24 February 2000 External T.I. 1999-0015885 - Long Term Care

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Whether Long Term Care insurance policy qualifies as a PHSP?

Position: General comments only.

Reasons: Department's comments regarding a PHSP are set out in IT-339R2 and Medical Expenses in IT-519R2.

XXXXXXXXXX 1999-001588

Wm. P. Guglich

Attention: XXXXXXXXXX

February 24, 2000

Dear Sirs:

Re: Private Health Services Plan

This is in reply to your letter of December 17, 1999, requesting our views as to whether the premiums paid under the proposed Long Term Insurance Plan for the XXXXXXXXXX may be included as a qualifying medical expense pursuant to paragraph 118.2(2)(q) of the Income Tax Act (the "Act"). You submitted a final version of the XXXXXXXXXX Long Term Care insurance policy (the "Policy").

Our Comments

The situations outlined in your letter appear to relate to actual proposed transactions involving particular taxpayers. A binding determination from us regarding the application of any provision of the Act can only be obtained by way of an advance income tax ruling request following the procedures outlined in Information Circular, IC-70-6R3. Nevertheless, we offer the following general comments in connection with your request.

For a general discussion of our position on a Private Health Services Plan ("PHSP"), please refer to Interpretation Bulletin IT-339R2, Meaning of Private Health Services Plan. Paragraph 3 of IT-339R2 indicates that one of the requirements of a PHSP is that it must be in the nature of insurance. Paragraph 4 indicates that the PHSP coverage must be for hospital care or expense or medical care or expense which normally would otherwise have qualified as a medical expense under subsection 118.2(2) of the Act. Paragraphs 24 to 31 of IT-519R2, Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction, set out the general position regarding attendant care expenses that qualify as medical expenses under subsection 118.2(2) of the Act.

The Home and Adult Day Care Benefit described in XXXXXXXXXX the Policy covers care of an individual in the home or an Adult Care Center. The Policy defines Adult Care Center as a facility that operates on less than a twenty-four hour basis. Pursuant to paragraph 118.2(2)(b.1) of the Act, remuneration for attendant care in Canada cannot exceed $10,000 per year (or $20,000 if the individual dies in the year). We understand that under the Policy, the amounts payable for part-time attendant care in the home or an Adult Care Center, can exceed $10,000 per year. Therefore, any amount in excess of $10,000 for the year would not qualify as a medical expense pursuant to paragraph 118.2(2)(b.1) of the Act (see paragraph 25 of IT-519R2). On the other hand paragraphs 118.2(2)(b), (c) and (d) of the Act do not provide for a maximum amount that may be paid in the year if the remuneration is for one full-time attendant in a patient's home or a nursing home. Similarly, there is no maximum amount (and no full-time attendant requirement) if the medical expense qualifies under paragraph 118.2(2)(e) of the Act (see paragraphs 30 and 31 of IT-519R2).

You also asked for comments regarding remuneration for one full-time attendant where there are daily attendants that include paid attendants. In our view, the reference in paragraphs 118.2(2)(b) and (c) of the Act to "one full-time attendant" limits amounts claimed as a medical expense under these provisions, to amounts paid for an individual who requires constant care and attendance by reason of that individual's injury, illness or affliction. It does not impose a requirement on the minimum time to be spent in attending to the cared-for person by a particular attendant. It is understood that an individual who requires continuous care and attendance throughout the day and night will not normally be able to obtain such care through a single attendant. Such care can be satisfied in whole or in part by a person(s) employed for that purpose in combination with other individuals (such as a spouse, parent or other related person) who may be in attendance during hours that their other commitments permit, provided the period of each paid attendant does not overlap.

XXXXXXXXXX the Policy provides for payment of Care Advisory Services provided by a Care Advisor. Care Advisor is defined in the Policy to mean a nurse or social worker. Paragraph 118.2(2)(a) of the Act allows an individual to include, as a qualifying medical expense, an amount paid to a medical practitioner, dentist or nurse or a public or licensed private hospital for medical or dental services provided to the patient. The rules for determining whether a person is a medical practitioner, dentist or nurse for purposes of the medical expense tax credit are discussed in paragraph 4 of IT-519R2. Although a nurse is specifically referred to in paragraph 118.2(2)(a) of the Act, we will only consider fees paid to social workers as "medical expenses", if the social workers:

a) are working in a recognized mental health clinic, community agency or hospital,

b) are members of the association governing their particular profession, and

c) provide a treatment at the request of, or in association with, a medical practitioner.

The Supportive Services Benefit in XXXXXXXXXX the Policy provides for payment of actual expenses for supportive services or supplies relating to supportive equipment, home modification and/or caregiver training.

Supportive equipment is defined in the Policy to include, among other things, adaptive equipment to enable independent feeding and dressing (specialized utensils and fasteners). Feeding and dressing equipment is not listed in section 5700 of the Income Tax Regulations as one of the prescribed devices or equipment for purposes of paragraph 118.2(2)(m) of the Act and hence, would not qualify as a medical expense. The remaining supportive equipment described in the Policy qualifies as a medical expense provided the conditions in paragraph 118.2(2)(m) of the Act are otherwise met (see paragraph 57 of IT-519R2).

As stated in paragraph 55 of IT-519R2, in the case of an individual who lacks normal physical development or who has a severe and prolonged (see 2(a) of IT-519R2) mobility impairment, reasonable expenses relating to renovations or alterations to the individual's dwelling can be claimed as medical expenses under paragraph 118.2(2)(l.2). To qualify, these expenses must be paid to enable the individual to gain access to the dwelling or be mobile or functional within it. It should be clear under the Policy that home modification expenses will only qualify, if the above conditions are met.

Benefits are payable under XXXXXXXXXX the Policy for caregiver training expenses incurred by an individual for training a caregiver to provide care for the individual in the individual's home. Paragraph 118.2(2)(l.8) of the Act limits caregiver training expenses to reasonable expenses to train an individual or a person related to the individual, provided the training relates to the mental or physical infirmity of a person who is related to the individual and is a member of the individual's household or is dependent on the individual for support. However, expenses incurred by an individual to train a caregiver who will provide care to the individual do not qualify as a medical expense under paragraph 118.2(2)(l.8) of the Act.

Since the Policy provides for coverage payment of certain benefits that do not qualify as medical expenses under subsection 118.2(2) of the Act, the Policy does not qualify as a PHSP. As a result, the premiums paid in respect of the Policy do not qualify as medical expenses under paragraph 118.2(2)(q) of the Act.

We trust our general comments will be of assistance.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch