5 April 2001 Internal T.I. 2001-0075297 - PERSONAL CARE HOMES

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 residents of Personal Care Homes qualify for a medical expense under 118.2(b), (b.1), (b.2), (d) or (e)

POSITION TAKEN:

1. 118.2(2)(d) does not apply -Personal Care Homes are not nursing homes

2. Amounts not paid as remuneration, thus attendant care not deductible under 118.2(b), (b.1), (b.2), (e).

3. 118.2(2)(e) Generally, Personal Care Homes are not institutions as described under 118.2(2)(e) but it may be possible for one to qualify.

4. 118.2(2)(b.2) Depending on how supervision and care is itemized and depending on whether the home qualifies as a group home operated exclusively for the benefit of individuals who have a severe and prolonged impairment, part of the amounts paid may qualify for a deduction under 118.2(2)(b.2.)

Reasons FOR POSITION TAKEN:

1. Care in a nursing home is more extensive.

2. Attendant care must be paid as remuneration.

3. Personnel and facilities must be specially provided.

4. Personal care Homes may qualify as a group home under 118.2(2)(b.2), if all residents qualify under 118.3 - care and supervision may be deductible.

		June 4, 2001

	Appeals Branch	HEADQUARTERS
	Income Tax Appeals Directorate	C. Tremblay, CMA

	Attention: John Kingston
		2001-007529

Medical Expense Claims
Paragraphs 118.2(2)(b),(b.1),(b.2),(d) and (e) of the Income Tax Act (the "Act")

This is in reply to your memorandum of March 14, 2001 and to your e-mail of March 23, 2001, requesting our views on whether a resident of a Personal Care Home ("PCH") can make a claim under either paragraph 118.2(2)(b.1) or (e) of the Act.

The facts as we understand them:

1. A PCH is a privately operated licensed care facility in XXXXXXXXXX.

providing a range of personal services to old age residents. A PCH may range from a care facility providing personal care, specialized care or both specialized and personal care. A PCH is usually at a care level below that of a nursing home.

2. A trained assessor designated by the District Health Board assesses the abilities and care needs of a resident so he or she can determine which PCH is best suited to his or her needs. The assessment identifies what the resident needs are and what they can do for themselves. A PCH develops a personal care plan for each individual resident.

3. Staff are on site at the PCH 24 hours a day. Each PCH must have a sufficient number of care staff on duty to meet the needs of each resident at all times. Staff members are required to hold a certificate in a standard First Aid Course and to hold a valid certificate in Basic Food Service if they participate in meal preparation for the residents.

4. Residents of a PCH are mentally or physically disabled and meet the criteria needed to qualify for a disability tax credit under section 118.3 of the Act.

The Surrey Tax Centre has been disallowing medical expense claims on the basis that a PCH is not a nursing home and does not provide sufficient care to be considered a nursing home.

The Appeals Division of the Burnaby-Fraser TSO would like us to consider whether paragraph 118.2(2)(e) of the Act could encompass a PCH. In their view, a PCH provides care by staff that are specially trained to deal with the residents' mental or physical disabilities since the resident receives an assessment by the assessment agency certifying that he or she needs the care provided by the PCH.

Head Office Appeals is of the view that the payment by the resident can be considered for "attendant care". Staff members appear to provide the same type of services that would be provided by an attendant, if the resident were to be cared for outside the institution. The question is whether some portion of the payments made to the PCH can be allocated and claimed under paragraph 118.2(2)(b.1) of the Act.

The Appeals Division of Burnaby-Fraser TSO also wants us to consider attendant services provided by a retirement home where meals, weekly linen and maid service is provided and where a nurse is on duty 24 hours a day. Should we find that a portion of these fees qualify for the deduction under paragraph 118.2(2)(b.1) of the Act, would a retirement home be required to keep detailed records or could the amount paid by the residents be allocated on arbitrary percentage of the monthly rent?

