Subsection 191.1(2)
See Also
Windsor Elms Village for Continuing Care Society v. The King, 2023 TCC 58
The Appellant, which had been operating a long-term care facility for seniors in Windsor, Nova Scotia decided to build a new facility in nearby Falmouth (the “Facility”). After the Department of Health accepted its proposal to build the Facility, it concluded a Development Agreement with the Department, which set out the terms upon which the Appellant was to develop the Facility, and entered into a “Service Agreement” with the Department, which set out the services that the Appellant was to provide through the Facility and the payments that it would receive from both the Nova Scotia government and the Facility’s residents. Although assisted–living facilities normally are subject to HST on their fair market value when substantially completed, s. 191.1(2) effectively deemed the HST to be payable on the greater of most costs and the fair market value (which was significantly lower than those costs) where the builder received government funding "for the purpose of making residential units in the complex available to [seniors]."
In dismissing the Appellant’s appeal based on CRA having assessed on the basis of the application of s. 191.1(2), Graham J indicated that the facts of this case were in all material respects identical to those in High-Crest, and that he agreed with the conclusions of Jorré J in that case:
- He agreed with Jorré J that “[s]o long as some portion of the total payments that the Department of Health made to the Appellant were made for the purpose of making residential units in the Facility available to seniors” the government funding test was met (para. 37), as was the case here given that the Service Agreement included accommodation in the required services, and the payments thereunder covered interest and principal under the mortgage financing.
- Similarly, given that the Service Agreement payments ultimately would cover the entire cost of constructing the Facility, the funding was in respect of the Facility.
- Even if, after completion of the Facility, the supplies made to the residents were a single supply of health care services, it nonetheless should be considered that the Appellant satisfied the test in s. 191.1(2)(b) that “possession or use of at least 10% of the residential units in the complex is intended to be given for the purpose of their occupancy as a place of residence or lodging by …seniors,” as was implicitly accepted by the Appellant in treating itself as subject to the self-supply rule in s. 191(3).
Subsection 191.1(1)
Government Funding
See Also
High-Crest Enterprises Limited v. The Queen, 2017 TCC 210, which replaces 2015 TCC 230, nullified on procedural grounds by 2017 FCA 88
The appellant ("High-Crest") agreed with the Nova Scotia Department of Health (the "Department") to contract for a 20-bed addition to one of its nursing homes. It entered into a Development Agreement with the Department which required it to obtain mortgage financing to finance the construction (which it did with the Nova Scotia Housing Development Corporation), and also entered into a Service Agreement with the Department under which the Department agreed to pay to the appellant approximately at least approximately 2/3 of a stipulated per diem rate per resident (to cover raw food and health costs), and a portion of the accommodation and amortized capital costs - with the balance made up of direct accommodation charges by High-Crest to the resident. In the case of low-income residents, the Department would cover up to 100% of the per diem amount.
On substantial completion, High Crest self-assessed itself under s. 191(4) on the basis that the fair market value of the addition was substantially lower than the costs incurred by it, so that the s. 191(4) “output” tax was lower than the input tax credits previously claimed by it during construction. Before finding that s. 191.1 applied, so that such output tax instead was based on the higher costs, Jorré J stated (at para 22):
The critical question to be decided can be stated as:
Whether, at the time of the self supply, High Crest could expect to receive an amount of money from the government of Nova Scotia “for the purpose of making residential units in the [20 bed addition] available to individuals” (emphasis added).
Jorré J further stated (at para 61):
… High-Crest would not have made such a large and risky investment in the construction of the addition, a construction with a fair market value upon completion that was substantially less than its cost, if it did not expect the service contract to come into operation and be renewed for many years. …
After quoting from the Department of Finance Explanatory Notes, he stated (at para. 76):
…[T]he scheme of the section indicates a clear purpose … to deny a net tax refund on the self supply by bumping up the output tax where there is government support for the provision of residential accommodation to the groups of individuals described in the section. It does so without regard to the extent of the support; in relation to the costs of the accommodation, the support can be modest or it can be the entire cost or anything in between.
High-Crest Enterprises Limited v. The Queen, 2015 TCC 230, nullified on procedural grounds 2017 FCA 88
The appellant ("High-Crest") agreed with the Nova Scotia Department of Health (the "Department") to contract for a 20-bed addition to one of its nursing homes. It entered into a Development Agreement with the Department which required it to obtain mortgage financing to finance the construction (which it did with the Nova Scotia Housing Development Corporation), and also entered into a Service Agreement with the Department under which the Department agreed to pay approximately 2/3 of a stipulated per diem rate per resident (to cover operating and health costs), with the balance made up of direct accommodation charges by High-Crest to the resident. In rejecting a submission that the money payable to High-Crest by the Department was not "government funding" as it was not for the purpose of making residential units in the facility available to seniors but, rather, was payable for the purpose of securing the services stipulated in the Service Agreement, Owen J stated (at para. 93):
It is true that High-Crest was required to provide the Services as consideration for the payments it received from the Department. However, this does not alter the fact that the dominant purpose of the Department in entering into these arrangements and agreeing to make these payments was to secure additional long‑term care beds for seniors in Nova Scotia. The immediate result of the payments may have been the provision of the Services but that was not the purpose behind the payments.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Purpose/Intention | government funding only of operating costs did not detract from its purpose of increasing beds | 365 |
| Tax Topics - Statutory Interpretation - Certainty | interpretation with reasonably certain application is preferred | 176 |
| Tax Topics - Excise Tax Act - Regulations - Public Service Body Rebate (GST/HST) Regulations - Section 2 - Government Funding | government funding only of operating costs did not detract from its objective of increasing beds | 173 |