5 August 1997 Internal T.I. 9709637 - RESID PSYCHIATRIC FACIL FOR EMOTIONALLY HANDICAPPED

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:

eligibility of fees paid to a US adolescent residential psychiatric treatment facility as a medical expense as well as the related travel costs. - requirements for the certification in 118.2(2)(e)

Position:

fees qualify but travel probably doesn't

Reasons:

documentation submitted indicates that patient has a mental handicap, albeit an emotional handicap, requiring placement in a psychiatric treatment centre. For the purpose of travel costs there is no indication that similar facilities do not exist in Canada

		August 5, 1997

	XXXXXXXXXX Tax Services	Headquarters
	Business Audit	A. Humenuk
	XXXXXXXXXX 	957-8953
	Attention: XXXXXXXXXX
		970963

Medical Expense for Care or Care and Training at a School,
Institution or Other Place
XXXXXXXXXX

We are replying to your memoranda of April 2 and July 4, 1997, in which you request our views as to whether the amounts paid by XXXXXXXXXX for the care and education of his daughter, as well as the travel costs incurred by her in each of those years for travel between home and the school, qualify as medical expenses under the Income Tax Act (the "Act"). We apologize for the delay in our response.

We have reviewed the following documentation submitted in support of the taxpayer's claim for medical expenses:

- a letter XXXXXXXXXX in which he expresses the view that the taxpayer's daughter has a mental handicap, albeit an emotional one rather than an intellectual one, and his recommendation that she be placed in a residential treatment facility in order to monitor her behaviour and make modifications as required,

- an evaluation report XXXXXXXXXX which indicates that the taxpayer's daughter has deficits in the sensory-motor realm consistent with a history of mild closed head injury from which there has been good, but not total, recovery and that she likely has neurophysiologically-based attention deficit disorder or impulse control disorder,

- a handwritten opinion XXXXXXXXXX which indicates that the taxpayer's daughter's emotional development was significantly delayed at age 12 and recommends counselling for the daughter and her parents,

- a letter XXXXXXXXXX describing the treatment provided to the taxpayer's daughter while resident at the School and summarizing her condition at the time of her discharge. According to his diagnosis, the taxpayer's daughter suffered from Post Traumatic Stress Syndrome, Oppositional-Defiant Disorder, Episodic Explosive Disorder and Attention Deficient Disorder at that time,

- a photocopy of a brochure describing the School as an adolescent residential treatment facility for teenagers with behavioral and emotional difficulties,

- a description of the School XXXXXXXXXX according to which the School is a long-term residential psychiatric treatment facility that specializes in treating adolescents who are behaviorially out of control and who have been unresponsive to out-patient counselling or in-patient psychiatric or substance abuse programs, and

- correspondence between yourself and the taxpayer's representatives dated XXXXXXXXXX, in which you requested and received the above noted documentation.

The issue is whether the fees paid for the residential care of the taxpayer's daughter at the School qualify as a medical expense under paragraph 118.2(2)(e) of the Act. In order for an amount to be deductible under paragraph 118.2(2)(e) of the Act, the amount must be paid for the care, or care and training, of an individual who has been certified by an appropriately qualified person to be a person who, by reason of a physical or mental handicap, requires the equipment, facilities or personnel specially provided by the school, institution or other place. In your view, the requirements of paragraph 118.2(2)(e) of the Act have not been met in this particular situation, since the various letters submitted in support of the taxpayer's claim do not constitute proper certification, either because they are lacking certain information or because they were issued after the taxpayer's daughter was placed in the School, the letters do not establish that the taxpayer's daughter suffers from a mental handicap and comparable facilities are available in Canada.

Our Comments

As indicated in paragraph 32 of Interpretation Bulletin IT-519R, the expenses in respect of a patient (for example, a dependant) suffering from a behavioral problem arising out of a mental or physical impairment who attends a school that specializes in the care and training of persons who have the same problem qualify as medical expenses for purposes of paragraph 118.2(2)(e) of the Act. In our view, the fact that such a school is in a foreign country does not preclude a claim under paragraph 118.2(2)(e) of the Act.

