7 June 1995 Internal T.I. 9413016 - EMERGENCY HOME FOR CHILDREN IN CARE OF SOCIAL SERVICES

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: emergency home fees: are they exempt under para 81(1)(h)?

Position TAKEN: fees for operation a foster child emergency home in the taxpayer's home is exempt from income even though there are periods during which no child is in the taxpayer's home

Reasons FOR POSITION TAKEN:

-notwithstanding the quantum paid in BC, such fees are the fees envisioned as bed reservation fees described in the technical notes. Therefore the amt can be considered to be an amount which would ordinarily be paid to the caregiver on account of social assistance if the child were in her home. Her home is maintained for the use of up to 4 foster children & thus the income is exempt

		June 7, 1995
	VANCOUVER TAX SERVICES	HEADQUARTERS
	Audit Division		A. Humenuk
		957-8953
	Attention: George Press
		941301

Emergency Homes and Bed Reservation Fees
XXXXXXXXXX

We are replying to the memorandum from J.E. Thatcher of your Division dated May 12, 1994 concerning the issue of whether the payment from the British Columbia Ministry of Social Services (the Ministry) to the above noted taxpayer is exempt from income by reason of paragraph 81(1)(h) of the Act. We apologize for the delay in our response.

XXXXXXXXXX operates an emergency home in her principal of residence. She is under a contract with the Ministry to provide emergency care for up to four children in her home for an annual fee ($XXXXXXXXXX in 1992). The children typically stay in her home for one to three days and in 1992 there were 170 days during which no children were placed in her home.

You have asked whether such payments are to be excluded from income by reason of paragraph 81(1)(h) of the Act and whether XXXXXXXXXX could be considered a foster parent. You also ask for clarification on the taxation of payments made by XXXXXXXXXX to individuals assisting her in her home with the care of the children.

As the term "foster parent" or "foster child" is not found in the legislation, it is our view that the second issue raised is not necessarily relevant for the purpose of determining whether the amount should be excluded from income. As indicated in your submission, the explanatory notes released by the Department of Finance in July 1990 concerning the introduction of paragraph 81(1)(h) of the Act clearly state that bed reservation fees for foster children are to be excluded from income by reason of this provision. This is accomplished by the use of the word "ordinarily" and subparagraph 81(1)(h)(ii) of the Act. Paragraph 81(1)(h) of the Act excludes from income, social assistance payments which are received by a person other than the individual in need where such payment is

"ordinarily made on the basis of a means, needs or income test under a program provided for by an Act of Parliament or a law of a province, to the extent that it is received directly or indirectly by the taxpayer for the benefit of another individual (other than the taxpayer's spouse or a person who is related to the taxpayer or to the taxpayer's spouse), if ...

(ii) the other individual resides in the taxpayer's principal place of residence, or the taxpayer's principal place of residence is maintained for use as the residence of that other individual, throughout the period ..." (underlining added)

While the fees paid to XXXXXXXXXX do not, at first glance, have the appearance of "social assistance payments", payments by the Ministry for the care of foster children or severely disabled adults who cannot care for themselves can be considered social assistance payments as they are paid under the authority of the relevant Provincial Act (in British Columbia, the Guaranteed Available Income for Need Act). The basis upon which the Ministry makes payments to a foster parent or caregiver of a disabled adult is that the foster child or disabled adult qualifies for social assistance under the criteria set up in the relevant provincial legislation. In the case of an emergency home, the purpose of the fee (to provide social assistance to a foster child in need) is the same even though the payment is made regardless of whether or not a child is placed in the home. Thus, a bed reservation fee can be seen as an amount which would ordinarily be made on the basis of a means, needs or income test if the child were present in the home. We have confirmed with the Department of Finance that it is within tax policy to exempt the type of payment received by XXXXXXXXXX for the operation of her emergency home from income.

With respect to the issue of payments by an emergency home operator to an assistant, it is our view that such payment would ordinarily be considered employment income to the assistant and would not be excluded from the assistant's income by reason of paragraph 81(1)(h) of the Act. For further clarification as to whether a particular assistant is under a "contract of service" or a "contract for services", we refer you to the CPP-UI rulings section of your office.

As requested, we are returning the binder of information submitted with your request.

P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c. Legislative Policy Division