2015-0616341I7 Ontario healthy home renovation tax credit

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.

Principal Issues: Are expenses incurred to install a backup power generator, a skylight and a sun tunnel qualifying expenditures for the Ontario healthy home renovation tax credit?

Position: Although it is a question of fact, it is unlikely that these types of expenditures are qualifying expenditures for the OHHRTC.

Reasons: Do not meet all the conditions in section 103.1.1 of the Ontario Taxation Act, 2007.

Author: Shea-Farrow, Nancy
Section: 103.1.1 Ontario Taxation Act, 2007

                                                                                                  February 2, 2016

Ron Kerr                                                                                   HEADQUARTERS
Acting Manager                                                                        Income Tax Rulings Directorate
Provincial Legislative Amendments Section                            Tax Credits and Ministerial Issues
Legislative Policy Directorate                                                   Nancy Shea-Farrow
                                                                                                 (905)-721-5099
Attention: Ron Kerr

                                                                                                  2015-061634

Ontario Healthy Homes Renovation Tax Credit 

This is in response to your e-mail of November 2, 2015, asking our views on whether expenses incurred by an individual to install a backup power generator, a skylight or a sun tunnel in a home are qualifying expenditures for the Ontario Healthy Homes Renovation Tax Credit (OHHRTC) under the Taxation Act, 2007 (Ontario) (the “TA”). 

We have received the following information with respect to the backup power generator:

1)    A couple who are both XXXXXXXXXX years old have health issues that affect their mobility. The wife also has a severe form of XXXXXXXXXX disease.

2)    Exposure to XXXXXXXXXX can result in anaphylactic shock for the wife and therefore, she prepares her own food. According to the taxpayer, many of the foods in a XXXXXXXXXX diet must be purchased in bulk and kept frozen. The couple has two refrigerators and one freezer and in the event of a power outage, some of the food would be in danger of spoiling.  The taxpayers state that any emergency facility would be unlikely to supply a safe XXXXXXXXXX diet. They also argue that in such a situation, they need a well-lit home due to their mobility issues.

3)    As a result of these food concerns, a backup generator was installed in XXXXXXXXXX and now needs to be replaced. The old generator is hardwired into their home and the replacement will also be hardwired into the home’s electrical system at a cost of $XXXXXXXXXX.

The question as to whether a skylight or a sun tunnel would qualify was asked by a contractor. The contractor states that adequate lighting helps seniors’ mobility by helping to reduce falls and injuries. He notes that a sun tunnel has no view to the outside (unlike a window which is ineligible) and can be used at night with an electric lightbulb (like a light fixture that is eligible) added inside the tubing.

Our Comments

Section 103.1.1 of the TA provides for a 15% refundable OHHRTC in respect of qualifying expenditures made or incurred by individuals during the taxation year for listed improvements to a qualifying principal residence. A senior or a qualifying relation of a senior is eligible to claim the OHHRTC in respect of the qualifying principal residence. A senior is defined to mean an individual who is at least 65 years of age.  

A qualifying expenditure is an outlay or expense made or incurred by, or on behalf of, an individual that is directly attributable to a listed improvement by the individual.  

A listed improvement is:

1.    An improvement

*    that is a renovation or alteration of a residence or of the land on which the residence is situated, or that is part of the construction of the residence that can reasonably be considered to be undertaken 

o    to enable a senior to gain access to, or to be mobile or functional within, the residence or the land, or

o    to reduce the risk of harm to a senior within the residence or the land or in gaining access to the residence or land. 

Additionally, the improvement must be

*    of an enduring nature and integral to the residence or land, or

*    related to the purchase and installation of a modular or removable version of an item of a type that can otherwise be installed as a permanent fixture to the residence or land on which it is situated.

The improvement must also be

*    one where the primary purpose is not to increase the value of the residence or the land, and

*    ordinarily undertaken by, or on behalf of, a person who had an impairment to enable him or her to gain access to, or to be mobile or functional within, his or her residence or land.

2.    An improvement that is prescribed by the Ontario Minister of Finance.

Additionally, as well as prescribing an improvement as a listed improvement, the Ontario Minister of Finance may prescribe an improvement as ineligible for the purposes of the OHHRTC. Currently, there are no ineligible or listed improvements prescribed in the Ontario Regulations under the TA.

Although each situation is a question of fact, we offer the following comments. 

Backup Generator

The improvement appears to be of an enduring nature and integral to the residence. In this particular situation, it does not appear that the primary purpose of the improvement was to increase the value of the residence (if it did in fact increase the value of the residence).  However, it is questionable whether the improvement is one that would ordinarily be undertaken by, or on behalf of, a person who had an impairment (such as XXXXXXXXXX disease or a mobility impairment) to enable him or her to gain access to, or to be mobile or functional within, his or her residence or land.

Skylight or Sun Tunnel

Generally speaking, a skylight is a window that mounts directly on the roof of a home to bring in natural light and sometimes air. A sun tunnel is a tubular skylight which extends from the roof through the ceiling to deliver natural light into the home. These are both similar to a window, which is an opening in the wall or roof of a home with glass in a fixed, sliding or hinged frame to allow natural light and sometimes air into a home and usually allows the occupants to see outside. Thus, like a window, the installation of a skylight or a sun tunnel appears to be the type of improvement that is of an enduring nature and integral to the residence. 

Essentially, a skylight and sun tunnel allow for more light in the day.  In contrast, additional light fixtures provide for additional lighting 24 hours a day and is an improvement ordinarily undertaken by a senior with an impairment in sight to enable the senior to gain access to, or to be mobile or functional within his or her residence. 

Although it is a question of fact, in our view, it seems reasonable that the primary purpose of these types of improvements (installation of a skylight, sun tunnel or window) would be to increase the value of the residence, rather than to make a senior mobile or functional or to reduce the risk of harm to a senior within a residence. It is also our view that it is unlikely that these types of improvements would be ordinarily undertaken by, or on behalf of, a person who had an impairment to enable him or her to gain access to, or to be mobile or functional within, his or her residence. Instead, it is likely that these types of improvements would be undertaken by any individual regardless of whether they have an impairment. 

Adding an electric light kit to the sun tunnel does not alter our view on the eligibility of a sun tunnel, since it does not alter the primary purpose for the installation of the sun tunnel. 

Therefore, in our view, although it is a question of fact, it is unlikely that the expenses incurred for the installation of a skylight or a sun tunnel, or a backup generator would be a qualifying expenditure for the OHHRTC. 

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure, including information that could reveal the identity of the taxpayer. The taxpayer may ask for a version that has been severed using the Privacy Act criteria, which does not remove taxpayer identity. You can request this by e-mailing us at: ITRACCESSG@cra-arc.gc.ca. A copy will be sent to you for delivery to the taxpayer.

We trust our comments will be of assistance.

Pamela Burnley, CPA, CA
Manager
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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