5 May 1998 Internal T.I. 9807716 - NURSING HOME - SUBCONTRACTOR

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 a facility qualifies as a nursing home if care is provided by a subcontractor. If not, whether payments for the care provided by subcontractor qualify as attendant care expense

Position:

Facility may be a nursing home if the subcontractor provides services on its behalf and level of care is sufficient to meet the conditions of the Act. If services are not provided on behalf of the facility, the fees paid may qualify as remuneration for attendant if paid by or on behalf of a patient.

Reasons:

The Act requires that the institution provides a certain level of care to the residents. However, it does not require the institution to provide this care through its employees. They can be provided by a subcontractor on behalf of the institution.

		May 5, 1998
	IRPP	HEADQUARTERS
	Special Processing Division	Nicole Mondou, M.Fisc.
	Validation Section	(613) 957-8961
	Attention:  Mike Pastuch, A/Manager
		980771

Your file HDM 6696-6 Medical Expenses - Nursing Homes

This is in reply to your memorandum of March 23, 1998, in which you requested our views with respect to the qualification as medical expenses of payment made by taxpayers to a facility that subcontracts the provision of nursing care to a company affiliated to the facility.

In a telephone conversation (Waterfield/Mondou), you confirmed that fees for the care provided to the residents are paid by them to the facility which provides room and board and subcontracts the nursing care. However, residents are provided with two receipts: one from the facility for the room and board, and one from the nursing care subcontractor for the nursing care.

For the purpose of this memorandum, we assume that the residents qualify for the disability tax credit or have been certified to have a lack of normal mental capacity.

You wish to know whether such a facility would qualify as a nursing home under the Income Tax Act (the “Act”), and if not whether the amounts evidenced by the receipts issued by the nursing care subcontractor would qualify as an attendant care expense.

Our comments:

As you mentioned in your memorandum, it is a question of fact as to whether a particular facility is a nursing home providing full-time care as required by both paragraphs 118.2(2)(b) and (d) of the Act. In that respect, it is our view that the full-time care that is required under the Act from the facility may be provided by a third party under a subcontract entered into by the facility. However, services provided by a third party to the resident under an agreement with the resident would not allow the facility to qualify as a nursing home, since the facility would not be responsible for the provision of the full-time care.

The situation you describe does not indicate clearly who the subcontractor is working for. You indicate that the residents pay a inclusive fee for all the services provided, including the nursing care. However, separate receipts are issued by the subcontractor to the residents. For the full-time care to be provided by the facility, the facility must be the person who is responsible for the payment of the services to the subcontractor. If the facility only acts as an agent for the residents for the retention of the services of the subcontractor, it will not be considered as providing the full-time care required under the Act.

Where the facility provides the nursing care through a subcontractor, we must determine whether the level of services provided by the subcontractor is sufficient to constitute “full-time care”. In this respect, the phrase “full-time” is not intended to place a requirement of a minimum time spent caring for the patient in the nursing home but rather it implies the constant care and attendance required by an individual by reason of the injury, illness or affliction of such individual. Also, the subcontractor has to provide qualified personnel in attendance of a calibre and in sufficient numbers to provide care to the resident patients on a 24-hour basis.

Where the facility acts as an agent for the residents, it does not qualify as a nursing home. The amounts paid to the subcontractor on behalf of the resident may however qualify as an attendant care expense pursuant to paragraph 118.2(2)(b)of the Act if they are paid as remuneration for the services of an attendant.

Finally, there may be situations where although the facility provides the level of full-time care required by the Act, it also acts as an agent for some residents to retain special care services beyond what would be expected from a nursing home. In such cases, both the payments to the nursing home and the payments to the third party might qualify as medical expenses.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department’s mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at 613 957-0682. The severed copy will be sent to you for delivery to the client.

We trust that these comments are of assistance.

P. Spice
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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