17 July 2006 External T.I. 2006-0175271E5 - Home Providers and Respite Providers

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: (1) Tax treatment of per diem payments plus the monthly room and board received by a "Home Provider" to provide support in their home to a person with a developmental disability. (2) Tax treatment of amounts for the purchase or provision of respite services received directly or indirectly by the person with a disability, the "Home Provider" and the "Respite Provider". (3) Whether the rent and/or board payments, paid on behalf of the person with a developmental disability might be used by him or her to claim the Ontario refundable property tax credits.

Position: General comments provided.

Reasons: Questions of fact.

									2006-017527
XXXXXXXXXX  							Dominic Tiu
(613) 957-8961
July 17, 2006

XXXXXXXXXX:

Re: Payments Received By Home Providers, Respite Providers and Cared-For Individuals

We are writing in response to your March 8th, 2006 inquiry on the above subject and further to our subsequent telephone discussions (XXXXXXXXXX/Tiu). You inquired as to the tax treatment of the following type of payments:

• Per diem payments plus the monthly room and board received by a "Home Provider" to provide support in their home to a person with a developmental disability.
• Amounts for the purchase or provision of respite services received directly or indirectly by the person with a disability, the "Home Provider" and the "Respite Provider".

You also inquired whether the rent and/or board payments paid on behalf of the person with a developmental disability might be used by him or her to claim the Ontario refundable property tax credits.

You provided the following relevant details:

• The XXXXXXXXXX is a service offered through XXXXXXXXXX is a non-profit agency, providing voluntary service and is a transfer payment agency, which receives funding from the Ministry of Community and Social Service. XXXXXXXXXX and XXXXXXXXXX specialize in providing support and services to adults with a developmental disability.
• Home Providers are individuals who welcome adults with a development disability to live with them in their home. These individuals are contracted by XXXXXXXXXX to provide support to the person with a developmental disability within all activities of daily living.
• Respite Providers are people who are paid to provide relief for the Home Provider. They are paid using the Ministry of Community and Social Services funds that are transferred through XXXXXXXXXX.

The particular situations in your letter appear to relate to factual ones, involving specific taxpayers. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an Advance Income Tax Ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to provide the following general comments, which may be of assistance.

Per Diems/Room And Board Payments Received By Home Providers

Section 81 of the Income Tax Act (the "Act") lists various amounts that are not included in computing a taxpayer's income. In general, paragraph 81(1)(h) exempts from income social assistance payments to an individual caregiver, for the benefit of a cared-for individual under the caregiver's care. The cared-for individual can be either a child or an adult.

The income exclusion under paragraph 81(1)(h) would apply to an amount received by the Home Provider provided all of the conditions detailed in the first page of the attached relevant section of our Income Tax Technical News Issue #31R3 dated May 16, 2006 are met. This publication also provides additional information on a number of related subject matters.

If the income exclusion in paragraph 81(1)(h) does not apply, the subject payments would be taxable income of the Home Provider. Depending on the facts of each case, the subject payments may be:

• Income from a business under section 9, or
• Employment income under section 5.

Amount For The Purchase Or Provision Of Respite Services Received By:

Home Providers

In general, it is our opinion that payments received by a Home Provider to purchase respite services would be treated in the same manner as the payments received by the Home Provider to provide care for the cared-for individual.

Respite Providers

A Respite Provider provides care on a temporary or short-term basis. It is our view that the income exclusion under paragraph 81(1)(h) does not apply for a Respite Provider because:

• The cared-for individual would not be residing in the Respite Provider's principal place of residence, and
• Similarly, the Respite Provider's residence would not be maintained as the cared-for individual's residence.

Consequently, it is our view that payments received for providing respite care by a Respite Provider are, depending on the facts of each case, either employment or business income.

Cared-for Individual

In our opinion, payments received by a cared-for individual to purchase respite services are social assistance payments that are included in income under paragraph 56(1)(u). While the payments are not exempt from income under paragraph 81(1)(h), they are deductible in computing taxable income by virtue of paragraph 110(1)(f). However, because these payments are included in income, certain net income-tested benefits (such as the Canada child tax benefit, the GST Credit and Old Age Security) will be affected.

Ontario Refundable Property Tax Credit on Rent and/or Board

It is our opinion that a cared-for individual is generally eligible to claim the Ontario refundable property tax credit under paragraph 8(3)(a) of the Ontario Income Tax Act in respect of the rent paid by him or her or, on his or her behalf, excluding all payments on account of meals or board. Please note, however, that there are exceptions for certain rents. For more detailed information, please refer to the attached copy of the Ontario Information Bulletin No. 6303 on Property and Sales Tax Credits. Please also note that it is apparent from the bulletin that since the cared-for individual would be renting from a Home Provider, the latter's entitlement to this credit would be affected by the portion of the residence rented to the cared-for individual.

These comments represent our opinions of the law as it applies generally, and as indicated in paragraph 21 of Information Circular 70-6R5, are not binding on the Department. We trust that our comments will be of assistance to you.

Randy Hewlett
Section Manager
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

Attachments: ITTN 31R2, Ontario Information Bulletin No. 6303