Disability and the Income Tax
David G. Duff”
The federal Income Tax Act contains an extensive
number of provisions addressing the taxation of fami-
lies with disabled persons. These provisions, however,
have been the subject of a series of ongoing incre-
mental adjustments, and do not reflect a comprehensive
and coherent approach to the taxation of these indi-
viduals in light of their unique financial circumstances.
This article considers the existing income tax provi-
sions regarding families with disabled persons, ana-
lyzing the relationship between disabilities and appro-
priate tax liabilities, and providing suggestions for re-
form of the current tax structure. Focussing on the
goals of tax policy narrowly defined as compared to the
broader social policy goals that may be pursued
through the tax system, the article evaluates in turn (i)
existing provisions aimed at recognizing the costs of
disability for disabled individuals and theirfamilies; (ii)
tax measures designed to facilitate participation by dis-
abled persons in the paid labour force; and (iii) current
tax rules on income support for disabled persons who
have difficulty supporting themselves. In each of these
areas, the article undertakes critical analysis of the pre-
sent tax provisions and makes proposals for their im-
provement or replacement, bearing in mind the over-
riding rationale of promoting horizontal equity between
individuals with and without disabilities and between
persons who support disabled individuals and persons
without such support obligations.
La Loi de P’imp& sur le revenu contient un grand
nombre de dispositions visant l’impositioa de families
avec des personnes handicap6es. Cependant, ces dispo-
sitions ont 6t6 assujetties A une s6rie de rdajustements
progressifs et ne semblent pas t~moigner d’une politi-
que d’imposition suffisamment complete et coh6rente,
6tant don6 ]a situation flnancire particulire de ces
individus. Cet article passe en revue les dispositions
actuelles visant les familles avec des personnes handi-
capes, tout en analysant le rapport entre les handicaps
physiques ou mentaux et les assujettissements Ai l’imptt
appropri~s et en sugg6rant des moyens de rformer la
structure actuelle du systame d’imposition. En se con-
centrant sur les buts vis6s par ]a politique d’imposition,
d6finie de fagon restrictive, compards aux buts plus lar-
ges de politique sociale pouvant 6tre poursuivis par
l’entremise du systame d’imposition, l’article 6value, A
tour de r6le, (i) les dispositions actuelles visant h pren-
dre en compte les cofits de l’handicap pour les person-
nes handicapes et leurs familles, (ii) les mesures cher-
chant h faciliter l’intgration des personnes handica-
ptes h ]a main d’oeuvre rdmun rie, et (iii) les r~gles
actuelles portant sur l’alIocation de pensions alimentai-
res aux personnes handicapes ayant des difficultds A
subvenir A leurs propres besoins. L’auteur fait une ana-
lyse critique des dispositions actuelles dans chacun de
ces domaines, et propose soit de les amdliorer soit de
les remplacer, tout en tenant compte du but primordial
de promouvoir l’6quit horizontale parmi les individus
avec et sans handicap, ainsi que parmi les personnes
qui subviennent aux besoins de personnes handicapes
et celles qui n’ont pas de telles obligations.
* Faculty of Law, University of Toronto. This paper was originally completed for the Canadian As-
sociation for Community Living. For assistance and comments in the preparation of the paper, I am
indebted to Harry Beatty of the Advocacy Resource Centre for the Handicapped (ARCH), Michael
Bach and Cam Crawford of the Roeher Institute, Connie Laruin-Bowie of the Canadian Association
for Community Living, Sheri Tojman of the Caledon Institute of Social Policy, Greg Williams of
Williams Research.com Inc., and Bill Young of the Parliamentary Research Branch. The opinions and
recommendations advanced in the paper are those of the author alone. This paper was written prior to
the 2000 Federal Budget, which introduces a number of amendments consistent with recommenda-
tions in the paper. While the basic structure and argument of the paper reflect the state of the law prior
to the 2000 Federal Budget, the paper has been updated to identify budgetary reforms where relevant.
McGill Law Joumal 2000
Revue de droit de McGill 2000
To be cited as: (2000) 45 McCill L.. 797
Mode de rdf&ence: (2000) 45 R.D. McGill 797
MCGILL LAW JOURNAL / REVUE DE DROITDE MCGILL
[Vol. 45
Introduction
I. Tax Policy and Social Policy
I1. The Costs of Disability
A. Medical Expenses Tax Credit
Interpretation
1. Description
2.
3. History
4. Evaluation and Recommendations
a. Name
b. Eligible Expenses
c. Threshold
d. Credit or Deduction
e. Social Policy
B. Disability Tax Credit
1. Description
2. History
3.
4. Evaluation and Recommendations
Interpretation
a. Purpose
b. Eligibility
c. Dollar Amount
d. Credit or Deduction
e. Social Policy
f. Administration
C. Disability Expenses Tax Credit
1. Description
2. Evaluation and Recommendations
a. Eligibility
b. Relationship to Disability Tax Credit or Deduction
c. Refundability and Rates: Social Policy and Tax Policy
D. Personal Tax Credits
1. Description
2. History
3. Evaluation and Recommendations
a. Purpose
b. Credit or Deduction
c. Amounts
E. Child Care Expense Deduction
1. Description
2000]
D.G. DUFF- DIsABILITY AND THE INCOME TAX
2. History
3. Evaluation and Recommendations
a. Purpose
b. Dollar Ceilings
c.
d. Claimants and Providers
e. Other Dependants
Income-Related Limit
F Child Tax Benefit
1. Description
2. History
3. Evaluation and Recommendations
G. Private Savings
1. Description
2. Evaluation and Recommendations
III. Labour Market Integration
A. Measures Directed at Disabled Persons
1. Description
2. History
3. Evaluation and Recommendations
a. Purposes
b. Direct Costs of Earning Income
c. Loss of Social Assistance Subsidies
B. Measures Directed at Employers
1. Description
2. Evaluation and Recommendations
a. Purpose
b. Efficacy
c. Distributive Impact
d. Administration and Transparency
e. Conclusion
IV. Income Support
A. Tax Treatment of Disability Income and Contributions
1. Description
2. Evaluation and Recommendations
a. Purposes
b. Tax Policy
c. Social Policy
B. Comprehensive Income Support for Persons with Disabilities
V. Summary and Recommendations
A. Recognizing the Costs of Disability
1. Description
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MCGILL LAW JOURNAL / REVUE DE DROIT DE MCGILL
[Vol. 45
2. Purpose
3. Recommendations
a. Personal Tax Credits
b. Disability Amount
c. Medical and Disability-Related Expenses
d. Private Savings
e. Child and Disabled Adult Care Deductions
f. Canada Child Tax Benefit
B. Facilitating Labour Market Integration
1. Description
2. Purpose
3. Recommendations
a. Costs of Earning Income
b. Refundable Medical Expense Supplement
c. Tax Incentives Directed at Employers
C. Income Support for Disabled Persons
1. Description
2. Purpose and Recommendations
Conclusion
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D. G. DUFF- DISABILITYAND THE INCOME TAx
Introduction
In recent years, federal, provincial, and territorial governments have devoted in-
creasing attention to the status of disabled Canadians, emphasizing the integration of
disabled persons as equal citizens within the broader community through policies de-
signed to promote equal access to generic programs and services, while simultane-
ously recognizing the need for specific measures to address the costs of disabilities, to
facilitate participation by disabled persons in the paid labour force, and to provide in-
come support for disabled persons who have difficulty supporting themselves.’ Like-
wise, Canadian governments have demonstrated increasing concern about the welfare
of families with dependent children, employing differing measures to alleviate the fi-
nancial burden associated with the care of children to enable parents to participate in
the paid labour force,2 and agreeing on a combined strategy to combat child poverty
through the National Child Benefit involving federal refundable tax credits and social
assistance delivered by provincial and territorial governments. In each of these areas,
the federal income tax has played a significant role in the pursuit of government poli-
cies.
3
With respect to persons with disabilities, the Income Tax Act recognizes the costs
of disabilities through credits for itemized medical expenses (“medical expense tax
credit”) and for mental or physical impairment (“disability tax credit”)4 Other provi-
sions recognize additional costs associated with the care of disabled relatives by pro-
viding credits for infirm dependants over the age of 18 (“infirm dependants credit”),
and for specified relatives living in an individual’s home who are over the age of 18
‘See e.g. Canada, Federal/Provincialterritorial Ministers Responsible for Social Services, In Uni-
son: A Canadian Approach to Disability Issues (A Vision Paper) (Ottawa: Human Resources Devel-
opment Canada, 1998) [hereinafter In Unison]; Canada, Federal Task Force on Disability Issues,
Equal Citizenship for Canadians with Disabilities: The Will to Act (Ottawa: Human Resources De-
velopment Canada, 1996).
2 At the provincial and territorial level these measures have involved direct subsidies (as in Quebec)
and tax credits (as in Ontario). At the federal level, the maximum allowable deduction for child care
expenses increased from $2,000 for each eligible child in 1987 (maximum $8,000) to $7,000 or
$4,000 per child (depending on the child’s age and disability) for 1998 and subsequent taxation years.
3 While disability-related policies are also pursued through federal and provincial sales taxes and
provincial income taxes, the federal income tax is the most important tax instrument for the pursuit of
these policies. This paper examines only the federal income tax.
4 R.S.C. 1985 (5th Supp.), c. 1, ss. 118.2, 118.3 [hereinafter /TA]. S. 118.4 contains definitions rele-
vant to the application of these and other provisions involving mental or physical impairment.
SIbid, s. 118(l)(d), describing B in s. 118(1). For the purpose of s. 118(1)(d), s. 118(6) defines a
“dependant!’ as
a person who at any time in the year is dependent on the individual for support and is
(a) the child or grandchild of the individual or of the individual’s spouse; or
(b) the parent, grandparent, brother, sister, uncle, aunt, niece or nephew, if resident in
Canada at any time in the year, of the individual or the individual’s spouse.
MCGILL LAW JOURNAL / REVUE DE DROIT DE MCGILL
[Vol. 45
and dependent on the individual because of mental or physical infirmity (“caregiver
credit”);’ additional provisions encourage private savings to support disabled persons
through special tax rules for inter vivos trusts with disabled beneficiaries.! Participa-
tion by disabled persons in the paid labour force is facilitated by exempting specified
disability-related employment benefits from tax,8 by allowing individuals eligible for
the disability tax credit to deduct the cost of attendant care provided to enable them to
participate in the paid labour force,9 by compensating disabled individuals who par-
ticipate in the paid labour force for lost subsidies for disability-related supports under
provincial social assistance,” and by permitting employers to claim an immediate de-
duction for prescribed disability-related modifications to buildings and prescribed dis-
ability-related equipment.” Finally, income support for disabled persons is encour-
aged by non-taxation of employer contributions to group sickness or accident insur-
ance plans,’2 and enhanced by non-taxation of social assistance benefits,’3 workers’
compensation,” and tort compensation for personal injuries.'”
/bid, s. 118(l)(c.1), describing B in s. 118(1). This credit also applies where the individual main-
tains a “self-contained domestic establishment which is the ordinary place of residence of the individ-
ual” and a parent or grandparent over the age of 65.
7 See the “election by trust and preferred beneficiary” in ibid., s. 104(14), which allows income re-
tained by the trust to be taxed as if it were received by a preferred beneficiary, and the definition of
“preferred beneficiary” in s. 108(1). As a general rule, inter vivos trusts are taxable at the top marginal
rate (29%) without any recognition of the tax credits available to beneficiaries.
sbld., s. 6(16), which excludes from an individual’s income benefits or reasonable allowances in
respect of (a) transportation to and from work (including parking) if the individual is blind or eligible
for the disability tax credit because of mobility impairment; and (b) an attendant to assist the individ-
ual in the performance of his or her duties if the individual is eligible for the disability tax credit.
/bTid, s. 64.
‘0 See the “refundable medical expense supplement’ in ibid, s. 122.51.
“Ibid, ss. 20(l)(qq), 20(1)(rr); Income Tax Regulations, C.RC., c. 945, ss. 8800, 8801 [hereinafter
Regulations]. S. 8800 specifies as prescribed disability-related modifications to buildings
(a) the installation of
(i) an interior or exterior ramp; or
(ii) a hand-activated electric door opener, and
(b) a modification to a bathroom, elevator or doorway to accommodate its use by a per-
son in a wheelchair.
S. 8801 prescribes as disability-related equipment
(a) an elevator car position indicator, such as a braille panel or an audio signal, for indi-
viduals having a sight impairment;
(b) a visual fire alarm indicator, a listening device for group meetings or a telephone
device, for individuals having a hearing impairment; and
(c) a disability-specific computer software or hardware attachment.
‘”1TA, ibid, s. 6(1)(a)(i), which excludes these contributions (among other amounts) from inclusion
in the employee’s income as a taxable benefit. Where an employer has made a contribution to such a
plan, periodic payments received under the plan are taxable as employment income under s. 6(1)(f).
2000]
D.G. DUFF- DIsABILITYAND THE INCOME TAx
803
With respect to families with dependent children, the !TA recognizes the costs of
supporting and caring for children through a credit for single parents (“wholly de-
pendent person credif’),” a deduction for child care expenses incurred to enable par-
ents to participate in the paid labour force,’7 and a refundable tax credit provided to
low-income families with dependent children (“Canada Child Tax Benefit”).” Other
provisions recognize specific financial needs of dependent children by allowing tax-
deferred savings to be transferred to dependent children and grandchildren on a tax-
payer’s death free of tax.” While most of these provisions are more generous regard-
ing disabled children, the Canada Child Tax Benefit does not distinguish between dis-
abled and other children.
Notwithstanding these many provisions, however, the pursuit of disability-related
policies through the income tax appears to reflect a series of ad hoc adjustments
rather than a comprehensive approach to the income tax treatment of disabled indi-
viduals and families with disabled persons. The medical expense tax credit, for exam-
ple, is increasingly directed at disability-related expenses, while retaining a structure de-
” Although social assistance benefits are included in computing the recipient’s net income under
ibid, s. 56(1)(u), the amount so included is deductible under s. 110(1)(f) in computing the recipient’s
taxable income. Although the net result of these provisions is to exempt social assistance benefits
from income tax, the inclusion of these payments in computing the recipient’s net income can affect
entitlement to a number of non-refundable and refundable tax credits, the amount of which depends
on net income.
” Like social assistance benefits, workers’ compensation is included in computing the recipient’s net
income under ibid, s. 56(l)(v), but deductible under s. 110(l)(f) in computing the recipient’s taxable
income. While these provisions make worker’s compensation exempt from income tax, the inclusion
of these payments in computing the recipient’s net income can affect the calculation of various non-
refundable and refundable tax credits, the amount of which depends on net income.
“S See Cirella v. M.N.R. (1977), [1978] C.T.C. 1, 77 D.T.C. 5542 (F.C.T.D.) [hereinafter Cirella cited
to C.T.C.], in which the Federal Court held that tort damages for personal injury arising from an
automobile accident were not taxable, even though they were payable in respect of foregone income.
See also ITA, ibid, ss. 81(l)(g.1), 81(l)(g.2), which exempt the income and capital gains derived from
property acquired pursuant to an action for damages in respect of physical or mental injury where the
injured person is less than 21 years old. ”
S61TA, ibid, s. 118(l)(b). This credit is also available to individuals who support in a self-contained
domestic establishment in which they live a wholly dependent relative who is either under the age of
18 or a parent or grandparent of the individual.
s. 63.
‘7/bid,
“T/ia, ss. 122.6-122.64.
“See ibid, ss. 146(8.9), 146.3(6.2), and the definition of “refund of premiums” in s. 146(1), which
exclude amounts paid to financially dependent children or grandchildren from inclusion in the income
of the deceased, and s. 60(1), which allows the child or grandchild to deduct amounts so received
which are contributed to a registered retirement savings plan or used to acquire an annuity. While this
deduction is generally limited to children or grandchildren under 18 years of age, no such limit exists
for children or grandchildren who were dependent on the deceased “by reason of mental or physical
infirmity”. For a detailed explanation of these provisions, see M.N.R., Interpretation Bulletin 1T-500R,
“Registered Retirement Savings Plans – Death of an Annuitanf’ (18 December 1996).
MCGILL LAW JOURNAL / REVUE DE DROITDE MCGILL
[Vol. 45
signed to recognize extraordinary costs associated with sudden and transitory illnesses.?0
Nor are these provisions always consistent with their primary rationale to promote hori-
zontal equity between individuals with and without disabilities and between persons
who support disabled individuals and persons without such support obligations.
This paper reviews and evaluates current income tax provisions and possible re-
forms relevant to families with disabled persons, with the goals of better recognizing
the impact of disabilities on appropriate tax liabilities and bringing a greater degree of
coherence to current income tax provisions bearing on families with disabled persons.
For this purpose, Part I provides a framework for analysis by distinguishing between
the goals of tax policy narrowly defined and broader social policy goals that may be
and often are pursued through the tax system. Part II considers existing provisions and
proposed reforms directed at recognizing the costs of disability, both for disabled in-
dividuals themselves and for families with disabled persons. Part III examines tax
measures designed to facilitate participation by disabled persons in the paid labour
force, while Part IV reviews existing and proposed tax rules regarding income support
for disabled persons who have difficulty supporting themselves. Part V summarizes
the main conclusions of the analysis and makes specific recommendations.
I. Tax Policy and Social Policy
As one of the most significant policy instruments available to the federal govern-
ment, it is not surprising that the ITA might be used to pursue a variety of social policy
objectives. Indeed, to the extent that a progressive income tax is designed to collect a
larger proportionate share of revenue from high income taxpayers than lower-income
taxpayers and exempt those with very low incomes, the tax itself can be said to serve
a broad social policy objective of moderating inequalities in the pre-tax distribution of
income.2′
Nonetheless, in reviewing the characteristics of an optimal tax system, commen-
tators generally distinguish between broad social policy goals regarding the appropri-
ate allocation and distribution of economic resources, and the aims of tax policy more
narrowly defined to raise revenue in a manner that is equitable among different tax-
payers, that minimizes unintended effects on economic decisions, and that is relatively
easy to understand and collect. Among those writing in the area, these more narrow
tax policy goals are referred to as equity, efficiency, and simplicity.’
Although these criteria are often employed to discuss the merits of one kind of tax
as compared with another (e.g., income versus consumption), they are also used to
The medical expense tax credit is examined in detail in Part IIA, below.
21 See e.g. N. Brooks, “Fattening the Claims of Flat Taxers” (1998) 51 Dal. W. 287; M.E. Kom-
hauser, “The Rhetoric of the Anti-Progressive Income Tax Movement: A ‘Typical Male Reaction!’
(1987) 86 Mich. L. Rev. 465.
21 See e.g. R.W. Boadway & H.M. Kitchen, Canadian Tax Policy, 3d ed. (Toronto: Canadian Tax
Foundation, 1999) at 52-86.
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D.G. DUFF- DISABILITYAND THE INCOME TAX
examine the various characteristics of specific taxes. With respect to the income tax,
for example, efficiency considerations tend to favour a broad definition of income and
relatively low rates to minimize tax-induced distortions in economic behaviour, while
simplicity concerns favour a relatively straightforward and uniform set of rules to
minimize the cost of administering the tax (involving government collection costs and
the costs of taxpayer compliance). While some equity objectives are consistent with
these efficiency and simplicity goals, others may contradict economic efficiency and
administrative simplicity by supporting higher tax rates at higher income levels or
special allowances to account for relevant differences in taxpayers’ personal circum-
stances. As a result, like other areas of government policy, tax policy may involve dif-
ficult choices among different and conflicting policy goals.
When considering issues of tax equity, commentators generally distinguish be-
tween horizontal and vertical equity.’ According to the former principle, taxpayers
with the same ability to pay tax should pay the same amount of tax. According to the
latter principle, taxpayers with a greater ability to pay tax should pay an appropriately
greater amount of tax. In the context of the income tax, horizontal equity considera-
tions apply to the definition of the tax base, while questions of vertical equity concern
the rate structure.
Although the elaboration of these abstract tax policy principles in the actual de-
sign of a specific income tax is by no means uncontroversial, horizontal equity is of-
ten said to favour a broad or comprehensive definition of income,2′ while vertical eq-
uity is said to favour graduated or progressive rates which impose a proportionately
higher tax burden at higher income levels.’ In computing the income that is subject to
progressive tax rates, however, commentators generally agree that horizontal equity
requires that taxpayers be allowed to deduct all costs that are necessary to obtain this
income. ‘ Moreover, to the extent that a taxpayer’s ability to pay is further diminished
Can. ed. (Toronto: McGraw Hill Ryerson, 1987) at 214; Boadway & Kitchen, ibid. at 52-73.