As regards the certificate required under paragraph 118.2(2)(e) of the Act, while there is no prescribed form or specific wording required in a certificate, it should demonstrate that, as a result of a particular mental or physical handicap, the individual named in the certificate requires the equipment, facilities or personnel specially provided by a particular place to deal with that particular handicap. A statement that an individual may benefit from the special equipment, facilities or personnel provided by a particular place would not meet this requirement, since the individual must require such equipment, facilities or personnel because of a physical or mental handicap. Generally, the certificate should include a description of the equipment, facilities or trained professionals required to adequately provide care, or care and training, for the individual. In addition, the Department must be satisfied that the equipment, facilities or personnel provided by a particular place meets this description.

The issue as to when the certificate required under paragraph 118.2(2)(e) of the Act must be issued was considered in Kushnir et al. v. M.N.R. (86 DTC 1381). In that case, the Court rejected documents which were prepared after the children were admitted to the school, on the basis that the wording of paragraph 118.2(2)(e) of the Act, and in particular, the use of the past tense with reference to the need for certification, requires that the certification be made prior to, or at the time of, the individual's placement in a particular school, institution or other place. Not only had none of the various letters been prepared before the placement of the children in the school, but the testimony of the medical practitioners who had assessed the children prior to their placement in the school was either non-committal or in one case, indicated that the child did not have a mental handicap.

When the care, or care and training, at a particular place is not restricted to individuals with a mental or physical handicap, a certificate which is obtained after the individual begins to receive care at that place is somewhat dubious, in that it is not clear that the individual was placed there because he or she requires the equipment, facilities, or personnel provided by the place by reason of a physical or mental handicap. However, where the care provided by a particular place is restricted to individuals with a particular handicap, a certificate made after the individual's placement in that place is not as questionable, since it is likely that the individual was placed in that facility because of his or her handicap.

With respect to the qualifications of the person providing the certification, while it is clear that a medical practitioner as defined in paragraph 118.4(2)(b) of the Act or a medical doctor is qualified to make the certification required by paragraph 118.2(2)(e) of the Act, the term "appropriately qualified individual" is not restricted to such professionals. In our view, the fact that a medical doctor or other health professional with the necessary expertise and qualifications is not resident in the jurisdiction in which the individual, or the person supporting that individual, resides, does not detract from that person's qualifications to make a certification for the purposes of paragraph 118.2(2)(e) of the Act. However, it would be preferable that the certification be made by someone unconnected with the school, institution or other place.

Although we have no reason to doubt the qualifications of any of XXXXXXXXXX, only the letter from XXXXXXXXXX could qualify as a certificate for purposes of paragraph 118.2(2)(e) of the Act, since the report from XXXXXXXXXX recommends therapy, not placement in a facility such as the School, the letter from XXXXXXXXXX makes no reference to any requirements for dealing with the condition of the taxpayer's daughter and the letter from XXXXXXXXXX of the School merely confirms the daughter's condition at the time she was discharged. XXXXXXXXXX letter, on the other hand, indicates that the taxpayer's daughter suffers from a mental handicap, albeit an emotional one, and that it became clear to him in 1991 that the daughter needed residential treatment where her behaviour would be continually monitored and interventions made in a timely fashion. His letter also states that her behaviour was so severe that, in his view, she required special equipment or facilities or the services of specially trained personnel, which was not available in the public school system. In our view, this letter contains sufficient information to meet the requirements of paragraph 118.2(2)(e) of the Act.

Although XXXXXXXXXX letter was written after the taxpayer's daughter was discharged from the School, namely in XXXXXXXXXX, we hesitate to recommend that you disallow the amount of the taxpayer's claim solely on the basis of the date of the letter, since it is obvious from this letter that XXXXXXXXXX assessed the taxpayer's daughter's condition before she was placed in the School and that, at that time, he was of the view that she had a mental handicap and as a result, required the equipment, facilities, or personnel specially provided by residential treatment facilities for children suffering from such a handicap.

