defines "ancillary supply" as

(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, 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.

Therefore, it is not evident that supplies made by XXXXX would be ancillary supplies as defined in the proposed legislation.

Home medical supply

The proposed legislation defines a "home medical supply" as 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 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 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

The term "medical funding" is defined as 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;

XXXXX. While it is possible that funding from XXXXX to XXXXX might constitute medical funding, we do not have sufficient information to make that conclusion. However, it is not necessary to make this determination, as it is not clear that the services provided by XXXXX meet the other requirements of the definition of home medical services.

Based on the information provided, XXXXX provides exempt XXXXX services to certain individuals in their own homes. Reference is made to qualified professional staff, XXXXX, but there is no indication that a physician has identified or confirmed that it is appropriate that a medically necessary process, of which XXXXX supplies are a part, take place at the individual's place of residence.

Further, while a case manager may work with XXXXX to determine the appropriate care to be provided to the client, there is no indication that the case manager carries 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.

On this basis, it is not evident that XXXXX makes facility supplies, ancillary supplies or home medical supplies and therefore, it will not meet the definition of an external supplier.

As XXXXX does not meet the definition of a facility operator or external supplier, it is not entitled to the proposed 83% rebate available to facility operators and external suppliers for the non-creditable tax charged on its purchases. It will continue to be eligible for the 50% rebate available to charities under the ETA.

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.

2005/04/22 — RITS 59102 — [83% Public Service Body Rebate Proposed for Government Funded Charities, Public Institutions and Qualifying Non-profit Organizations]