” See e.g. R.A. Musgrave, P.B. Musgrave & R.M. Bird, Public Finance in Theory and Practice, 1st
2 See e.g. Boadway & Kitchen, ibid, at 52-56. Among the most prominent concepts of income con-
sistent with this objective is the so-called Haig-Simons concept, according to which income is defined
as the sum total of the taxpayer’s consumption and increases to net wealth. See generally R.M. Haig,
“The Concept of Income–Economic and Legal Aspects” in American Economic Association Read-
ings in the Economics of Taxation (Illinois: Irwin, 1954) 54; H.C. Simons, Personal Income Taxation:
The Definition of Income as a Problem of Fiscal Policy (Chicago: University of Chicago Press, 1938);
Canada, Report of the Royal Commission on Taxation, vol. 3 (Ottawa: Queen’s Printer, 1966) (Com-
missioner K. Carter) [hereinafter Royal Commission on Taxation].
See e.g. Musgrave, Musgrave & Bird, supra note 23 at 214-18; Boadway & Kitchen, supra note
22 at 56-73. In addition to vertical equity arguments, progressive income taxation can be justified
more directly on the basis that it moderates pre-tax inequalities in the distribution of income (see e.g.
Brooks, supra note 21; Kornhauser, supra note 21; A. Warren, “Would a Consumption Tax Be Fairer
than an Income Tax?” (1980) 89 Yale LJ. 1081 at 1083-93).
26See e.g. R. Goode, The Individual Income Tax, rev. ed. (Washington: The Brookings Institution,
1976) at 75; W.R. Thirsk, “Giving Credit Where Credit is Due: The Choice between Credits and De-
ductions under the Individual Income Tax in Canada” (1980) 28 Can. Tax . 32 at 33.
806
MCGILL LAW JOURNAL / REVUE DE DROITDE MCGILL
[Vol. 45
by various involuntary expenses (e.g., various disability-related expenses’), it is argu-
able that horizontal equity also requires that taxpayers be permitted to deduct these
expenses in computing the income that is properly subject to tax.’ Where the income
tax base is determined in this manner, progressive rates ensure that taxpayers with
more discretionary income pay a proportionately larger share of this income in tax.
In contrast to these tax policy goals narrowly defined, social policy addresses
broader questions concerning the manner in which goods and services are allocated
and economic resources distributed among members of a political community. Taking
disability-related expenses as an example, social policy is concerned less with the de-
ductibility of these expenses in computing an individual’s taxable income than with
the extent to which the additional costs incurred by persons with mental or physical
disabilities are properly borne by the disabled person and/or supporting individuals, or
by the community as a whole. Likewise, where a disability affects a person’s ability to
participate in the paid labour force, social policy is concerned less with the tax impli-
cations for supporting individuals or the deductibility of additional expenses that the
disabled person must incur in order to earn income than with the respective roles of
the private or public sectors in providing for the individual’s support and with the im-
plementation of effective measures designed to make the workplace more accessible
to persons with disabilities.
As indicated at the beginning of this part, these social policy goals can be and of-
ten are pursued through the ITA. Where a social policy decision is made to insure half
of all disability-related expenses, for example, this policy may be effected through a
refundable tax credit equal to 50% of all eligible expenses.’ Likewise, where a social
policy decision is made to provide a guaranteed annual income to persons with dis-
abilities, this policy may be implemented through a refundable tax credit the value of
which diminishes as the recipient’s income increases.” Similarly, investments in dis-
” For the purposes of this explanation, I assume that these disability-related expenses are, in fact,
involuntary, and do not involve an element of personal consumption. To the extent that these expenses
involve a discretionary element, they should be only partly, not wholly, deductible in computing tax-
able income.
” For a persuasive articulation of this position, see P. Cloutier & B. Fortin, “Converting Exemptions
and Deductions into Credits: An Economic Assessment’ in L Mintz & J. Whalley, eds., The Eco-
nomic Impacts of Tax Reform (Toronto: Canadian Tax Foundation, 1989) 45 at 54-62. See also Boad-
way & Kitchen, supra note 22 at 131. For a similar argument with respect to the costs of supporting
dependent children, see A. Sayeed, “Choosing between Tax Credits and Exemptions for Dependent
Children” (1985) 33 Can. Tax J. 975.
” While the ITA does not contain such a general provision, a refundable credit provides a similar
kind of insurance to low-income taxpayers participating in the paid labour force by reimbursing 25%
of eligible medical expenses exceeding 3% of the claimant’s net income, up to a maximum amount of
$500 ($2,000 of qualifying medical expenses) (see ITA, supra note 4, s. 122.51, examined below).
” While the federal government provides disability benefits under the Canada Pension Plan, these
depend on prior contributions and do not diminish as the recipient’s income increases (although they
are included in computing the recipient’s taxable income and are therefore subject to tax at progres-
sive rates). In contrast, the ITA is used to deliver income support to low-income individuals and fami-
2000]
D. G. DUFF- DISABILITYAND THE INCOME TAx
ability-related equipment or modifications to a workplace may be encouraged by ac-
celerated deductions or tax credits (refundable or non-refundable) through which
these costs are shared by the public sector.’
Where social policy goals are pursued through the !TA, however, neither they nor
the provisions by which they are implemented should be regarded as alternatives to
tax policy goals more narrowly defined. Where a social policy decision is made to
reimburse 50% of all privately borne disability-related expenses through a refundable
tax credit, for example, a tax policy issue remains as to whether disability-related ex-
penses that are not reimbursed are properly deductible in computing the payor’s tax-
able income. 2 Correspondingly, where a refundable tax credit is paid to low-income
persons with disabilities, tax policy considerations continue to apply in comparing the
ability to pay of higher income individuals with or without disabilities.
Conversely, while tax policy considerations are central to the equitable distribu-
tion of income tax burdens among different taxpayers, neither they nor the basic pro-
visions through which an equitable income tax is applied can substitute for the
broader social policy goals that might also be pursued through the ITA. Indeed, where
the income tax provides a deduction or non-refundable credit to recognize privately
borne disability-related expenses, this allowance is irrelevant to individuals whose in-
come is too low to pay any tax. As a result, although such a provision may be neces-
sary to achieve horizontal equity among different taxpayers, it is neither an effective
nor equitable method of reimbursing a share of privately borne disability-related ex-
penses, nor a coherent way to provide income support to low-income individuals with
disabilities or low-income families with disabled persons.
While this paper is concerned primarily with tax policy issues more narrowly de-
fined, it neither disregards nor devalues broader social policy objectives that are or
might be pursued through the /TA. In considering the costs of disability, therefore, it
reviews both tax and social policy objectives, and the various tax measures through
which these different goals might be best pursued. Likewise, in reviewing measures
by which the JTA might facilitate the integration of disabled persons in the paid labour
force or provide income support for disabled individuals and their families, it consid-
ers both tax and social policy considerations. Although it is important to distinguish
tax and social policy goals from the specific measures by which they are best imple-
lies through the refundable Goods and Services Tax Credit in s. 122.5 and the refundable Canada
Child Tax Benefit, supra note 18. The Canada Child Tax Benefit is examined in Part ll.F, below.
3′ Although the TA, supra note 4, does not provide tax credits for investments in disability-related
modifications to buildings or the acquisition of disability-related equipment, it allows businesses to
deduct the cost of these investments in the year in which they are acquired, rather than capitalizing
these costs and deducting them over several years (see supra note 11).
12 Where disability-related expenses are fully covered through one or more social insurance pro-
grams (e.g., public health care, or a refundable tax credit, or both), of course, the tax policy issue be-
comes moot since there cease to be any privately borne disability-related expenses for the income tax
to take into account.
MCGILL LAW JOURNAL/REVUE DE DROITDE MCGILL
[Vol. 45
mented, it is possible to pursue both sets of goals through the /TA without sacrificing
either to the other.
II. The Costs of Disability
As the Standing Committee on Human Rights and the Status of Disabled Persons
has emphasized, “Disability involves costs-to governments and society as a whole,
but most importantly, to disabled persons themselves.”‘3 For families with disabled
persons, these costs are also borne by supporting individuals-both directly in the
form of out-of-pocket expenses and indirectly in the form of foregone income attrib-
utable to time lost from employment or business activities in order to care for the dis-
abled person. While these costs are partly covered through a variety of public and pri-
vate programs, including social assistance, worker’s compensation, public health care,
and supplementary health insurance, uncompensated costs are necessarily borne by
disabled individuals and their families. It is these privately borne costs that give rise to
the tax policy issues discussed in Part I.
As outlined in the introduction to this paper, the !TA contains numerous provi-
sions through which the costs of disabilities to disabled individuals and their families
are or might be recognized. The most notable of these are the medical expense tax
credit and the disability tax credit. Recent studies have recommended that these provi-
sions be further supplemented or replaced by a separate “disability expenses tax
credit”.’ In addition to these provisions, the income tax recognizes additional costs
associated with the care of disabled relatives through various “personal tax credits”
(the infirm dependants credit, the caregiver credit, and the wholly dependent person
credit), and non-discretionary costs associated with the care of dependent children
through the child care expense deduction, and the Canada Child Tax Benefit. Yet
other provisions encourage private savings to support disabled persons through spe-
cial trust tax provisions, and recognize financial needs of dependent children by al-
lowing tax-deferred savings to be transferred to dependent children and grandchildren
on a taxpayer’s death without any immediate tax liability.
This part examines each of these provisions and their possible reform, including
the introduction of a separate disability expenses tax credit as a supplement or alter-
native to the existing statutory scheme. While the main focus of this analysis concerns
the treatment of disability-related expenses as a matter of tax policy narrowly defined,
the discussion necessarily touches on broader social policy issues considered in Part I.
“Standing Committee on Human Rights and the Status of Disabled Persons, ‘As True as Taxes:
Disability and the Income Tax System” in House of Commons Debates (March 1993) at 3 [hereinafter
Standing Committee].
‘ See e.g. ibid. at 14; Federal Task Force on Disability Issues, supra note 1 at 97-99.
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D.G. DUFF- DISABILITYAND THE INCOME TAx
809
A. Medical Expenses Tax Credit
1. Description
The medical expenses tax credit (“METC”) provides a credit against basic federal
tax otherwise payable equal to 17% of eligible medical expenses paid during any
twelve-month period ending in the taxation year exceeding the lesser of 3% of the in-
dividual’s net income or $1,637.’ Taking provincial income tax into account, the
combined value of this credit for taxpayers with tax otherwise payable is roughly 25
cents for each dollar of eligible medical expenses exceeding the applicable threshold.’
For the purposes of this provision, eligible medical expenses must be proven by
filing receipts,37 and are limited to expenses in respect of specifically defined goods
and services provided to the individual, the individual’s spouse, or a related dependant
(the “patient”) .’ Where an individual claims medical expenses in respect of a related
dependant, the credit is reduced by 68% of the dependant’s income exceeding
$7,294.’
