BETWEEN:
and
Heard at Calgary, Alberta, on October 3, 2006.
Judgment delivered at Ottawa, Ontario, on October 17, 2006.
REASONS FOR JUDGMENT BY: SHARLOW J.A.
CONCURRED IN BY: PELLETIER J.A.
MALONE J.A.
Docket: A-118-05
Citation: 2006 FCA 331
CORAM: SHARLOW J.A.
PELLETIER J.A.
MALONE J.A.
BETWEEN:
CLAIRE LISTER
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
[1] This is an appeal by Claire Lister, and a cross appeal by the Crown, of a judgment of the Tax Court of Canada (2005 TCC 113), rendered under the informal procedure of that Court in relation to Ms. Lister’s income tax appeals for the years 2001, 2002 and 2003.
[2] During the years under appeal, Ms. Lister resided at Hawthorn Park, which describes itself as a “residence for seniors”. Ms. Lister paid the owners of Hawthorn Park “accommodation and service fees” and certain other amounts totalling approximately $27,000 for each of the years under appeal. As consideration for those payments, Ms. Lister obtained the right to occupy an apartment, two prepared meals each day in the dining room, a 24 hour emergency call system and health monitoring with a personal pendant, medical supervision to assist her with medication four times a day, assistance with puffers, and laundry and housekeeping services.
[3] Hawthorn Park also had a residence called Orchard Manor that was equipped to provide secure facilities and 24 hour nursing care for persons suffering from Alzheimer’s disease or dementia. During the years under appeal, Ms. Lister did not reside in Orchard Manor.
[4] Ms. Lister was born in 1923. During the years under appeal, she had a number of medical conditions that worsened over time. Her mobility and mental functions were impaired. She was at constant risk of falling, and of suffering a stroke. She required assistance with health care monitoring, medication administration, meal planning and preparation, personal care, and also needed access to a 24 hour emergency response service. The evidence was that her medical condition was so severe that her adult children were unable to care for her at home, which is why she moved to Hawthorn Park. At one point, all cooking facilities were removed from her room because she was at risk of endangering herself with them.
[5] In each of the years under appeal, Ms. Lister claimed the medical expense tax credit under paragraph 118.2(2)(e) of the Income Tax Act, R.S.C. 1985, c. 1 (5th supp.) for the full amounts she paid to Hawthorn Park. That claim was not allowed.
[6] Ms. Lister filed a notice of objection. The objection was partially successful, not on the basis of her original claim, but on the basis of two different provisions. As a result of the objection, Ms. Lister was allowed a medical expense credit for each year on the basis that $10,000 of the amounts she paid to Hawthorn Park qualified as remuneration for attendant care under paragraph 118.2(2)(b.1) of the Income Tax Act. Ms. Lister was also allowed, in each year, the maximum disability tax credit under section 118.3 of the Income Tax Act. Broadly speaking, the tax relief resulting from the disability tax credit is approximately the same as the tax relief for a medical expense credit for expenses of $6,000 per year. The disability tax credit is available to a person who has a severe and prolonged mental or physical impairment, the effects of which are that the ability to perform one or more basic activities of daily living is markedly restricted (see section 118.3 of the Income Tax Act).
[7] Ms. Lister was not satisfied with the disposition of her objection, and she appealed to the Tax Court on the basis of the claims she originally made. The Tax Court Judge allowed Ms. Lister’s appeal. His judgment resulted in Ms. Lister obtaining the tax relief she had originally claimed, which was a medical expense tax credit under paragraph 118.2(2)(e) for the full amounts she paid to Hawthorn Park, but nothing for attendant care under paragraph 118.2(2)(b.1) and no disability tax credit under section 118.3.
[8] Ms. Lister appealed to this Court on the basis that the Tax Court Judge erred in disallowing the disability tax credit. The Crown concedes that the Tax Court Judge erred on that point, because the disability tax credit had been allowed after Ms. Lister’s objection and her entitlement to the disability tax credit was not in issue in the Tax Court. Ms. Lister’s appeal will be allowed with the Crown’s consent.
[9] The Crown cross-appealed on the basis that the Tax Court Judge erred in concluding that Ms. Lister was entitled to a medical expense credit under paragraph 118.2(2)(e) of the Income Tax Act for the full amounts paid to Hawthorn Park, rather than a medical expense credit under paragraph 118.2(2)(b.1) in respect of a maximum of $10,000 per year of those payments.
