2021-0915651E5 XXXXXXXXXX Long-term care facilities

Principal Issues: Whether XXXXXXXXXX is required to issue T5007's in respect of reduced accommodation charges, XXXXXXXXXX payments and personal use allowance (PUA) payments made for residents of long-term care facilities?

Position: Reduced accommodation charges - no, XXXXXXXXXX Payments - yes, PUA payments – yes.

Reasons: The reduced accommodation charges are likely in respect of medical expenses and would fall under the exception in paragraph 233(2)(a) of the Regulations, the XXXXXXXXXX and PUA payments are social assistance payments that do not meet any of the exceptions listed in subsection 233(2) of the Regulations.

Author: Wirag, Eric
Section: 56(1)(u); Regulation 233(1), 233(2)

XXXXXXXXXX                                                                       2021-091565
                                                                                                 Eric Wirag, CPA, CMA

April 22, 2022

Dear XXXXXXXXXX:

Re: Payments to residents in long-term care facilities in XXXXXXXXXX

This is in reply to your email of October 29, 2021 asking for our comments on the requirements to issue T5007 Statement of Benefits (T5007). More specifically you have asked whether the XXXXXXXXXX (the Department) is required to issue T5007’s for three types of payments to eligible residents in long-term care (LTC) facilities in XXXXXXXXXX. Those payments include amounts for reduced accommodation charges, XXXXXXXXXX.  

You have explained that LTC facilities in XXXXXXXXXX provide nursing and personal care on a 24-hour basis including care given under the supervision of a nurse, administration of medication and assistance with daily living. Other services may include physiotherapy, occupational therapy, recreation, and those provided by a Social Worker. Residents of LTC facilities are assessed by the XXXXXXXXXX of the Department as requiring nursing home care.

Reduced accommodation charge

You state that residents of LTC facilities are charged a standard accommodation charge, which is billed and collected by the LTC facility. Residents are eligible to apply, on an annual basis, for a reduced accommodation charge, which is determined by the application of an income test for the resident. We understand the LTC facility bills the Department for the difference between the standard accommodation charge and the reduced accommodation charge billed to the resident. This amount is paid by the Department on the resident’s behalf.

You have stated that the standard accommodation charge paid by a resident, would be claimed as medical expenses when filing their income tax return. As such, you have concluded that the payment is not social assistance in nature and a T5007 is not issued by the Department.

XXXXXXXXXX

You state that XXXXXXXXXX is the annual amount set by the province that, at a minimum, each adult applicant shall be left with as XXXXXXXXXX after paying accommodation charges (standard or reduced). Residents with less XXXXXXXXXX after paying for their accommodation charges are provided financial assistance for incidental expenditures. This funding is provided from the Department to each LTC facility based on a monthly claims process and the LTC facility distributes the funds to the residents personal or trust account. XXXXXXXXXX.

Personal use allowance

You state that a publicly assisted resident is any resident who has been residing in a LTC facility since prior to January 1, 2005 and who receives financial assistance from the Department exceeding $12.75 per day. 100% of a publicly assisted resident’s income is applied against the standard accommodation charge. These residents receive a monthly Personal Use Allowance (PUA), unless the resident meets specific exclusion criteria. For the 2021 year the PUA is set as $170.00 per month.

You have stated that the XXXXXXXXXX and PUA amounts paid to a resident do not meet the criteria of social assistance because they are not intended for food, clothing, or shelter. The XXXXXXXXXX and PUA are intended for items such as pharma care co-pays, premiums, phone charges, and incidentals. As such, you have concluded that a T5007 is not required for either of these payments.    

Our comments:

This technical interpretation provides general comments about the provisions of the Income Tax Act (the Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer 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 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Paragraph 56(1)(u) of the Act includes in a taxpayer’s income, social assistance payments received in the year that are made on the basis of a means, needs, or income test, except to the extent that such amounts are otherwise required to be included in the taxpayer’s income or the income of the taxpayer’s spouse or common-law partner. Amounts included in a taxpayer’s income under paragraph 56(1)(u) are offset by a matching deduction under paragraph 110(1)(f) of the Act. As a result, there are no income tax implications related to the income inclusion other than it may affect certain income-tested benefits and the calculation of certain tax credits.