These medical expenses are defined as
” amounts paid to a medical practitioner, dentist or nurse or a public or licensed
private hospital in respect of medical or dental services provided to the pa-
tient;
” remuneration for one full-time attendant (other than the individual’s spouse or a
person under 18 years of age) or full-time care in a nursing home for a patient
eligible for the disability tax credit;,
remuneration not exceeding $10,000 (or $20,000 if the patient dies in the year)
for attendant care provided to a patient eligible for the disability tax credit by a
3′ See iTA, supra note 4, s. 118.2(1), as indexed by s. 117.1. For a detailed explanation of the
METC, see D. Sherman, Taxes, Health, and Disability (Toronto: Carswell, 1995) at 65-125. Consis-
tent with its announcement to restore full indexing to income tax provisions, the 2000 Federal Budget
increased the dollar amount of this threshold from $1,614 (see “Tax Measures: Supplementary Infor-
mation” in Stikeman Elliott, Canadian Federal Budget 2000: Budgetary Proposals of the Hon. Min-
ister of Finance with Comments by Stikeman Elliott (Toronto: Carswell, 2000) [hereinafter 2000 Fed-
eral Budget] 3-1 at 3-14 – 3-15 [hereinafter “Supplementary Information 2000′).
m This assumes a provincial income tax rate equal to 45% of basic federal tax payable. For 1999,
basic provincial taxes range from a low of 39.5% in Ontario to a high of 69% in New Brunswick.
Quebec levies its own income tax, with rates ranging from 20% of taxable income below $25,000 to
26% on taxable income over $50,000.
ITA, supra note 4, s. 118.2(1).
/Tbid, s. 118.2(2), and the definition of “patient’ for the purposes of this subsection in s.
118.2(2)(a). For the purposes of this provision, a related “dependanf’ is defined ins. 118(6).
31 See the description of D in ibid, s. 118.2(1).
40 bid, s. 118.2(2)(a).
41bid, s. 118.2(2)(b).
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person who is neither the individual’s spouse nor under 18 years of age, pro-
vided that attendant care is not claimed in respect of the patient under any other
provision of the /TA;
remuneration for a full-time attendant in the patient’s home (other than the in-
dividual’s spouse or a person under 18 years of age) if the patient has been cer-
tified by a medical practitioner to be a person who, by reason of mental or
physical infirmity, is and is likely to be for a long-continued period of indefinite
duration dependent on others for personal needs and care; 3
” amounts paid for the full-time care in a nursing home of a patient 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 oth-
ers for personal needs and care;”
* amounts paid for the care, or care and training, at a school, institution or other
place of a patient certified by a qualified person to be a person who, by reason
of a physical or mental handicap, requires the equipment, facilities or personnel
specifically provided by that school, institution or other place for individuals
suffering from the handicap suffered by the patient;”
* ambulance fees;”
” various kinds of transportation fees to obtain medical services;’7
* the cost of various kinds of devices, including artificial limbs, hearing aids,
kidney machines,” devices for incontinence,” eyeglasses,’ a portion of the cost
of a wheelchair-accessible van,5′ dentures,”2 and other devices designed to assist
persons suffering from visual impairments, hearing impairments, breathing im-
pairments, mobility impairments, diabetes or heart disease;3
* the cost to acquire and maintain an animal (e.g., a guide dog) specifically
trained to assist a patient who is blind or profoundly deaf or suffers from a se-
,Ibid., s. 118.2(2)(b.1).
‘3 Ibid., s. 118.2(2)(c).
“Ibid., s. 118.2(2)(d).
“Ibid., s. 118.2(2)(e).
“Ibid., s. 118.2(2)(t.
“Ibid., s. 118.2(2)(g).
“IbidU, s. 118.2(2)(i).
“Ibid., s. 118.2(2)(i.1).
“Ibid., s. 118.2(2)0).
‘ Ibid., s. 118.2(2)0.7).
“Ibid., s. 118.2(2)(p).
” Ibid., s. 118.2(2)(m); Regulations, supra note 11, s. 5700.
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D. G. DUFF- DISABILITYAND THE INCOME TAx
vere and prolonged impairment that markedly restricts the use of his or her
arms or legs; ‘
costs associated with the transplant of bone marrow or an organ;”
” reasonable expenses related to renovations or alterations to a patient’s home,
including the driveway, for patients with severe and prolonged mobility im-
pairments;’
” up to $2,000 in expenses for a patient with a severe and prolonged mobility
impairment to move to a physically accessible dwelling;”
” reasonable expenses related to rehabilitative therapy to adjust for the patient’s
hearing or speech loss, including training in lip reading and sign language; 8
* the cost of sign language services for a patient with a speech or hearing im-
pairment;59
” reasonable expenses for training a caregiver who is related to the patient (other
than the individual’s spouse or a person under 18 years of age), and is a mem-
ber of the individual’s household;’
” the cost of drugs, medicaments or other preparations or substances prescribed
by a medical practitioner or dentist;
” the cost of lab tests; 2 and
private health insurance premiums.’
Many of these items have been added in recent years, often in response to judicial de-
cisions in which specific expenses were held to be ineligible for the credit.” Accord-
ing to the 1999 Federal Budget, this list is to be further supplemented by the inclusion of
TM1TA, ibid, s. 118.2(2)().
I/bid, s. 118.2(2)01.1).
Ibid., ss. 118.2(2)0.2), 118.2(2)0.6). The 2000 Federal Budget proposes to add to this item “the
portion of reasonable expenses, relating to the construction of the principal place of residence of an
individual who lacks normal physical development or has a severe and prolonged mobility impair-
ment, that can reasonably be considered to be incremental costs incurred to enable the individual to
gain access to, or be mobile or functional within, the individual’s principal place of residence” (see
Excerpts from Budget Papers” in 2000 Federal Budget, supra note 35, 2-1 at 2-9 [hereinafter
‘Budget Papers 2000″]).
571A, ibid., s. 118.2(2)G.5).
“!bid, s. 118.2(2)Q.3).
Ibid, s. 118.2(2)0.4).
60 Ibid, s. 118.2(2)0.8).
6, Ibid, s. 118.2(2)(n).
6Ibid, s. 118.2(2)(o).
Ibid., s. 118.2(2)(q).
6The list of cases in which expenses have been ruled ineligible for the METC or its predecessor
deduction is lengthy. See e.g. Morley v. MN.R. (1949), 1 Tax A.B.C. 81 (corrective eyeglasses and
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” remuneration for the care or supervision in a group home of an individual eli-
gible for the disability tax credit;
* remuneration for specific kinds of therapy administered to a person eligible for
the disability tax credit; and
” remuneration for tutoring services provided to a person with a learning disabil-
ity or a mental impairment who is certified by a medical practitioner to be a
person who requires these services on account of the disability or impairment.”
2.
Interpretation
In applying these provisions, the courts have tended to adopt a more liberal ap-
proach than the strict method of interpretation traditionally employed.” In one case,
for example, the Tax Court of Canada adopted a broad interpretation of the word
“care” in order to permit the taxpayer to claim as eligible medical expenses under
paragraph 118.2(2)(e) of the /TA tuition and other fees paid by the taxpayer to a pri-
vate school for the “care and training” of his learning-disabled children.’ In other
cases, courts have allowed taxpayers to claim the cost of a hot tub, whirlpool equip-
ment, and a security alert system as eligible medical expenses on the basis that they
ambulance services); Brunet v. M.N.R. (1955), 14 Tax A.B.C. 185 (cost of oxygen purchased for tax-
payer’s wife who suffered from pulmonary tuberculosis); Witthuhn v. MN.I.
(1957), 17 Tax A.B.C.
33, 57 D.T.C. 174 [hereinafter Witthuhn cited to Tax. A.B.C.] (attendant care for wife able to get up
for a few hours and sit in specially designed rocking chair); Cohen v. M.N.R. (1957), 23 Tax A.B.C.
82 (cost of part-time institutional care for mentally handicapped son); Balfour v. M.N.R. (1961), 27
Tax A.B.C. 291 (attendant care for wife suffering from depressed nervous condition); Stefanchuk v.
M.N.R., [1968] Tax A.B.C. 511 (cost of air cleaner installed to help taxpayer’s husband overcome at-
tacks of bronchitis and asthma); Wall v. M.N.R, [1969] Tax A.B.C. 962 (acquisition and maintenance
cost of wig for taxpayer suffering from condition leading to total baldness); Tate v. M.N.R., [1969]
Tax A.B.C. 1172 (attendant care for mentally infirm son); Stewart v. MN.)?, [1972] C.T.C. 2097,72
D.T.C. 1092 (T.R.B.) (fees paid to school designed to enable qualified medical practitioners to pro-
vide treatment to taxpayer’s schizophrenic child).
6′ “Excerpts from Budget Papers”‘in Stikeman Elliott, Canadian Federal Budget 1999: Budgetary
Proposals of the Hon. Minister of Finance with Comments by Stikeman Elliott (Toronto: Carswell,
1999) 2-1 at 2-6 – 2-7 [hereinafter 1999 Federal Budget].
“See e.g. Cotd v. MN..
(1996), [1997] 3 C.T.C. 2607 (T.C.C.) [hereinafter Cotel; Vantyghem v.
M.N.R. (1998), [1999] 2 C.T.C. 2159 at para. 19 (T.C.C.) [hereinafter Vantyghem], in which the courts
emphasized the need to interpret s. 118.2 “in its most equitable and liberal manner compatible with
the attainment of [its] object … and Parliament’s intent.” For an example of the strict approach, see
Witthuhn, supra note 64 at 37, where a claim for attendant care expenses was disallowed on the basis
that the patient, who could get up for a few hours and sit in a specially designed rocking chair, was
not “necessarily confined to a bed or wheelchair”. On the history of the strict construction approach to
the interpretation of the 1TA, supra note 4, see D.G. Duff, “Interpreting the Income Tax Act-Part I:
Interpretive Doctrines” (1999) 47 Can. Tax . 464 at 469-85.
” Rannelli v. M.N.&?, [1991] 2 C.T.C. 2040 at 2044, 91 D.T.C. 816 (T.C.C.), referring to the “reme-
dial” role of then s. 1 10(1)(c)(vi), which “broadened the scope of medical deductions”, and conclud-
ing that, for the purposes of this provision, “care” need not be “custodial”, but could also be of a nur-
turing or solicitous nature as provided by the school to its students.
2000]
D.G. DUFF- DISABILITYAND THE INCOME TAX
constituted reasonable expenses relating to renovations or alterations to a dwelling
within the meaning of paragraph 118.2(2)(.2) of the ITA.’
