File 11880-7
Ref. ss. 123(1)
Doc. 464, 767 & 770
XXXXX April 4, 1995
Dear XXXXX
This concerns your letters dated August 9, 1994, with regard to the GST status of the XXXXX and the XXXXX . We would also like to address XXXXX memo of January 14, 1994, which deals with the same issues. We regret the delay in responding.
Facts
The facts, as outlined in your letter and your telephone discussions with Don Dawson, are as follows.
1. The XXXXX and the XXXXX were established pursuant to The XXXXX XXXXX ), as were the XXXXX and the XXXXX
2. XXXXX and XXXXX were situated in what became the XXXXX Both were certified as public hospitals by Health and Welfare prior to the creation of the XXXXX . They were subsequently dissolved into the XXXXX
4. XXXXX and XXXXX were situated in what became the XXXXX and were certified as public hospitals by Health and Welfare prior to the creation of the XXXXX They were subsequently dissolved into the XXXXX
5. The hospital corporations were dissolved into the Board pursuant to section 16 of the XXXXX , which states that on the one hundred and twentieth day after the day on which a health district is established, each union hospital located in the district is dissolved and its assets, liabilities, rights and obligations are transferred to the board.
Questions
In your letters of August 9, 1994, you indicated that you were concerned as to whether the Boards were eligible to claim the 83% rebate available to hospital authorities in respect of all of its non-creditable tax charged, and asked us to address the following questions.
1. Does a Board qualify as a hospital authority, when only part of the Board operates public hospitals?
2. If a Board qualifies as a hospital authority, is the Board eligible to claim the 83% rebate for all of the GST paid on expenses relating to the operation of all health care facilities within the health district?
3. If a Board is not eligible to claim a rebate of 83% on all of its non-creditable tax charged, is it entitled to claim a rebate of 83% of a portion of its non-creditable tax charged? Can the Board, if it is a charity or qualifying NPO, claim a fifty percent rebate on the balance of its non-creditable tax charged? What legislative authority allows the Department to require the Board to apportion its claims in this manner? Does subsection 259(8) of the Excise Tax Act (ETA) apply to this situation?
XXXXX indicated that he was concerned about similar questions. His clients had asked, prior to the creation of consolidated health boards, what the proper rebate rate should be, given that their clients who would become part of a board claimed rebates at different rates, with hospitals using the 83% rate and other health care facilities using the 50% rebate rate.
Analysis
Our responses to your questions are as follows.
1. If an organization or part of an organization wishes to be designated as a hospital authority, it must operate a hospital that meets the following criteria:
(a) it is recognized as a public hospital by the government of the province in which it is located;
(b) it is established and operated otherwise than for profit;
(c) it is operated for the medical or surgical treatment of the sick or injured; and
(d) it provides and maintains inpatient beds and services.
The organization must apply to the Department to be designated, and must provide documentation to support each of the criteria. Applications for designation as a hospital authority should be sent to the following address:
Director
Tax Policy - Special Sectors
GST Rulings and Interpretations
Ninth Floor, Tower C
Vanier Towers
Vanier, Ontario
K1A 0L5
Acceptable documentation for an amalgamated health board in XXXXX would include:
(a) the Order in Council from the Lieutenant Governor that created the board, pursuant to subsection 3(2) of the XXXXX
(b) appropriate documentation from the Government of XXXXX stating that the hospital or hospitals affected by the designation are currently recognized as public hospitals by the Province of XXXXX and
(c) any necessary documentation concerning what portion of the board is involved in operating the public hospital or public hospitals.
If organizations other than hospital authorities have been dissolved and amalgamated into the boards, this is a concern, since the other organizations would not appear to meet the criteria for designation. We would need further facts in order to determine the proper GST treatment of such health boards.
2. If the Minister of National Revenue designates the whole of a health board to be a hospital authority, it can claim a rebate of 83% of all of its non-creditable tax charged. However, the definition of "hospital authority" in subsection 123(1) of the Act allows the Minister to designate only a part of an organization as a hospital authority.
Subsection 259(1) of the ETA defines the term "selected public service body" as including hospital authorities. Subsection 259(3) states that, where a person is a selected public service body, the Minister shall pay a rebate to the person equal to the prescribed percentage of the non-creditable tax charged for the claim period. Therefore, if the Minister designates the whole of a health board as a hospital authority, the health board is entitled to claim a rebate at the 83% rate prescribed for hospital authorities on the non-creditable tax charged in relation to all its activities. If the Minister designates only part of a health board as a hospital authority, refer to the answer to question 3 that follows.
3. If it appears that a health board as a whole does not qualify to be designated as a hospital authority, but some part of the health board may qualify for such a designation, we cannot provide a decision as to how rebates should be treated until we have had an opportunity to review the structure and activities of the individual health board.
Subsection 259(8) of the ETA does not apply to this type of situation, but instead deals with situations where a person may be more than one type of selected public service body.
We hope that the information provided is of assistance to you. If you require any further information concerning this letter, please contact Mr. Don Dawson at 954-4393.
Yours truly,
J.A. Venne
Director
Tax Policy - Special Sectors
GST Rulings and Interpretations
c.c.: J. Houlahan
D. Dawson XXXXX
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