The first requirement in paragraph 56(1)(u) of the Act is that the amount must be “social assistance”. The term “social assistance” is not defined in the Act but generally means aid provided by governments or government agencies, although it can also be provided by other organizations (such as a charity), on the basis of need. Social assistance payments generally include payments made to individuals whose income is inadequate or non-existent owing to disability, unemployment, old age or other similar factors.

In our opinion, each of the three payments made to or on behalf of residents in LTC facilities by the Department would be considered social assistance payments.

The second requirement in paragraph 56(1)(u) of the Act is that the payment must be “made on the basis of a means, needs or income test”. We consider each one of these tests to be a financial test and they are described as:

1. An “income” test, which is a test based solely on the income of the applicant.

2. A “means” test, which is similar to an income test, but also takes into account the assets of the applicant.

3. A needs test, which takes into account the income, assets and financial needs of the applicant.

Based on the information provided, it appears that the payments made to or on behalf of residents in LTC facilities by the Department are based on an income test. Therefore, each of the payments would be considered to be a social assistance payment made on the basis of a means, needs, or income test as described in paragraph 56(1)(u) of the Act.

When an organization or government has provided social assistance as described in paragraph 56(1)(u) of the Act to an individual, subsection 233(1) of the Income Tax Regulations (the “Regulations”) requires the payer that provided the social assistance to report the payment on a T5007 unless the payment is specifically excluded from this reporting requirement. The exceptions from these reporting requirements are listed in subsection 233(2) of the Regulations. As described in subsection 233(2) of the Regulations, a payment that does not have to be reported on a T5007 is a payment that:

(a) is in respect of medical expenses incurred by or on behalf of the recipient;

(b) is in respect of child care expenses, as defined in subsection 63(3) of the Act, incurred by or on behalf of the recipient or a person related to the recipient;

(c) is in respect of funeral expenses in respect of a person related to the recipient;

(d) is in respect of legal expenses incurred by or on behalf of the recipient or a person related to the recipient;

(e) is in respect of job training or counselling of the recipient or a person related to the recipient;

(f) is paid in a particular year as a part of a series of payments, the total of which in the particular year does not exceed $500; or

(g) is not a part of a series of payments.

It is a question of fact whether a particular payment meets any of the exclusions listed in subsection 233(2) of the Act. Where amounts are excluded from the reporting requirements by subsection 233(2) of the Regulations, it is the practice of the Canada Revenue Agency not to require the excluded amounts to be included in income of the recipient, thereby not affecting the calculation of income-tested benefits.

The types of medical expenses contemplated under paragraph 233(2)(a) of the Regulations are those meeting the requirements of an “eligible medical expense” as described in paragraphs 1.18 to 1.142 of Income Tax Folio S1-F1-C1, Medical Expense Tax Credit. You have stated that the amounts paid by the Department on behalf of residents of LTC facilities for reduced accommodation charges would otherwise be considered eligible medical expenses for those residents, if they had paid the full accommodation charges. In those cases, it appears the payments would meet the exception found in paragraph 233(2)(a) of the Regulations. Therefore, a T5007 would not be required for those payments, and the payment would not be included in the recipient’s income under paragraph 56(1)(u) of the Act.

However, it does not appear that the XXXXXXXXXX or the PUA payments made to a resident would meet the exceptions listed in subsection 233(2) of the Regulations, unless the XXXXXXXXXX or PUA payments met the exception in paragraphs 233(2)(f) or (g). We generally consider a series of payments to mean a number of similar payments made in a particular year to an individual under the same program of a government or other organization.

Therefore, it is our view that the Department is required to file a T5007 for individuals who received payments for XXXXXXXXXX or PUA where the exceptions in paragraph 233(2)(f) or (g) have not been met.

We trust that these comments will be of assistance to you.

Yours truly,

Lita Krantz, 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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