[10] The Crown argues that the judgment under appeal is based on an incorrect interpretation of paragraph 118.2(2)(e) of the Income Tax Act, while counsel for Ms. Lister argues that the case turns primarily on questions of fact that must be allowed to stand because there is no palpable and overriding error. Whether a particular expense falls within paragraph 118.2(2)(e) is a question of mixed law and fact. The Judge in this case was required to determine the correct interpretation of paragraph 118.2(2)(e), and apply it to the relevant facts. The factual elements of the Judge’s decision must stand absent palpable and overriding error.
[11] The Tax Court Judge reasoned that, as Ms. Lister suffered from handicaps that met the description in paragraph 118.2(2)(e), and those handicaps were accommodated by the facilities of Hawthorn Park, it followed that Hawthorn Park “specially provided” the facilities she needed for her care.
[12] The Crown argues that this reasoning is not correct. The Crown argues that in order to determine whether a particular payment is eligible for the medical expense credit under paragraph 118.2(2)(e), it is necessary to consider two questions independently. The first question is whether the individual in respect of whom the credit is claimed has the requisite physical or mental handicap (in this case it is undisputed that Ms. Lister meets that test). The second question is whether the place that received the payment is a place that is within the scope of paragraph 118.2(2)(e). I agree with the Crown that this is the correct way to approach the interpretation of paragraph 118.2(2)(e).
[13] Subsection 118.2(2) of the Income Tax Act is a lengthy and detailed list of the expenses that form the basis of a claim for a medical expense tax credit. Although subsection 118.2(2) is amended frequently, no amendments relevant to this case were made during the years under appeal, and so it is convenient to refer to the version applicable to 2003. Only paragraph 118.2(2)(e) is directly relevant to this case, but other portions of subsection 118.2(2) (in particular paragraphs 118.2(2)(a), (b), (b.1), (b.2), (c) and (d)), provide useful context.
[14] The relevant parts of subsection 118.2(2) read as follows (the emphasis is mine; note also that I have shortened many of the paragraphs to a single word or phrase to give an indication of the subject matter of the paragraph; I have omitted most of the detailed lists and statutory preconditions within those paragraphs):
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(2) For the purposes of subsection 118.2(1), a medical expense of an individual is an amount paid |
(2) Pour l'application du paragraphe (1), les frais médicaux d'un particulier sont les frais payés: |
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(a) [medical practitioner, dentist or nurse or a public or licensed private hospital]; |
a) [médecin, dentiste, infirmière ou infirmier, hôpital public ou hôpital privé agréé]; |
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(b) as remuneration for one full-time attendant … or for the full-time care in a nursing home of, the patient in respect of whom an amount would, but for paragraph 118.3(1)(c), be deductible under section 118.3 in computing a taxpayer's tax payable under this Part for the taxation year in which the expense was incurred; |
b) à titre de rémunération d'un préposé à plein temps […] aux soins du [patient] pour qui un montant serait, sans l'alinéa 118.3(1)c), déductible en application de l'article 118.3 dans le calcul de l'impôt payable par un contribuable en vertu de la présente partie pour l'année d'imposition au cours de laquelle les frais sont engagés -- ou à titre de frais dans une maison de santé ou de repos pour le séjour à plein temps d'une de ces personnes;
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(b.1) as remuneration for attendant care provided in Canada to the patient if (i) the patient is a person in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer's tax payable under this Part for the taxation year in which the expense was incurred, (ii) no part of the remuneration is included in computing a deduction claimed in respect of the patient under section 63 or 64 or paragraph (b), (b.2), (c), (d) or (e) for any taxation year, (iii) at the time the remuneration is paid, the attendant is neither the individual's spouse or common- law partner nor under 18 years of age, and (iv) each receipt filed with the Minister to prove payment of the remuneration was issued by the payee and contains, where the payee is an individual, that individual's Social Insurance Number, to the extent that the total of amounts so paid does not exceed $10,000 (or $20,000 if the individual dies in the year); |
b.1) à titre de rémunération pour les soins de préposé fournis au Canada au particulier, à son époux ou conjoint de fait ou à une personne à charge visée à l'alinéa a), dans la mesure où le total des sommes payées ne dépasse pas 10 000 $ (ou 20 000 $ en cas de décès du particulier dans l'année) et si les conditions suivantes sont réunies: (i) le particulier, l'époux ou conjoint de fait ou la personne à charge est quelqu'un pour qui un montant est déductible en application de l'article 118.3 dans le calcul de l'impôt payable par un contribuable en vertu de la présente partie pour l'année d'imposition au cours de laquelle les frais sont engagés, (ii) aucune partie de la rémunération n'est incluse dans le calcul d'une déduction demandée pour le particulier, l'époux ou conjoint de fait ou la personne à charge en application des articles 63 ou 64 ou des alinéas b), b.2), c), d) ou e) pour une année d'imposition, (iii) au moment où la rémunération est versée, le préposé n'est ni l'époux ou conjoint de fait du particulier ni âgé de moins de 18 ans, (iv) chacun des reçus présentés au ministre comme attestation du paiement de la rémunération est délivré par le bénéficiaire de la rémunération et comporte, si celui-ci est un particulier, son numéro d'assurance sociale; |