Notwithstanding this general tendency toward a more liberal interpretation of the
METC, at least some decisions continue to reflect a narrow reading of the statutory
provisions. In one recent case, for example, a claim for attendant care expenses under
paragraph 118.2(2)(b) of the ITA by an elderly disabled woman who lived in an
apartment building specifically designed to cater to senior citizens was disallowed on
the grounds that the building was not a nursing home, that “full-time” care must be
(but had not been) provided exclusively to the patient, and that the monthly payments
did not distinguish between rent and attendant care.’ In another recent case, a claim
for $10,184 incurred in the construction of a new residence in order to make the resi-
dence wheelchair accessible was disallowed on the basis that the expenses did not re-
to a dwelling” as required by paragraph
late to “renovations or alterations
118.2(2)(.2).’
3. History
The METC originated in 1942, at which time a deduction was introduced for a
limited number of medical expenses up to a maximum of $400 for a single person,
$600 for a married couple, and $100 for each dependant (up to $400), but only to the
extent that these amounts exceeded 5% of the taxpayer’s net income.’ According to
‘ See e.g. Vantyghem, supra note 66 (hot tub for taxpayer’s wife who had severe and prolonged
mobility impairment); Cotd, supra note 66 (cost of whirlpool equipment for exercise and a security
alert system to enable the taxpayer, who suffered from a severe and prolonged mobility impairment,
to continue living safely alone).
Flumerfelt v. MN.R. (1998), [1999] 3 C.T.C. 2168 at paras. 6-8 (T.C.C.). In the absence of a spe-
cific statutory definition of the term “nursing home”, it does not seem unreasonable to regard a build-
ing designed to cater specifically to senior citizens as a nursing home for the purposes of the provi-
sion. Nor is it obvious that the words “full-time” necessitate exclusive care by a single attendant as
opposed to an arrangement in which staff are available to assist the patient on a full-time basis. Nor
does it seem reasonable for the court to have disallowed the taxpayer’s alternative claim for “part-
time” attendant care under s. 118.2(2)(b.1) on the grounds that payments of $2,500 per month under
the building’s “attendant care package” were solely “for the rent of an apartment’.
7 Gustafton v. M.N.R., 1999 CarswelINAT 718 (T.C.C.), online: TAXNET (raxPARTNER Main).
To the extent that the original plans were altered to make the residence wheelchair accessible, it is ar-
guable that the expenses related to “alterations” to the dwelling that might otherwise have been con-
structed. While the court concluded at para. 12 that “there was never any intent’ for the expenses at
issue to “be included in any recognition of medical expense under paragraph 118.2(2)0.2):’ it is im-
plausible to suggest that Parliament would have intended to exclude modifications to newly con-
structed dwellings, thereby creating a tax bias in favour of the acquisition and renovation of already
existing dwellings. The 2000 Federal Budget proposes to reverse this decision (see supra note 56).
7’An Act to amend the Income War Tax Act, S.C. 1942-43, c. 28, s. 5(6), adding s. 5(1)(n) to the In-
come War Tax Act, R.S.C. 1927, c. 97. This provision was modelled on a similar U.S. deduction
which was also introduced in 1942. For a brief analysis of the U.S. medical expenses deduction, see
Goode, supra note 26 at 156-60.
814
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then Minister of Finance Mr. fIsley, the deduction was designed to recognize the di-
minished ability to pay on the part of taxpayers who incurred extraordinary medical
expenses, exceeding average medical expenditures (which were estimated to be ap-
proximately 5% of net income).’ According to subsequent commentators, a threshold
on deductible expenses may have reflected “a judgment that the taxation of income
spent on medical care creates significant horizontal inequities only if the medical ex-
penses are large, since a high level of medical expenditure is more likely to be non-
discretionary than a low one: ” More plausibly, such a threshold likely reflected a
judgment that average medical expenses, though also involuntary, were adequately
addressed through standardized personal exemptions, and need not be accounted for
through a separate medical expenses deduction.
While the dollar ceilings on allowable claims were originally justified in order to
prevent possible abuses,’ these were eliminated in 1961 on the grounds that “[s]ince
the whole purpose of the deduction for medical expenses is to give relief to those tax-
payers whose ability to pay income tax has been reduced by extraordinary expenses, it
seems both logical and fair to remove the limit entirely ..
Other post-1942 amendments lowered the threshold on deductible expenses to
4% of a taxpayer’s net income in 1944 and 3% in 1953,”‘ and significantly increased
the categories of expenses eligible for the deduction,” In 1988, the deduction was
converted to a credit computed at 17% of eligible expenses, and the applicable thresh-
old was capped at a dollar amount of $1,500 (now $1,637).”
4. Evaluation and Recommendations
In evaluating the METC, critics have questioned the name of the credit, the defi-
nition of eligible expenses, the structure and existence of the threshold, the 1988 con-
” House of Commons Debates (23 June 1942) at 3580.
71 Cloutier & Fortin, supra note 28 at 60, citing J.E. Stiglitz, Economics of the Public Sector (New
York: Norton & Company, 1986) at 427-28.
“4 See G. McGregor, Personal Exemptions and Deductions under the Income Tax (Toronto: Cana-
dian Thx Foundation, 1962) at 18.
House of Commons Debates (20 June 1961) at 3580.
76Canada, Department of Finance, Disability Tax Credit: Evaluation of Recent Experience (Ottawa:
Department of Finance, 1992) at 11 [hereinafter Disability Tax Credit]. According to this report, the
reduction to 3% in 1953 was “justified on the basis of a statistical’study by the Department of Na-
tional Health and Welfare which concluded that the new threshold provided a more accurate measure
of the average medical expenses incurred by taxpayers:’
” See e.g. ibid. at 10, noting that twenty new items had been added to the list of eligible expenses
during the eight years from 1984 to 1992.
7 See An Act to amend the Income Tax Act, the Canada Pension Plan, the Unemployment Insurance
Act, 1971, the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and
Health Contributions Act, 1977 and certain related Acts, S.C. 1988, c. 55, ss. 77, 92, repealing former
s. 110(l)(c) and adding, inter alia, s. 118.2, applicable to 1988 and subsequent taxation years [herein-
after 1987Anendments].
2000]
D. G. DUFF- DISABILITYAND THE INCOME TAX
815
version of the previous deduction into a credit, the rate at which the credit is com-
puted, and its non-refundability.
a. Name
With respect to the name of the credit, critics have suggested that the METC be
renamed “to make it clearer that disability-related items are included.”‘ As the Coun-
cil of Canadians with Disabilities has observed: “It is plausible that many persons
with disabilities and their families would not necessarily identify items and services
such as home renovations, van purchases and modifications, and sign language serv-
ices, as ‘medical expenses’. ‘ Indeed, since many of the items added to the list of eli-
gible expenses over the last fifteen years have included disability-related expenses
(e.g., home renovations, van purchases and modifications, sign-language services, and
various devices to assist visually or hearing impaired individuals), it is arguable that
the primary purpose of the credit has evolved from recognizing extraordinary medical
expenses to recognizing both extraordinary and recurring costs associated with physi-
cal or mental disabilities. For this reason, as several commentators have suggested, it
seems both appropriate and desirable to rename the credit the “medical and disability
expenses tax credit”.” Alternatively, as the Standing Committee has recommended, it
might make even more sense to recognize itemized disability-related expenses
through a new disability expenses tax credit, separate from a more narrowly defined
METC.’ This proposal is examined more thoroughly in Part ll.C, below.
b. Eligible Expenses
Regarding the definition of eligible medical expenses, some commentators have
.questioned the restriction on allowable expenses to those incurred for goods and
services provided only to the individual, his or her spouse, and a related dependant.’
Although it might be argued that tax recognition for such expenses should be limited
to goods and services provided only to the individual taxpayer and others whom the
taxpayer has a legal obligation to support (e.g., spouses and dependent children) on
the basis that only these expenses are truly involuntary, the !TA currently recognizes
expenses incurred for goods and services provided to grandchildren, parents, grand-
parents, siblings, aunts and uncles, and nieces and nephews, provided that the recipi-
ent of the good or service is “dependent on the individual for support” at any time in
“Council of Canadians with Disabilities, Tax Reform Positions (Winnipeg: Council of Canadians
with Disabilities, 1999) at 6. See also G. Williams, The Tax System and the Cost of Disability Sup-
ports: A CACL Discussion Paper (Toronto: Canadian Association of Community Living, 1996) at 18
[hereinafter The Tax System]; D. Baker & H. Beatty, Consultant’s Report on Taxation and Disability:
Summary of Recommended Reforms (Task Force on Disability Issues, 1997) at 7.
‘0 Council of Canadians with Disabilities, ibid. at 6.
,See e.g. The Tax System, supra note 79 at 18; Council of Canadians with Disabilities, ibid
Supra note 33 at 14.
“See e.g. Council of Canadians with Disabilities, supra note 79 at 6.
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the year.’ Having thus expanded the scope of allowable expenses, it is difficult to un-
derstand why it should not be further extended to include payments for goods and
services provided to anyone who is dependent on the individual for support at any
time in the year, whether the person is a close or distant relative or simply a friend.
Given the exclusion of same-sex couples from the current definition of spouse in sub-
section 252(4) of the ITA, moreover, this reform would seem particularly appropriate.
Turning to specific categories of expenses, several commentators have questioned
why eligible attendant care expenses must be paid to someone other than the individ-
ual’s spouse or a person under 18 years of age.’ While the apparent policy goal of this
exclusion is to prevent income-splitting, ‘ this concern seems misplaced where a
spouse receives a reasonable amount in exchange for qualifying attendant careY Al-
though the income tax used to contain a rule prohibiting the deduction of any amount
paid to a spouse as salary,’ this rule was repealed in 1979 as part of a series of legis-
lative reforms to recognize the equal status of women. The exclusion of payments to a
spouse from eligible attendant care expenses seems to be an anachronistic holdover
from a previous era that should also be repealed.
Commentators have also questioned the characterization of “attendant care”,
which may not include personal services necessitated by the patient’s disability, and
the characterization of nursing home expenses, which Revenue Canada interprets to
include the costs of the patient’s room and board as well as recreational activities.”‘ In
order to ensure equity among taxpayers in different living situations and to prevent
tax-induced distortions in the kind of care employed, it seems reasonable that atten-
dant care should be specifically defined to include such necessary personal services,
while eligible expenses for care in a nursing home should be defined to exclude basic
room and board? To the extent that nursing home expenses are interpreted to include
the cost of recreational programs, moreover, eligible expenses should also include the
cost of similar programs for disabled individuals who are not cared for in a nursing
home.
See the definition of “dependant” quoted in supra note 5.
