2016-0677071E5 Amount paid to adults w/developmental disabilities

Principal Issues: Will paragraph 81(1)(h) apply to payments made by XXXXXXXXXX directly or indirectly through third party agencies to individuals to provide services under the XXXXXXXXXX to adults with developmental disabilities?

Position: If the amounts that the caregiver receives are for the benefit of the care recipient, and provided that all the other required conditions in paragraph 81(1)(h) are met, then these amounts will likely qualify for the exemption under paragraph 81(1)(h) of the Act.

Reasons: All the conditions of paragraph 81(1)(h) must be met.

Author: D'Angelo, Sandro
Section: 81(1)(h)

XXXXXXXXXX                                                                                                       2016-067707
                                                                                                                               S. D’Angelo
March 28, 2018

Dear XXXXXXXXXX,

Re:  Payments for In-Home Care of Developmentally Disabled Persons

We are writing in response to your letter of November 23, 2016, requesting our views whether payments made by XXXXXXXXXX (footnote 1) directly, or indirectly through third-party agencies (the “Agencies”), to individuals other than trusts, (the “Caregivers”) to provide services under the XXXXXXXXXX to adults with developmental disabilities (footnote 2) (the “Cared-for Individuals”) would meet the requirements under paragraph 81(1)(h) of the Income Tax Act (“Act”).

Home sharing under the XXXXXXXXXX is a residential option in which a Cared-for Individual, who has a developmental disability, shares a home with a Caregiver who is contracted to provide ongoing support. Homes may be owned or rented by the Caregiver or Cared-for Individual and home sharing may be arranged by Agencies or directly by XXXXXXXXXX. You have provided the following additional information:

*     The payments under the XXXXXXXXXX are made under a program provided for by a provincial law (i.e., the XXXXXXXXXX).

*     The payments under the XXXXXXXXXX are made directly by XXXXXXXXXX, or indirectly by XXXXXXXXXX through Agencies, to the Caregivers for the benefit of the Cared-for Individuals.

*     The Cared-for Individuals are not the Caregivers’ spouse or common-law partner or related to the Caregiver or the Caregivers’ spouse or common law partner.

*     No family allowance under the Family Allowance Act (Canada) or any similar allowance provided for by provincial or territorial law is payable in respect of the Cared-for Individuals for the period for which payments are made under the XXXXXXXXXX.

*     The Cared-for Individuals reside in the Caregivers’ principal place of residence, or the Caregivers’ principal place of residence is maintained for use as the Cared for Individual’s residence, during the period for which the payments are made.

*     Cared-for Individuals must have developmental disabilities to be entitled to XXXXXXXXXX benefits. XXXXXXXXXX sets eligibility criteria for XXXXXXXXXX support and services by reference to an implicit, but nevertheless compelling, financial-based test for basic XXXXXXXXXX eligibility. An individual with developmental disabilities would ordinarily have little if any income or assets.

*     XXXXXXXXXX develops individual support plans for each Cared-for Individual using a XXXXXXXXXX to determine disability needs. The XXXXXXXXXX considers the appropriate level of support required by the Cared-for Individual in each of XXXXXXXXXX different areas and is assigned an overall XXXXXXXXXX rating.  This overall XXXXXXXXXX rating will then be used to determine the services to be provided by the Caregivers and the financial needs of the Cared-for individual.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) and related legislation.  It does not confirm the income tax treatment of a particular situation, but is intended to assist you in making that determination.  The income tax treatment of transactions will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC-70-6R7 Advance Income Tax Rulings and Technical Interpretations.

Paragraph 81(1)(h) of the Act excludes from income social assistance payments that an individual caregiver (the “caregiver”) receives for the benefit of another individual (the “care-recipient”) under the caregiver’s care. The care recipient can be either a child or an adult. The amount the caregiver receives must meet all the following conditions to be excluded from income:

*     The payment is a social assistance payment ordinarily made on the basis of a means, needs, or income test.

*     The payment is made under a program provided for by a federal, provincial or territorial law.

*     The payment is received directly or indirectly by the caregiver for the benefit of the care recipient.

*     The care recipient is not the caregiver’s spouse or common-law partner or related to the caregiver or the caregiver’s spouse or common-law partner.

*     No family allowance under the Family Allowance Act or any similar allowance provided for by provincial or territorial law can be payable in respect of the care recipient for the period for which the social assistance payment is made.

*     The care recipient resides in the caregiver’s principal place of residence, or the caregiver’s principal place of residence must be maintained for use as the care recipient’s residence, during the period for which the payment is made.

The term “social assistance” is not defined in the Act. Generally, social assistance means aid provided by a government or government agency on the basis of a need. It does not matter if the payments are made directly by a government or government agency or if they are received indirectly through another organization, be it a not-for profit or for profit entity.

According to you, the payments made by XXXXXXXXXX under the XXXXXXXXXX are not determined by an actual financial means, needs or income test of the individual with the developmental disability but rather through a developmental assessment. However, it is implicit that individuals who receive funding under the XXXXXXXXXX would not pass a means, needs or income test as they are not capable of financially supporting themselves or living independently.  Consequently, it is our opinion that the requirement under paragraph 81(1)(h) for the social assistance to be ordinarily based on a means, needs or income test, is satisfied.

For the purpose of paragraph 81(1)(h) of the Act, it does not matter if the social assistance payments are made directly by a government or government agency or if they are received indirectly through another organization. Therefore, if the payments made to Caregivers are for social assistance, the fact that these payments are made directly by XXXXXXXXXX or indirectly through Agencies will not disqualify an amount that would otherwise qualify under paragraph 81(1)(h).

As noted above, the care recipient must reside in the caregiver’s principal place of residence, or the residence must be maintained for the care recipient’s use.  An individual’s principal place of residence is the place where the individual regularly, normally or customarily lives.  This requirement is not met in situations where the caregiver and the care recipient do not share common living areas in the residence.

Therefore, provided that all the requirements under paragraph 81(1)(h) outlined above are met, it is our view that payments received by Caregivers made by XXXXXXXXXX under the XXXXXXXXXX would qualify for the exemption under paragraph 81(1)(h) of the Act.

We trust our comments will be of assistance.

Yours truly,

Lita Krantz, CPA, CA
Manager
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

FOOTNOTES

Note to reader:  Because of our system requirements, the footnotes contained in the original document are shown below instead:

XXXXXXXXXX

All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without the prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5.

© Her Majesty the Queen in Right of Canada, 2018

Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistribuer de l'information, sous quelque forme ou par quelque moyen que ce soit, de façon électronique, mécanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.

© Sa Majesté la Reine du Chef du Canada, 2018