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(b.2) as remuneration for the patient's care or supervision provided in a group home in Canada maintained and operated exclusively for the benefit of individuals who have a severe and prolonged impairment …; |
b.2) à titre de rémunération pour le soin ou la surveillance du [patient] dans un foyer de groupe au Canada tenu exclusivement pour le bénéfice de personnes ayant une déficience grave et prolongée […]; |
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(c) as remuneration for one full-time attendant on the patient in a self-contained domestic establishment in which the patient lives …; |
c) à titre de rémunération d'un préposé à plein temps aux soins du [patient] dans un établissement domestique autonome où le particulier, l'époux ou conjoint de fait ou la personne à charge vit […]; |
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(d) for the full-time care in a nursing home of the patient, who has been certified by a medical practitioner to be a person who, by reason of lack of normal mental capacity, is and in the foreseeable future will continue to be dependent on others for the patient’s personal needs and care; |
d) à titre de frais dans une maison de santé ou de repos pour le séjour à plein temps du [patient] qu'un médicine atteste être quelqu'un qui, faute d'une capacité mentale normale, dépend d'autrui pour ses besoins et soins personnels et continuera d'en dépendre ainsi dans un avenir prévisible; |
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(e) for the care, or the care and training, at a school, institution or other place of the patient, 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 that school, institution or other place for the care, or the care and training, of individuals suffering from the handicap suffered by the patient; |
e) pour le soin dans une école, une institution ou un autre endroit -- ou le soin et la formation -- du [patient], qu'une personne habilitée à cette fin atteste être quelqu'un qui, en raison d'un handicap physique ou mental, a besoin d'équipement, d'installations ou de personnel spécialisés fournis par cette école ou institution ou à cet autre endroit pour le soin -- ou le soin et la formation -- de particuliers ayant un handicap semblable au sien; |
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(f) [transportation by ambulance]; |
f) [le transport par ambulance]; |
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(g) [transportation]; |
g) [le transport]; |
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(h) [other travel expenses]; |
h) [les frais raisonnables de déplacement, à l'exclusion des frais visés à l'alinéa g)]; |
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(i) [equipment]; |
i) [l’équipement]; |
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(i.1) [equipment]; |
i.1) [l’équipement]; |
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(j) [eye glasses]; |
j) [les lunettes]; |
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(k) [equipment]; |
k) [l’équipement]; |
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(l) [animal specially trained to assist the patient] |
l) [un animal spécialement dressé pour aider le patient]; |
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(l.1) [expenses in respect of a bone marrow or organ transplant]; |
l.1) [les frais pour une transplantation de la moelle épinière ou d'un organe]; |
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(l.2) [renovations or alterations to a dwelling]; |
l.2) [les rénovations ou transformations apportées à l'habitation]; |
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(l.21) [construction of residence]; |
l.21) [la construction de la résidence]; |
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(l.3) [rehabilitative therapy]; |
l.3) [les programmes de rééducation]; |
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(l.4) [interpretation services]; |
l.4) [les services d'interprétation] |
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(l.41) [note-taking services]; |
l.41) [les services de prise de notes]; |
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(l.42) [voice recognition software] |
l.42) [le logiciel de reconnaissance de la voix]; |
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(l.5) [moving expenses]; |
l.5) [les frais de déménagement]; |
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(l.6) [alterations to the driveway]; |
l.6) l[es transformations apportées à la voie d'accès]; |
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(l.7) [van]; |
l.7) [une fourgonnette]; |
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(l.8) [training]; |
l.8) [la formation]; |
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(l.9) [therapy]; |
l.9) [le traitement administré]; |
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(l.91) [tutoring services] |
l.91) [les services de tutorat]; |
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(m) [prescribed device or equipment]; |
m) [le dispositif ou l’équipement d'un genre visé par règlement]; |
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(n) [drugs and medicaments]; |
n) [les médicaments et les produits pharmaceutiques]; |
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(o) [laboratory, radiological or other diagnostic procedures]; |
o) [les actes de laboratoires, de radiologie ou autres actes de diagnostic]; |
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(p) [dentures]; |
p) [es dentiers]; |
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(q) [a private health services plan]; or |
q) [un régime privé d'assurance-maladie]; |
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(r) [celiac disease]. |
r) [la maladie coeliaque]. |
[15] One theme that emerges from subsection 118.2(2) is that no tax relief is provided for the ordinary expenses of living such as the costs of accommodation and food, except where those expenses are inextricably tied to a specific need resulting from a physical or mental impairment.