With respect to the issue of whether the taxpayer's daughter suffers from a mental handicap, as indicated above, in his letter XXXXXXXXXX states that the daughter has a mental handicap, or more specifically, an emotional handicap. In our view, unless the facts surrounding a particular situation cast doubt upon the statements made by the appropriately qualified person, it would be difficult to challenge a certificate. Although the daughter was discharged from the School prior to XXXXXXXXXX, we surmise that it was due to the fact that she had completed her high school studies or attained the age limit (18 years old) for that school. Nevertheless, you may wish to inquire about the circumstances that lead to the discharge and her subsequent placement, if any.

In Somers v. M.N.R. (79 DTC 21), the Court found that the child's behavioral problems were not a mental handicap and therefore denied the taxpayer's medical expense claim. In that case, a child had been placed in Ashbury College because he experienced difficulties in the public school system, primarily due to his poor concentration and hyperactivity. Ashbury College is a private school which has a tightly structured environment, but it is not an institution which is particularly designed to accommodate mentally or physically handicapped students, or students with behavioral problems. In our view, the Somers case is different from the situation under consideration in two respects. Unlike the situation in Somers, the medical reports concerning the taxpayer's daughter indicate that she could be dangerous to herself and others and that she suffers from a mental handicap of an emotional nature. In addition, the School is described as a residential psychiatric treatment facility which administers psychotropic drugs to control behaviour when necessary. While behavioral problems and emotional disturbances of the type often experienced by children is not considered a mental handicap, an emotional disorder that is severe enough to warrant placement in a psychiatric facility may well qualify as a mental handicap.

We asked one of the Department's medical advisors in matters concerning the disability tax credit whether, in her view, an emotional or behavioral disorder is a mental handicap (Bertrand/Humenuk). In her opinion, while emotional difficulties or behavioral disorders are often the result, or symptoms of, an underlying physical or mental handicap, such terms rarely constitute a medical diagnosis. However, where the level of disturbance is so extreme that placement in a psychiatric facility is warranted, our advisor would be prepared to consider the individual to have a mental handicap or impairment.

From the information provided, it would appear that the School is primarily a psychiatric facility for school age children and that the taxpayer's daughter was placed there because she needed the monitoring, intervention and care provided in such a place because of her handicap. Although the brochure from the School provides little information, we would expect the School, as a residential psychiatric facility, to have personnel specially trained to provide care for individuals with physiological and psychological mental impairments of the kind suffered by the taxpayer's daughter. However, you may wish to obtain more information from the taxpayer in this regard.

Although it is unlikely, you may wish to consider whether, despite its name, the School is licensed XXXXXXXXXX as a private hospital. If so, the fees paid to the School might qualify as a medical expense under paragraph 118.2(2)(a) of the Act.

As regards the travel expenses, one of the conditions that must be met in order for travel costs to qualify as a medical expense under paragraph 118.2(2)(g) of the Act is that substantially equivalent medical services not be available in the place where the patient lives. XXXXXXXXXX letter seems to indicate that there are no residential treatment facilities in Western Canada that provide extended twenty-four hour care. Since we expect that there are such facilities in Western Canada, we surmise that XXXXXXXXXX was referring to the fact that, by reason of its name and the fact that it does not accept the most severe cases, the School was better suited to the taxpayer's daughter, since it doesn't carry the stigma of a psychiatric facility which accepts patients requiring the full range of psychiatric services. In our view, such a distinction would not be sufficient to render the travel expenses eligible under paragraph 118.2(2)(g) of the Act. However, if the care and training provided by the School is substantially different from that provided by the facilities situated in the locality where the taxpayer and his daughter reside, the travel expenses would be eligible medical expenses. You may wish to obtain further clarification from XXXXXXXXXX as to his statement regarding the lack of comparable facilities.

In closing, although the issue is not free from doubt, based on the information you submitted, we would be reluctant to challenge the eligibility as a qualifying medical expense of the fees paid to the School for the residential care of the taxpayer's daughter. However, in our view, the information submitted is not sufficient to consider the travel costs incurred between Calgary and the School to be a medical expense under paragraph 118.2(2)(g) of the Act.

C. Chouinard
A/Section Chief
Business, Property & Employment Section
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch