Citation: 2007TCC271
Date: 20070516
Docket: 2006-1072(IT)I
BETWEEN:
ANNETTE MALECEK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
McArthur J.
[1] These appeals for
the 2002 and 2003 taxation years are from assessments by the Minister of
National Revenue (the Minister) reducing Annette Malecek's (the Appellant)
claimed deductions for child tax expenses in 2002 from $7,901 to $2,161 and in
2003 from $7,904 to $924. The issue boils down to the interpretation of
subsections 63(1) and (3) as they apply to the facts as I find them.
[2] During the relevant
years, the Appellant was married to a professional; and in 2002 her three boys
were 10, 8 and 6 years old. Apart from being a busy mother, she had full-time
employment outside the home. Her annual income was approximately $35,000. She
is an articulate and intelligent lady who is devoted to the upbringing of her
three boys. Her work was demanding although her employer gave her flexibility
to come and go from the office as needed provided that her office workload was
completed in a timely manner. This required her at times to return to the
office on weekends.
[3] The Appellant was
the only witness. She testified that her husband's work took him out of town
frequently, obliging them to find suitable care for their children. In her
application for an extension of time to institute an appeal, she stated:
… I work five days a week, my husband and
I coach three hockey teams and manage one team. I have been general contracting
a 2000 square foot addition to my residence since the beginning of last August;
now we have taken on all remaining aspects of the construction to completion
and spend all extra time building. As well I have recently been involved in a
small claims matter which has required seven court dates and many hours of
work. Currently I co-coach a little league majors baseball team as well. So..
it has been perhaps a simple case of overlooking dates due to schedule.
[4] In computing her
income, the Minister refused the deduction of the following expenses:
2002 Taxation Year
|
Activity
|
Claimed by Appellant
|
Allowed by MNR
|
Denied by MNR
|
|
|
|
|
|
|
NSMH (Hockey)
|
$1,684
|
|
$1,684
|
|
RRS (Consent)
|
275
|
|
275
|
|
B.C. Boys Choir
|
225
|
|
225
|
|
L.V. Little League
|
264
|
|
264
|
|
David Borys
|
980
|
980
|
|
|
Allegro School of Music
|
1,290
|
|
1,290
|
|
NV Recreation Commision
|
318
|
318
|
|
|
Ice Sports North Shore
|
182
|
|
182
|
|
22nd Seymour Scouts
|
412
|
|
412
|
|
Andrea Milner
|
735
|
735
|
|
|
Marna Leiren
|
1,140
|
|
1,140
|
|
Extreme Sports Club
|
396
|
|
396
|
|
In-Line Hockey Camp
|
______
|
128
|
_____
|
|
TOTAL
|
7,901
|
2,161
|
5,868
|
2003 Taxation Year
|
Activity
|
Claimed by Appellant
|
Allowed by MNR
|
Denied by MNR
|
|
|
|
|
|
|
BC Orff Chapter
|
$25
|
|
$25
|
|
Ross Road School
|
156
|
|
156
|
|
WV Yacht Club
|
320
|
|
320
|
|
Allegro School of Music
|
2,280
|
|
2,280
|
|
NS Winter Club
|
477
|
|
477
|
|
LV Little League
|
170
|
|
170
|
|
NV Minor Hockey League
|
1,484.86
|
|
1,484.86
|
|
Gymnastic BC
|
97
|
|
97
|
|
Andrea Milner
|
128
|
128
|
|
|
David Borys
|
701
|
546
|
155
|
|
22nd Seymour Scouts
|
575
|
|
575
|
|
Canian Ice Sports
|
1,120.80
|
|
1,120.80
|
|
After School Arts with Shannon Brown
|
250
|
250
|
|
|
Katrina Jones
|
120___
|
____
|
120___
|
|
TOTAL
|
7,904.66
|
924
|
6,980.66
|
[5] These activities
occupied the children for periods of one hour (Allegro School of Music) to occasionally,
entire weekends, (22nd Seymour Scouts). Most activities were seasonal and only
a few accommodated all three children at the same time. They normally took
place after school and on weekends. The Appellant considers that they all have
an educational value and were not simply the warehousing of their children.
[6] The Appellant's
primary submission is that all the claimed costs were "child care
expenses" as defined by paragraph 63(3)(a) because they provided
care for her children and enabled her "to perform the duties of an office
or employment". The Minister's position included that (i) the expenses in
excess of those allowed by the Minister were not incurred or were for
activities that were recreational in nature; and (ii) expenses in excess of
those allowed by the Minister were not paid in respect of services provided to
enable the Appellant to earn income.
[7] Subsection 63(3)
states:
63(3) In this section,
"child care expense" means an expense incurred in a
taxation year for the purpose of providing in Canada, for an eligible child of a taxpayer, child care services including
baby sitting services, day nursery services or services provided at a boarding
school or camp if the services were provided
(a) to enable
the taxpayer, or the supporting person of the child for the year, who resided
with the child at the time the expense was incurred,
(i) to perform the duties of an office or employment
…
except that
(c) any such
expenses paid in the year for a child's attendance at a boarding school or camp
to the extent that the total of those expenses exceeds the product obtained
when the periodic child care expense amount in respect of the child for the
year is multiplied by the number of weeks in the year during which the child
attended the school or camp, and
(d) for greater
certainty, any expenses described in subsection 118.2(2) and any other
expenses that are paid for medical or hospital care, clothing, transportation
or education or for board and lodging, except as otherwise expressly provided
in this definition,
are not child care expenses;
[8] The Minister's
counsel fairly presented case law that appears to present two separate schools
of thought. The first of these arises in Levine v. Canada, where Justice Archambault
found that expenses for ballet lessons, swimming, visual arts, tennis, skiing,
skating and gymnastics were not incurred for the purpose of watching over
children to protect them. He found that they were incurred to develop the
physical, social and artistic abilities of the children and were not
"child care expenses" within the meaning of paragraph 63(3)(a).
[9] The reasoning in Levine
was followed in Keefer v. Canada,
where Rowe J. supported this approach stating:
There is no doubt that it makes very good sense
to be able to do two things at once: your kids there so you can do this. But,
it is the limiting wording of the Act here, first of all care, child care,
babysitting, day nursery services, services provided, boarding school, camp.
Even without going back to the technical notes or the debates in Parliament and
so on, what leaps out at you is the guardianship, the protection aspect of it.
Then, when you look further, as Judge Archambault did in the Levine case, it is
clear the intent of Parliament was that the recreational expenses, if that is
the overwhelming component, would not, in fact, be included in Section 63. And
when one, then, looks at the intention of Parliament, it is clear that it never
intended for the type of expenses incurred by Ms. Keefer here to be deductible
or it would, in fact, have said so.
…
Certainly, the language of the section might initially
permit the interpretation placed on it by the Appellant but an examination of
the decision of Judge Archambault, albeit not specifically binding upon
me, clearly indicates that is the conclusion I would have come to, in somewhat
lesser examination than Judge Archambault, but what is required and desired by
Parliament is that the expenses be expenses, under carefully controlled terms,
relating to the overwhelming component of guardianship, protection and child
care. Had Parliament meant it to be broadened to include the type of expense
claimed here by the Appellant, Parliament would have said so.
[10] In Keefer,
the expense claimed was for children's riding lessons. Rowe J. reiterated his
opinion in Sykes v. Canada
stating:
I concur with the comments of Judge Archambault
and there are other decisions also on point. In my view it is regrettable that
the particular provision of the Act is so restrictive that I can see no
other way of interpreting it as it is currently written. The overarching
purpose is to permit the parent to generate income while someone else is
looking after the child. However, for that to occur for the type of activities
carried out here, in my view, there is going to have to be an amendment to the Act.
[11] In Bell v. Canada, Campbell J. agreed
with the decisions in Levine and Keefer. At page 3 she stated:
I agree with the conclusions reached in both
Keefer and Levine that Parliament never intended for the type of expenses as
presented in this case to be eligible for deduction as child care expenses. The
activities here are related very clearly to developing the physical, social and
artistic abilities of the children.
