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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Whether amounts received by persons for providing foster care in their home for disabled individuals is taxable?
Position:
Exempt if all conditions of 81(1)(h) of the Act are met - in this situation it is a question of fact - general information provided
Reasons: conditions of ITA 81(1)(h) may be satisfied
XXXXXXXXXX 2001-010004
Shaun Harkin, CMA
December 14, 2001
Dear XXXXXXXXXX:
Re: Technical Interpretation Request: Taxable Income for
People Providing Support to an Individual with Disabilities
This is in reply to your facsimile of September 4, 2001, wherein you asked the following three questions:
1) Are the funds received by an individual, who was contracted by a non-profit organization ("NPO") to provide foster care for a disabled person in the individual's residence, taxable?
2) Are the funds received by an individual, who was contracted by the family of a disabled person to provide foster care for the disabled person in the individual's residence, taxable?
3) Could the person who provides care to a disabled person be a private contractor?
The particular circumstances in your letter on which you have asked for our views appear to be a factual situation involving specific taxpayers. We cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R4. However, we are prepared to offer the following general comments, which may be of assistance to you.
1) & 2) In order for payments that are received by an individual to provide foster care to be exempt from income under paragraph 81(1)(h) of the Income Tax Act (the "Act") all of the following conditions must be met:
(i) The payments must be ordinarily made on the basis of a means, needs, or income test.
(ii) The payments must be made under a program provided for by federal or provincial law.
(iii) The payments must be received directly or indirectly by an individual (the "individual") for the benefit of another individual (the "cared-for individual").
(iv) The cared-for individual cannot be the individual's spouse or related to the individual or the individual's spouse.
(v) No family allowance under the Family Allowances Act or any similar allowance provided for by provincial law can be payable in respect of the cared-for individual for the period for which the social assistance payment is made.
(vi) The cared-for individual must live in the individual's principal place of residence or the individual's principal place of residence must be maintained for use as the cared-for individual's residence during the period for which the payments are made.
In the situation you describe, it would appear that condition (ii) listed above would not be met since the program is not provided under federal or provincial law. In order to determine if condition (i) is met, reference would have to be made to the applicable federal or provincial law under which the program is authorized to determine if it contains a means, needs, or income test.
Social assistance payments are sometimes made through a NPO that has been authorized under a federal or provincial law (ex. the Child, Family and Community Services Act of British Columbia) to provide care for foster children. In that case, condition (ii) above could be satisfied.
3) A person who provides care to a disabled person could be an employed or self-employed person. In determining whether an individual is an employee or self-employed person, the Canada Customs and Revenue Agency generally applies the use of a four-in-one test. This test involves consideration of four criteria: (1) the extent to which the worker is subject to the control of the payor, (2) whether the worker provided his or her own tools, (3) whether the worker has a chance of profit or risk of loss, (4) whether or not the worker is employed as part of the business and performing services integral to the business. In applying the four-in-one test, it is the complete interaction between the worker and the payor that must be considered. No one criterion determines whether a person is an employee or independent contractor, all the criteria are considered relevant. The CCRA publication "RC4110 Employee or Self-employed" further elaborates on these criteria.
The Canada Customs and Revenue Agency is responsible for the administration of the Act and not for any changes to tax policy or for any amendment to the Act. Your suggestion that the legislation should be the same for foster care providers contracted through a NPO, a private individual or a government agency is a tax policy issue which is the responsibility of the Department of Finance. Should you wish to pursue your concern further you may contact the Tax Policy Division of the Department of Finance by writing to, 140 O'Connor Street, Ottawa, Ontario, K1A 0G5.
If you require further assistance in determining the income tax status of the specific payments you are making, please contact the Client Assistance Division of your local Tax Services Office.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R4, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency. Our practice is to make this disclaimer in all instances in which we provide an opinion.
We trust the above comments are of assistance.
Yours truly,
Steve Tevlin
for Director
Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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