See e.g. Baker & Beatty, supra note 79 at 10. See also Federal Task Force on Disability Issues,
supra note 1 at 93, recommending that the METC should cover “the reasonable cost of medically
necessary attendant care provided by family members”; Council of Canadians with Disabilities, supra
note 79 at 5, adding that a caregiver spouse in receipt of such payments should qualify for the em-
ployment insurance and Canada Pension Plan benefits upon the payment of EI premiums and CPP
contributions.
See R. Shillington, Taxation and Disability: A Report for the Task Force on Disability (Ottawa:
Canadian Council on Social Development, 1996) at 16.
” Concerns about the quality of the care provided may justify an exclusion for payments to caregiv-
ers under 18 years of age.
” See former s. 74(3), as rep. by An Act to amend the statute law relating to income tax, S.C. 1980-
81-82-83, c. 48, s. 40(1), applicable with respect to fiscal periods ending after December 11, 1979.
” See G. Katz, ‘Tax Assistance for the Disabled” (1999) 47 Can. Tax L 663 at 682, citing Revenue
Canada document no. 9501515 (May 26, 1995).
‘0 See Baker & Beatty, supra note 79 at 10.
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D.G. DUFF- DISABILITYAND THE INCOME TAX
Yet other commentators have criticized the complexity of the rules regarding at-
tendant care, which may be claimed under several different provisions, with different
implications for the patient’s ability to claim the disability tax credit.’ To the extent
that these provisions create complicated planning questions as to the ideal provision
under which to claim attendant care expenses, they are rightly criticized on the
grounds that they increase the complexity of the tax system and favour well-advised
taxpayers who are more likely to calculate the optimal claim for attendant care ex-
penses.’ Anticipating subsequent arguments in this paper, it is suggested that it would
be preferable to allow taxpayers to deduct attendant care expenses under a single pro-
vision, without affecting their right to claim a separate disability tax credit or deduc-
tion.
In addition to these specific criticisms, the Council of Canadians with Disabilities
has recommended that the following items be added to the list of allowable expenses:”
” the cost of repairs and maintenance to all assistive devices;
” the cost of outdoor powered lifts (as well as ramps);
” adaptations to dwellings, broadly defined (thus, include expenses for items
such as shower bench, transfer bars, support bars);
” the extension of the current permitted claim of 20% of a modified van to vans
modified more than six months after purchase;’9
” the additional monthly rent on an accessible apartment;
* expenses for widening a driveway to be used by an accessible van (the current
claim is limited to use by a bus);
“Attendant care may be claimed under ITA, supra note 4, s. 118.2(2)(b) (remuneration for one full-
time attendant for a patient eligible for the disability tax credit), s. 118.2(2)(b.1) (remuneration up to
$10,000 or $20,000 in the year of the patient’s death where the patient is eligible for the disability tax
credit and no other amount is claimed for attendant care), s. 118.2(2)(c) (remuneration for one full-
time attendant for care in the patient’s home if the patient has been certified by a medical practitioner
to be a person who, by reason of mental or physical infirmity, is and is likely to be for a long-
continued period of indefinite duration dependent on others for personal needs), s. 63 (child care ex-
pense deduction up to the lesser of $7,000 for each eligible child or two-thirds of the individual’s
earned income), or s. 64 (attendant care deduction up to two-thirds of the individual’s earned income).
Where attendant care is claimed under ss. 118.2(2)(b) or 118.2(2)(c), no amount may be claimed un-
der the disability tax credit, nor under s. 118.2(2)(b.1). Alternatively, while the disability tax credit can
be claimed by taxpayers who claim attendant care under ss. 118.2(2)(b.1), 63, or 64, the expenses that
may be claimed under these provisions are capped at fixed dollar amounts (under ss. 118.2(2)(b.1),
63) and/or a percentage of earned income (in the case of ss. 63, 64). Since ss. 63 & 64 operate as de-
ductions, while ss. 118.2 & 118.3 operate as credits, the optimal claim for attendant care expenses
may also depend on the individual’s marginal rate of taxation.
‘ For critical comments on the complexity of the current rules, see Katz, supra note 89 at 690-91.
‘ Canadian Council on Disabilities, supra note 79 at 7-8.
“4 See ITA, supra note 4, s. 118.2(2)0.7).
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” the extra costs of building a new accessible home;
expenses for oral interpreters;
” the cost of readers and persons to assist learning disabled and visually impaired
persons with scanning and editing to create accessible formats;
” voice-operated computer software (e.g., “Dragon Dictate”) required by a per-
son because of a disability;
a solid base for a computer required by a person because of cerebral palsy or a
related disability;
” grocery delivery required by a person because of a disability;
* clothing alterations provided to an individual with an orthesis or prosthesis, or
to a little person;
* recreation programs and equipment which enhance the skills and capacity of a
person with a disability;
” health care supplies related to incontinence;
multiple vitamins when related to a disability;
” second residence (e.g., cottage) accessibility;
* replacement and/or cleaning of items and home repairs when breakage or dam-
age is disability-related;
replacement of clothing when damage is disability-related;
extra laundry costs related to a disability;
extra bedding costs related to a disability; and
” extra heating costs related to a disability.
Many of these items (e.g., costs of repairs and maintenance, costs of specific devices,
and costs of grocery delivery), appear to be logical extensions of the current list of
eligible expenses and would appear to be unproblematic for this reason. Others (e.g.,
recreational programs) may seem like a departure from the prevailing list, but are ar-
guably consistent with recent amendments to include the costs of various kinds of
therapy and tutoring services. Yet other items (replacement and/or cleaning of dam-
aged items, and additional laundry, bedding, and heating costs) appear to be the kind
of difficult-to-itemize items that are best recognized through a separate disability tax
credit or deduction.95
While many of these additions would improve the METC, the number of items on
this list and the regular additions to the list of eligible expenses since the medical ex-
pense deduction was first introduced in 1942 suggest a more general concern that
“‘ See the discussion of the disability tax credit in Part ]ILB, below.
2000]
D.G. DUFF- DISABILITYAND THE INCOME TAX
changes in technology and prescribed therapies are certain to lead to the emergence of
comparable items that are not contemplated within the existing categories. For this
reason, as one commentator has suggested, it might be appropriate to supplement the
categorical list in subsection 118.2(2) with a general statement of principle according
to which eligible medical expenses would include all reasonable amounts to the extent
that they are paid for the purpose of acquiring goods or services certified as medically
necessary by a qualified medical practitioner. While the existing list should be re-
tained as an example of the kinds of expenses recognized by the provision, this
amendment would allow disabled individuals to obtain a credit for novel treatments or
technologies without having to lobby Revenue Canada and the Department of Finance
to increase the list of eligible expenses. Indeed, to the extent that the current list of
items reflects “the lobbying efforts of groups that are vocal and powerful” it has been
argued that “broader definitions would be useful to assist disabled individuals who are
not as well organized or represented. ”
c. Threshold
In relation to the threshold on eligible expenses in the year (expressed as 3% of
the individual’s net income or $1,637, whichever is lower), a number of concerns
have been raised. First, to the extent that the dollar amount caps the net income
threshold for individuals with net incomes exceeding $54,567,n the structure of the
threshold has been rightly criticized as regressive, allowing a larger share of medical
expenses as a percentage of net income to be claimed by high-income taxpayers than
by low-income taxpayers.’ From this perspective, a possible reform might be to
eliminate the dollar limit on the net income threshold, using the revenue saved from
this amendment to finance other disability-related tax reforms.'” A related concern in-
volves the ability of some couples to claim a larger percentage of medical expenses by
claiming the METC in computing the tax payable by the lower income spouse. To the
‘ Shillington, supra note 86 at 28-29. The language in the text borrows from the phraseology in
Shillington’s paper and from the ITA, supra note 4, s. 18(1)(a), which prohibits any deduction in com-
puting the income of a business “except to the extent that it was made or incurred by the taxpayer for
the purpose of gaining or producing income from the business or property” and from s. 67, which
limits all deductions in respect of an outlay or expense “to the extent that the outlay or expense was
reasonable in the circumstances” As explained below, where disability-related expenses are recog-
nized under a separate disability expenses tax credit or deduction, this language would have to be
modified accordingly.
J.E. Magee, “Tax Planning for the Disabled and Elderly and Their Caregivers” (1992) 40 Can.
9’ For taxpayers with net incomes exceeding $54,567, the dollar threshold of $1,637 is less than 3%
TaxJ. 1364 at 1370.
of net income.
See e.g. Council of Canadians with Disabilities, supra note 79 at 6. For this reason, it is not sur-
prising that taxation statistics demonstrate an increase in allowable medical expenses as a percentage
of taxfiler income for taxfilers with income above $60,000 (see Shillington, supra note 86 at 13-14).
“00 This recommendation was made by the Federal Task Force on Disability Issues, supra note 1 at
93. See also Council of Canadians with Disabilities, ibidL
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extent that the credit recognizes extraordinary medical expenses incurred by families
rather than individuals,”‘ it would seem more appropriate to set a threshold based on
the aggregate net income of cohabiting spouses, rather than the net income of the in-
dividual who happens to claim the credit. As with amendments to the provisions re-
garding attendant care, this reform would lessen the opportunities for more sophisti-
cated taxpayers to plan their way to a larger METC.”‘
From a different perspective altogether, one might question the level of the
threshold on allowable expenses, particularly for expenses incurred in respect of an
individual with a mental or physical infirmity that has lasted or may be expected to
last for a lengthy period of time. 3 While the purpose of this threshold (both when the
original deduction was introduced in 1942 and when the threshold was reduced to 3%
in 1953) was to exclude “average” medical expenses from recognition for tax pur-
poses, the determination of these thresholds preceded by several years the introduc-
tion of public health insurance, which might have been expected to dramatically re-
duce average private expenditures on medical care. Not surprisingly, therefore, some
commentators have suggested a re-examination of the threshold in light of more re-
cent data on average expenditures.’
Moreover, one should not forget that the primary purpose of the original deduc-
tion was to recognize catastrophic medical expenses incurred by otherwise relatively
healthy individuals, not the ongoing costs associated with a prolonged disability.
While an annual threshold is ideally suited for the former purpose, it is entirely inap-
propriate for the latter. To the extent, therefore, that the primary purpose of the METC
has evolved from recognizing a limited number of extraordinary medical expenses to
recognizing both extraordinary and recurring costs associated with mental or physical
disabilities, it is arguable that the existing threshold should be eliminated altogether.
Alternatively, by introducing a separate disability expenses tax credit or deduction, it
would be possible to retain the existing threshold for a more narrowly defined medical
expense tax credit or deduction, while eliminating any threshold for the tax recogni-
tion of disability-related expenses. Not surprisingly, therefore, when the Standing
Committee recommended the enactment of a separate disability expenses tax credit, it
also recommended that “the government should consider reducing or eliminating the
01 This is implicit in the definition of the word “patient”, supra note 38, which refers to the individ-
ual taxpayer, the individual’s spouse and dependants.