Our Comments

Nursing Homes - Paragraphs 118.2(2)(b) and (d) of the Act

Paragraphs 118.2(2)(b) and (d) of the Act provide, inter alia, that an amount paid for full-time care in a nursing home qualifies as a medical expense for the purposes of the Act where the patient has been certified to either have a severe and prolonged mental or physical impairment or to be a person who, by reason of a lack of normal mental capacity, is, and will continue to be for the foreseeable future, dependant on others. In our view, the issue of whether a particular place is a nursing home must be considered independently from the issue of whether the individual has been appropriately certified to meet the conditions set out in either paragraph 118.2(2)(b) or (d) of the Act. Consequently, fees paid for an individual's accommodation in a place which is not a nursing home, such as a seniors' residence or a home for the aged, do not qualify as a medical expense, even if the individual has a severe and prolonged mental or physical impairment. Although such individual may not be entitled to a medical expense tax credit for full-time care in a nursing home or remuneration for an attendant, they will, in all likelihood, be entitled to the disability tax credit.

While we accept that a particular place does not necessarily need to be licensed as a nursing home in order to be considered as such, it must have sufficient staff to operate as a nursing home. In other words, it must have the equivalent features and characteristics of a nursing home in order to qualify as a nursing home for the purposes of the medical tax credit. Hence, it must provide sufficient calibre and number of qualified personnel to provide nursing care to its residents on a 24-hour basis. While all regular fees charged by a nursing home, including any component for accommodation or meals, are normally accepted as being on account of full-time care in a nursing home, it would be difficult to establish that the normal amount charged for meals or accommodation in a place which does not ordinarily provide full-time nursing care to its residents is, in fact, paid for "full-time care" and not for accommodation or other services. In the case of a facility which provides multiple levels of care, the portion of the facility which provides regular nursing care of the type provided by a nursing home will qualify as a nursing home and the portion of the facility which does not, will not so qualify.

Care in a School, Institution, etc. - Paragraph 118.2(2)(e) of the Act

In certain circumstances, fees paid to an institution that is not a nursing home may qualify as a medical expense under paragraph 118.2(2)(e) of the Act. Although the requirements of paragraph 118.2(2)(e) of the Act appear less restrictive than those of paragraphs 118.2(2)(b) and (d) of the Act, in that the care need not be provided in a nursing home on a full-time basis, there are several additional requirements within 118.2(2)(e) of the Act that do not apply to subparagraphs 118.2(2)(b) or (d) of the Act. In order for an amount to qualify as a medical expense under paragraph 118.2(2)(e) of the Act, the individual receiving care or care and training at a particular place must be certified by an appropriately qualified person to be in need of the specialized equipment, facilities or personnel provided by that place for care or care and training of individuals with the handicap suffered by that individual. Therefore if an individual suffering from a handicap and as a result, receives care, or care and training, at a particular place, which has equipment, facilities or specially trained personnel specifically made available for the care of individuals with that particular handicap, the fees paid to such a place would generally qualify as a medical expense. For example, fees paid to an institution which has the staff specially trained to deal with the problems associated with Alzheimer's disease will qualify as a medical expense when paid in respect of an individual suffering from that disease. However, we are not aware that a PCH provides any specialized equipment, facilities or specially trained personnel. On the other hand, where a particular PCH does in fact provide specialized care aimed at a certain type of physical or mental impairment, we would consider such a PCH to qualify as an institution or other place of the patient as envisioned under paragraph 118.2(2)(e) of the Act.

Attendant Care - Paragraph 118.2(2)(b.1) of the Act

Paragraph 118.2(2)(b.1) of the Act allows an individual to include as a qualifying medical expense an amount paid "as remuneration for attendant care in Canada to the patient" who has severe and prolonged mental or physical impairment. The word remuneration according to the Oxford Dictionary means reward, pay for services rendered; serve as or provide recompense to a person. Remuneration is defined in Black's Law Dictionary as payment; compensation, "the act of paying or compensating". Thus, it is our view that only amounts paid for remuneration that are actually paid for an attendant will qualify as a medical expense under paragraph 118.2(2)(b) or (b.1) of the Act.