The facts in Bell are not unlike those in
the present case. Both Mr. and Mrs. Bell worked. Mr. Bell sought to deduct
expenses for programs that included soccer, swimming, baseball and science club
on the basis that he and his wife were able to work while their children
participated in these activities. Campbell J. concluded these recreational
activities did not qualify as child care expenses as they did not have the
primary goal of providing care for the children. Bell's use of his time when the
children were engaged in the activities was not a factor in deciding the
characterization of the activities.
[12] The second school of
thought or interpretation of subsection 63(3) is found in Jones v. Canada. Upon agreeing with the purpose and
interpretation of the legislation set out in Bailey v. R, Woods J. found that the main purpose in
Jones was to provide child care after school gym classes to permit Ms.
Jones to perform her employment duties and the expense for the school gym
classes was allowed. I believe the decisions in Levine and Jones
are diametrically opposed. I accept the reasoning in Levine as followed
in Keefer, Sykes and Bell. The conclusion in Levine is that
recreational activities do not qualify under paragraph 63(3)(a)
because they did not provide as their primary purpose "child care services
including baby sitting services, day nursery services or services provided at a
boarding school or camp". Woods J. found that the key words in paragraph 63(3)(a)
were "… to enable the taxpayer … to perform the duties of an office or
employment".
[13] She found support
for this position in Bailey, where the Minister argued that the services
provided by a private school were educational and were excluded in the definition
of "child care expense". At page 675, Rip J. defined the intent of
paragraph 63(3):
13 The legislative intent in enacting this provision was
to assist parents who work by subsidizing child care expenses in the form of a
deduction. Given that goal, it is difficult to accept the Minister's conclusion
that any expense related to looking after the child of a working parent should
be denied solely because it included an educative element. Such an
interpretation would clearly undermine the intent of the Parliament for it
would likely exclude all types of child care expenses, especially those in
respect of a young child; for to a young child almost all positive interaction
serves as education -- be it through discipline, television shows, stories or
games.
[14] The main thrust of the Bailey
decision is that the relevant question is what was the taxpayer's primary
reason for enrolling the child in the educational institution? Rip J. found as
a fact that Mrs. Bailey had the option between a previous daycare ($5,000)
which clearly was deductible under paragraph 63(3)(a)
or an academy ($4,000). He concluded that her
primary reason was for reasonably priced child care services and any education
received was an incidental benefit. I agree with this finding which deals with
child care services in an educational institution. In the present case, the
children were enrolled in activities that were not educational institutions and
I am not in any way satisfied that she enrolled her children for child care
services to enable her to perform the duties of employment. The activities were
not primarily educational and most were sport or music related; and they were held outside of regular
school hours. The Appellant and her husband often coached or assisted in
supervision of the children's activities. The Appellant had three boys of
different ages. Rarely did the three participate in the same activity at the
same time. There was no specific evidence that all three boys were occupied by
these activities at the same time permitting her to work. They all attended
school on a full-time basis. It is not the school expense that is in question,
as in Bailey. Even if I were satisfied as in Bailey that these activities
were a child care service, I am unable to conclude that the activities were
provided to enable the Appellant to perform her office duties. Her evidence in
this regard was general in nature and uncorroborated.
[15] Upon review of Levine, Keefer,
Sykes, Bell, Bailey and Jones,
I accept the reasoning and decision in Bailey as it is limited to its
particular facts. I agree with those decisions that concluded that it is
stretching the legislation too far to include predominantly recreational
activity expenses.
[16] Certainly there is
an educational element and a child care element in all the activities for which
the Appellant seeks a deduction but from reading the plain ordinary words of
the legislation it is clear that the type of expenses incurred here are not
deductible under subsection 63(3) or the legislature would have said so. I must
be guided by the actual interpretation of the statute as it is written and not
as I think it should be written, which is up to Parliament.
[17] The appeals are
dismissed.
Signed at Ottawa, Canada, this 16th day of May, 2007.
"C.H. McArthur"
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