0′ For a similar concern, see Baker & Beatty, supra note 79 at 8, questioning the ability to select a
twelve-month period for aggregating medical expense payments that differs from the calendar year.
‘”3 Although the sentence in the text does not define this period of time, the ITA, supra note 4, s.
118A(1)(a), defines a “prolonged” impairment for the purpose of the disability tax credit as an im-
pairment that “has lasted, or can reasonably be expected to last, for a continuous period of at least 12
months:’ It should be noted, however, that the sentence in the text uses the more general expression
“mental or physical infirmity” rather than the more narrowly defined “severe and prolonged mental
and physical impairment’ used for the purpose of the disability tax credit.
4 T7he Tax System, supra note 79 at 18.
2000]
D.G. DUFF- DISABILITY AND THE INCOME TAx
three per cent limit that currently applies to the Medical Expenses Tax Credit”‘” This
issue is examined more thoroughly in the discussion of the proposed disability ex-
penses tax credit in Part II.C, below.
d. Credit or Deduction
With respect to the 1988 conversion of the deduction int6 a credit, commentators
have taken different positions. To the extent that the provision is designed to recognize
the reduced ability to pay of individuals who must incur extraordinary medical ex-
penses, some have argued that a deduction in computing taxable income is a more ap-
propriate measure than a credit computed at a flat rate of 17%.”‘ Others, noting that
deductions are worth more to high-income taxpayers than to low-income taxpayers
are more favourably inclined to the 1988 reforms but nevertheless criticize the current
non-refundable credit on the grounds that it is of little or no value to low-income tax-
payers, among whom disabled individuals are statistically over-represented.”‘ Yet oth-
ers have criticized the rate of the credit, suggesting that it be increased from its current
rate of 17% to 30% or more.”
In dealing with these competing proposals, it is important to distinguish questions
of social policy from those of tax policy more narrowly defined. While social policy
considerations might favour public reimbursement for a larger share of medical and
disability-related costs than is currently the case under provincially operated health
care and social assistance programs, this social insurance objective is distinct from tax
policy considerations regarding horizontal equity. As a result, while a refundable tax
credit for medical or disability-related expenses might be an effective way to cover a
larger share of these involuntary costs,”‘ such a measure should not be viewed as a
substitute for a separate provision recognizing privately borne medical and disability-
related expenses in computing an individual’s taxable income.
To the extent that medical and disability-related expenses are not fully reim-
bursed, the tax policy issue more narrowly defined concerns the manner and extent to
which these privately bome costs should be taken into account in determining the in-
dividual’s tax liability. While deductions are often criticized on the basis that they are
“‘Supra note 33 at 14 (Recommendation 8).
‘See e.g. Cloutier & Fortin, supra note 28 at 54-62.
“‘See generally Shillington, supra note 86; The Tax System, supra note 79.
”See e.g. Baker & Beatty, supra note 79 at 7, suggesting 30-35%; Don Gallant and Associates,
Make Us Canadian: Discussion Paper for the Canadian Association for Community Living (Winni-
peg: Canadian Association for Community Living, 1998) at 20, suggesting 50%.
” To evaluate the merits of a social policy measure along these lines is beyond the scope of this pa-
per, the primary focus of which is tax policy narrowly defined, not social policy more broadly under-
stood. To evaluate such a measure properly, however, one would presumably have to consider not
only the relative roles of the private and public sectors in the provision of medical care and disability
supports, but also the respective roles of the federal and provincial governments in these areas.
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worth more to high-income taxpayers than they are to low-income taxpayers,”‘ this
argument assumes that the income tax should apply not to the discretionary income
that remains after deducting involuntary expenses (such as medical and disability-
related expenses), but to net income from various sources without taking into account
the personal circumstances of the individual taxpayer.”‘ Although the federal govern-
ment implicitly adopted the latter view when it converted various deductions to non-
refundable credits in 1988, it did so without any explicit argument to this effect, and it
has been suggested that the conversion was “a disguised way of moving the marginal
rate schedule upward” in order to offset the more visible impact of an accompanying
reduction in nominal tax rates.”2 In contrast, both the Royal Commission on Taxation
and the Quebec White Paper on the Personal Tax and Transfer Systems favoured a
concept of income according to which “the ability to pay of a taxpayer is reduced by
his obligation to cover essential needs for himself and his dependants.””‘ Moreover, as
Pierre Cloutier and Bernard Fortin explain, since “one can obtain whatever degree of
progressivity one desires” by changes to the rate structure, the treatment of involun-
tary expenses such as extraordinary medical and disability-related costs is best under-
stood as a matter of horizontal equity (according to which taxpayers with the same
ability to pay should pay the same income tax) not vertical equity (according to which
taxpayers with a greater ability to pay should pay an appropriately greater amount of
4
tax).”
From the latter perspective, a deduction for extraordinary medical expenses (and
arguably a separate deduction for necessary costs associated with a prolonged mental
or physical disability) may be justified as a necessary measure to achieve horizontal
equity among taxpayers with different involuntary expenses. Although a non-
refundable credit equal to the lowest marginal rate of tax might be justified on the
grounds that medical and disability-related expenses are entirely involuntary for low-
income taxpayers and increasingly discretionary for taxpayers subject to tax at higher
rates,” it is implausible that discretionary and non-discretionary aspects of these ex-
penses are perfectly correlated with the rate schedule. Moreover, inasmuch as medical
or disability-related expenses involve an element of personal consumption, the prefer-
“” See e.g. T.E Pogue, “Deductions vs. Credits: A Comment” (1974) 27 Nat. Tax J. 659; Canada,
Report of the National Council on Welfare on the Personal Income Tax System in Canada: The Hid-
den Welfare System (Ottawa: National Council on Welfare, 1976).
. For an excellent analysis of this argument, see Cloutier & Fortin, supra note 28 at 54-62.
11 Ibid. at 73.
” Quebec, Ministbre des Finances, White Paper on the Personal Tax and Transfer Systems (Intro-
ductory Paper) (Quebec: Le Ministre, 1984) at 58. See also Royal Commission on Taxation, supra
note 24 at 5-8.
“4 Cloutier & Fortin, supra note 28 at 58. While one might respond to this statement by questioning
the politicalfeasibility of obtaining “whatever degree of progressivity one desires” through changes to
the rate structure, it seems patently inexcusable to compensate for these political limitations through
what are in effect rate increases on specific categories of taxpayers with additional involuntary ex-
penses such as extraordinary medical or disability-related costs.
“‘ See the discussion in ibid. at 59.
2000]
D.G. DUFF- DISABILITY AND THE INCOME TAx
able approach is to recognize only a fraction of these expenses, as is the case with
medically necessary air conditioners for which only 50% of the cost may be claimed
as an eligible medical expense.
e. Social Policy
Lastly, having defined this tax policy objective, it is important to emphasize that it
cannot take the place of broader social policy goals that might also be pursued
through the !TA. To the extent that that the federal government considers it desirable
to assume a larger or more direct role in the reimbursement of medical or disability-
related expenses than it currently does through the Canada Health and Social Transfer,
a refundable tax credit might be appropriate for this purpose.”” In addition or as an
alternative to such a measure, the federal government might provide direct income
support to low-income individuals with disabilities or low-income families with dis-
abled children through a refundable tax credit the value of which diminishes as the in-
come of the individual or family increases.”‘ In either case, however, these social pol-
icy objectives and the tax measures through which they might be implemented should
be distinguished from the more narrow tax policy goals supporting a deduction for
extraordinary medical expenses and disability-related expenses.
B. Disability Tax Credit
1. Description
The disability tax credit (“DTC”) provides a fixed credit against basic federal tax
otherwise payable where
(1) the individual has “a severe and prolonged mental or physical impairment,”‘
the effects of which are such that the person’s “ability to perform a basic ac-
tivity of daily living is markedly restricted”;”9
(2) a qualified medical practitioner'” has certified that the impairment is “a se-
vere and prolonged mental or physical impairment the effects of which are
6 While this paper does not examine the constitutionality of such a refundable tax credit, one might
expect provincial and territorial governments to object to such a measure on the grounds that it might
interfere with their primary jurisdiction in this area.
“‘ The federal government currently operates various income support programs along these lines
(e.g. Old Age Security), two of which (the Goods and Services Tax Credit and the Canada Child Tax
Benefit) are delivered in the form of refundable tax credits and might serve as models for such a
measure. These issues are examined more fully in this paper, below.
“‘ 1TA, supra note 4, s. 118.3(l)(a).
“9 Ibid., s. 118.3(l)(a.1).
‘ For the purposes of this provision, the qualified medical practitioner depends on the kind of im-
pairment (medical doctor or optometrist for a sight impairment, medical doctor or audiologist for a
hearing impairment, medical doctor or occupational therapist for impairments affecting one’s ability
MCGILL LAW JOURNAL / REVUE DE DROIT DE MCGILL
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such that the individual’s ability to perform a basic activity of daily living is
markedly restricted”;’2′
(3) the individual has filed the certificate;'” and
(4) no amount for attendant care or care in a nursing home in respect of the indi-
vidual has been claimed as a medical expense under section 118.2, except
under paragraph 118.3(2)(b.1) which limits the amount that may be claimed
in a year to $10,000 or $20,000 if the patient dies in the year.'”
The credit is also available to individuals who support a disabled relative to the extent
that the credit otherwise available to the relative exceeds that person’s basic federal
tax payable before subtracting any non-refundable credits (other than the personal
credits and the credit for employment insurance and Canada Pension Plan (“CPP”) or
Quebec Pension Plan (“QPP”) premiums).’4 Similarly, any unused portion of a DTC
in respect of a disabled person may be transferred to that person’s spouse.'”
For the purpose of these provisions, subsection 118.3(4) allows the tax authorities
to “obtain the advice of the Department of Human Resources Development” with re-
to walk, feed, or dress oneself, medical doctor or psychologist for impairment with respect to per-
ceiving, thinking and remembering, and medical doctor with respect to any other impairment), and is
further defined in ibid., s. 118.4(2), as “a person authorized to practise as such … pursuant to the laws
of the jurisdiction in which the taxpayer resides, of a province or of the jurisdiction in which the prop-
erty is provided:’
“‘ Ibid., s. 118.3(l)(a.2). The 2000 Federal Budget proposes to extend the DTC to persons certified
by a medical doctor to be markedly restricted in their ability to perform a basic activity of daily living
all or substantially all of the time “but for therapy (other than therapy that can reasonably be expected
to be of benefit to persons who are not so impaired) that is (i) essential to sustain a vital function of
the individual, and (ii) required to be administered at least three times each week for a total period av-
eraging not less than 14 hours a week” (see “Budget Papers 2000”, supra note 56 at 2-9).