Paragraph 25 of Interpretation Bulletin IT-519R2 states that "Attendant care" is care provided by an attendant who performs those personal tasks, which the person with a disability is unable to do for him or herself. Depending on the situation, such tasks could include meal preparation, maid and cleaning services, transportation, and personal services, such as banking and shopping. "Attendant care" would also include companionship to the person with the disability. However, if a person is employed to simply do a specific task, for example, provide maid and cleaning services, or transportation services the provision of such a service would not be viewed as "attendant care". Further, paragraph 26 of IT-519R2, states that imputed salary or remuneration will not qualify since no actual payment is made.

Generally, the residents pay a fee for the use of the facilities of a PCH as rent. Employees that work in a PCH may be required to work as attendants as well as make the meals, clean the floors and do other household chores. We refer you to Tax Court of Canada (Informal Procedure) Shirley Flumerfelt v. Her Majesty the Queen (99 DTC 3506) involving a medical expense tax credit. In dismissing the taxpayer's appeal, the Court concluded, that although the taxpayer having at the relevant time a severe and prolonged physical impairment, being dependent upon a motorized chair and a walker to get about, the $30,000 claimed for attendant care was paid by the taxpayer as rent. The taxpayer choose to use the attendant care package at the apartment building in issue, but she was not required to pay for it separately, as a result, no amount was paid by the taxpayer as remuneration for attendant care services in either 1994 or 1995. In our opinion, depending on the particular facts, payments to a PCH could be treated similarly.

Group Homes - Paragraph 118.2(2)(b.2) of the Act

Paragraph 118.2(2)(b.2) of the Act allows an individual to include as a qualifying medical expense an amount paid as remuneration for the care or supervision provided in a group home maintained and operated exclusively for the benefit of individuals who have a severe and prolonged impairment. "Care" is defined in the Oxford Concise Dictionary and the Random House Dictionary as "protection, charge" and as a verb "ensure safety of" "to watch over or be responsible for". Black's Law Dictionary defines "care" as "serious attention". In our view, this definition can be reasonably restricted to that which is offered to persons who are unable to care for themselves. Page 29 of the Licensees' Handbook defines Personal Care as the assistance or guidance given to each resident to help them do things that they need to do every day. The Licensees' Handbook defines "Care" as the provision of personal care, specialized care or both personal and specialized care to a resident. Page 55 of the Licensee's Handbook sets out the requirements of the staff. The licensee must ensure that staff are on site at the PCH 24 hours each day and that there is a sufficient number on duty to meet the care needs of each resident at all times. As a rule, as the residents need more care, more staff is required. Accordingly, amounts paid on account of remuneration to persons providing care or supervision in a PCH, operated exclusively for the benefit of individuals with severe mental or physical impairments who are eligible for the disability tax credit, may qualify as a medical expense under paragraph 118.2(2)(b.2) of the Act. However, in our view, there should be a direct relationship between service provided as care or supervision and the remuneration paid for care or supervision. We would not object if a PCH, that is maintained and operated exclusively for the benefit of individuals who have a severe and prolonged impairment, were to itemize its statements to show the applicable medical expense portion for care or supervision.

We were given as a fact that the residents of a PCH meet the requirements of subsection 118.3(1) of the Act, and we have given our responses based on that assumption. Subsection 118.3(1) of the Act requires that the effects of the severe and prolonged mental or physical impairment of the person with a disability be such that his or her ability to perform a basic activity of daily living is markedly restricted. However, we did not see in our review of the Licensees' Handbook that only individuals who have a severe and prolonged mental or physical impairment could be residents of a PCH. Thus, the medical expense allowable under paragraph 118.2(2)(b.2) of the Act would not be available to residents of a PCH that is not maintained and operated exclusively for the benefit of individuals who have a severe and prolonged impairment.

In conclusion, you asked us whether a specific percentage of amounts paid to a retirement centre are allowable for a medical expense tax credit. In our view, none of the fees paid by a resident to a retirement centre qualify for the medical expense tax credit unless the medical condition of the resident who is claiming a medical expense tax credit meets the requirement of certification by a medical practitioner under paragraph 118.3(1)(a.2) of the Act and the retirement centre provides the level of full-time care expected of a "nursing home". XXXXXXXXXX.

As requested, we are returning you the copy of the Licensees' Handbook that you provided us.

Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate;
Policy and Legislation Branch

Enclosure

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