[16] For example, for those whose medical needs are such that they require the care provided by a nursing home or medical group home, the cost of that care qualifies for tax relief under paragraph 118.2(2)(d) or (b.1) even though some of that cost might relate to accommodation and meals. That is justified because the primary function of a nursing home or medical group home is to provide necessary medical care. Accommodation and meals are incidental to that medical care.
[17] There are people who do not reside in a medical facility, but nevertheless require the assistance of an attendant on a relatively constant basis. For those people, paragraphs 118.2(2)(b), (b.1) and (c) provide relief for the cost of attendant care, which normally would not include accommodation or meals. That is less generous than the relief provided for care in a nursing home or medical group home, but the need is also less.
[18] Given that statutory context, what kind of place is contemplated by paragraph 118.2(2)(e)? According to the words of the provision, an institution comes within paragraph 118.2(2)(e) if it “specially provides” the equipment, facilities or personnel needed for the care or training of its residents who require that specially provided equipment, facilities or personnel by reason of a physical or mental handicap. The circularity of this provision makes its interpretation somewhat awkward but it is reasonably clear, at least, that paragraph 118.2(2)(e) contemplates institutional care. For that reason, paragraph 118.2(2)(e) indirectly but necessarily provides tax relief for accommodation and other ordinary living costs that are included in the cost of care. However, given the context of subsection 118.2(2), an organization that functions mainly as a provider of residential accommodation should not fall within the scope of paragraph 118.2(2)(e) merely because it incidentally provides some medical services to its residents.
[19] I turn now to the facts of this case. The record establishes beyond doubt that the principal function of Hawthorn Park is to provide residential accommodation. The accommodation offered by Hawthorn Park is enhanced by access to services that are helpful to people who need or wish to have assistance with certain aspects of daily living. Some of those services are medical in nature (particularly the 24 hour emergency response facility and the access to assistance with medications), but in my view those services are incidental to Hawthorn Park’s principal function of providing residential accommodation. A person may reside at Hawthorn Park whether they need access to those services or not. In my view, given the statutory context, it is an unreasonable stretch of the language of paragraph 118.2(2)(e) to find that those additional services are “specially provided” for the care of its residents.
[20] I conclude that the Tax Court Judge incorrectly interpreted paragraph 118.2(2)(e), which led him to allow Ms. Lister’s appeal when he should have dismissed it. I would allow the appeal and the cross-appeal, and set aside the judgment of the Tax Court. The Crown has conceded that it is liable for the reasonable and proper costs of Ms. Lister on the cross-appeal.
“I agree
J.D. Denis Pelletier J.A.”.
“I agree
B. Malone J.A.”.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-118-05
STYLE OF CAUSE: Claire Lister v. Her Majesty the Queen
PLACE OF HEARING: Calgary, Alberta
DATE OF HEARING: October 3, 2006
REASONS FOR JUDGMENT BY: Sharlow J.A.
CONCURRED IN BY: Pelletier J.A.
APPEARANCES:
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FOR THE APPELLANT
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Ms. Pavanjit Mahil |
FOR THE RESPONDENT FOR THE RESPONDENT
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SOLICITORS OF RECORD:
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FOR THE APPELLANT
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Deputy Attorney General Of Canada |
FOR THE RESPONDENT
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