… 1TA, ibid., s. 118.3(l)(b).
‘ Ibid., s. 118.3(l)(c). For a detailed explanation of the DTC, see Sherman, supra note 35 at 29-63.
For a more recent review, see Katz, supra note 89 at 666-74.
.2. ITA, ibid., s. 118.3(2). For this purpose, the only individuals who may claim the DTC are indi-
viduals who claimed an equivalent to spouse credit in respect of the disabled person under s. 118(1),
or could have done so if they were not married (as defined in the ITA to include opposite-sex com-
mon-law spouses); and individuals who claimed a caregiver credit or infirm dependant’s credit in re-
spect of a disabled parent, grandparent, child or grandchild, or could have done so if the disabled per-
son had no income and had attained the age of 18 years before the end of the year. The 2000 Federal
Budget proposes to expand the list of relatives who can claim the DTC to include siblings, aunts and
uncles, and nieces and nephews (see “Budget Papers 2000”, supra note 56 at 2-9). As a result, as the
Budget explains, the list of relatives to whom one DTC can be transferred will be made consistent
with the rules for the METC (see “Supplementary Information 2000”, supra note 35 at 3-35). Where
more than one individual is entitled to claim the disability tax credit in respect of a disabled relative
under s. 118.3(2), s. 118.3(3) provides that the credit may be allocated among these supporting indi-
viduals, but may be allocated by the Minister where the supporting individuals cannot agree. For a
brief discussion of this element of the DTC, see Sherman, ibidt at 135-38.
“s ITA, ibid., s. 118.8. For a brief discussion of the rules governing the transfer of the DTC to a
spouse, see Sherman, ibid. at 134-35.
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D.G. DUFF- DISABILITY AND THE INCOME TAX
825
spect to whether an individual in respect of whom the DTC is claimed has “a severe
and prolonged impairment, the effects of which are such that the individual’s ability to
perform a basic activity of daily living is markedly restricted,” and requires individu-
als claiming the credit to furnish this Department with “information with respect to an
individual’s impairment and its effects on the individual” where requested in writing
by the Department. More specifically, subsection 118.4(1) of the ITA provides that
(a) an impairment is prolonged where it has lasted, or can reasonably be ex-
pected to last, for a continuous period of at least 12 months;
(b) an individual’s ability to perform a basic activity of daily living is markedly
restricted only where all or substantially all of the time, even with therapy
and the use of appropriate devices and medication, the individual is blind or
is unable (or requires an inordinate amount of time) to perform a basic ac-
tivity of daily living;
(c) a basic activity of daily living in relation to an individual means
(i) perceiving, thinking and remembering,
(ii) feeding and dressing oneself,
(iii) speaking so as to be understood, in a quiet setting, by another person
familiar with the individual,
(iv) hearing so as to understand, in a quiet setting, another person familiar
with the individual,
(v) eliminating (bowel or bladder functions), or
(vi) walking; and
(d) for greater certainty, no other activity, including working, housekeeping or
a social or recreational activity, shall be considered as a basic activity of
daily living.
Where an individual (or qualifying dependant) satisfies these requirements, the indi-
vidual (or supporting individual) may claim a non-refundable credit of $730 against
basic federal tax otherwise payable, 6 which is worth approximately $1,060 when
provincial taxes are taken into account.’-”
126 ITA, ibid, s. 118.3(1), which defines the amount of the credit as 17% of $4,293 or $730. These
amounts were increased pursuant to the proposal in 2000 Federal Budget, supra note 35, to restore
full indexation.
‘”7This assumes a provincial tax rate equal to 45% of basic federal tax payable. Actual provincial
income tax rates are outlined at supra note 36. The 2000 Federal Budget proposes to introduce an ad-
ditional non-refundable credit worth $500 (or approximately $725 when provincial income taxes are
taken into account) for disabled children who have not attained the age of 18 before the end of the
year. This supplementary amount will be reduced where the aggregate of child and attendant care ex-
penses claimed for the year in respect of the child exceeds $2,000 (see “Budget Papers 2000”, supra
note 56 at 2-9).
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2. History
Like the METC in section 118.2, the DTC originated during the Second World
War, when the federal government introduced a $480 deduction for persons who were
totally blind at any time in the year, provided that they did not claim an amount for
attendant care under the medical expense deduction.”‘ Although the deduction did not
require blind persons to itemize particular expenses associated with their disability,
the provision was justified on the grounds that it recognized “the additional expenses”
that blind persons are required to incur.”‘ According to the Department of Finance:
“Given that the itemization was already permitted for the expenses paid to hire a full-
time attendant, the effect of the disability deduction was to provide more complete re-
lief for such costs, including those under the deductible expenses threshold of 5 per
cent of income “‘”” In addition, the Department suggests, where the cost of a full-time
attendant was not claimed as a medical expense, the disability deduction “may also
have been intended to compensate for time expended by unpaid family members.””
Although the provision was amended in 1949 to include, in addition to blind per-
sons, individuals who were “throughout the whole of the year, necessarily confined,
by reason of illness, injury or affliction, to a bed or wheel chair”‘ 2 the disability de-
duction remained largely unchanged until 1986, with the exception of increases in the
dollar value of the deduction which reached $2,590 by 1985.”‘ In that year, the federal
government announced a major revision to the deduction to include “all severely dis-
abled Canadians” by extending eligibility to all persons with a severe and prolonged
mental or physical impairment.” For the purpose of this amended provision, former
paragraph 110(l.3)(a) stipulated: ‘
[A] person shall be considered to have a severe and prolonged impairment only
if by reason thereof he is markedly restricted in his activities of daily living and
the impairment has lasted or can be expected to last for a continuous period of
at least 12 months.
4
While this language endures in current paragraphs 118.3(1)(a.1) and 118.4(1)(a) of
the ITA, it was supplemented in 1991 by the statutory definitions of a “marked re-
striction” on an individual’s ability to perform a basic activity of daily living in para-
graph 118.4(1)(b) and of “a basic activity of daily living” in paragraphs 118.4(1)(c)
and (d). Otherwise, the only significant amendments since 1986 involve the conver-
years.
“‘ See s. 5(2) of the Income War Tax Act, supra note 71, enacted applicable to 1944 and subsequent
” House of Commons Debates (26 June 1944) at 4178.
“”Disability Tax Credit, supra note 76 at 10.
“‘ Ibid.
“‘See the Income Tax Act, S.C. 1948, c. 52, s. 26(1)(c), which became the Income Tax Act, R.S.C.
1952, c. 148, s. 27(l)(d) during the revision.
‘” The deduction was increased to $1,000 in 1972, and continued to increase after 1974, through
annual indexing which was introduced in that year.
‘m Department of Finance, Budget Papers (1985), as cited in Disability Tax Credit, supra note 76 at
2000]
D.G. DUFF- DISABILITY AND THE INCOME TAX
827
sion of the deduction to a credit in 1988,'” and increases in the value of the credit
from $550 during the period 1988-90 to $720 in 1991 and to $730 for the year
2000.’ 6
3.
Interpretation
In applying these provisions, the courts have adopted an increasingly liberal ap-
proach, emphasizing the need for a “humane and compassionate construction” to
achieve “the object of Parliament … to give to disabled persons a measure of relief
that will to some degree alleviate the increased difficulties under which their impair-
ment forces them to live.”3 In one recent case, for example, the court concluded that
the taxpayer’s children, who suffered from cystic fibrosis, had a severe and prolonged
physical impairment on the grounds that they required an inordinate amount of time
“to maintain their respiratory capacity”, notwithstanding that paragraph 118.4(1)(c) of
the ITA does not include “breathing” as a “basic activity of daily living”.”n In another
case, the court questioned the mandatory status of the medical certificate described in
paragraphs 118.3(1)(a.2) and (b), reasoning that “[o]ne does not need a person with a
degree in medicine to determine whether a claimant can walk or get dressed, or re-
quires an inordinate amount of time to do so. These matters are within ordinary hu-
man experience”
3 9
W See 1987 Amendments, supra note 78, ss. 77(6), 92, repealing former s. 1 l0(1)(e) and adding s.
118.3, applicable to 1988 and subsequent years.
‘” An Act to amend the Income Tax Act, the Canada Pension Plan, the Cultural Property Export
and Import Act, the Income Tax Conventions Interpretation Act, the Tax Court of Canada Act, the Un-
employment Insurance Act, the Canada-Newfoundland Atlantic Accord Implementation Act, the Can-
ada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act and certain related Acts,
S.C. 1991, c. 49, ss. 90(1), 90(3) [hereinafter Sch. ], being Sch. II to the Income Tax Amendments
Revision Act, S.C. 1994, c. 7 [hereinafter 1993 Amendments], those provisions applying to 1991 and
subsequent years. Additional amendments announced in the 2000 Federal Budget are outlined at su-
pra notes 121, 124, 127.
37 Radage v. M.N.R., [1996] 3 C.T.C. 2510 at 2529, 96 D.T.C. 1615 (T.C.C.) [hereinafter Radage
cited to C.T.C.], Bowman J.T.C.C., cited with approval by a majority of the Federal Court of Appeal
in Johnston v. M.N.R., [1998] 2 C.T.C. 262 at par. 10, 98 D.T.C. 6169 (F.C.A.) [hereinafter
Johnston].
‘m Fillion v. M.N.R., 1998 CarswellNAT 2907 at paras. 18, 21 (T.C.C.) [hereinafter Fillion], accept-
ing the taxpayer’s argument that “breathing” should be read into s. 118.4(1)(c), since “otherwise sec-
tion 15 of the Canadian Charter of Rights and Freedoms would be violated” (at par. 18). For another
case in which a taxpayer with a breathing impairment was considered eligible for the disability tax
credit, see Renken v. M.N.R., [1996] 2 C.T.C. 2687, 1996 CarswellNAT 1351 (T.C.C.), online:
TAXNET (TaxPARTNER Main) [hereinafter Renken cited to CarswellNATI (concluding that the tax-
payer, who suffered from severe asthma, required an inordinate amount of time to walk and dress her-
self).
,’ Morrison v. M.N.R. (1998), [1999] 1 C.T.C. 2331 at para. 17, Bowman T.CJ. (T.C.C.). For a
contrary view, emphasizing the statutory requirement for a medical certificate, see Partanen v.
M.N.R., [1998] 2 C.T.C. 2941 (T.C.C.), aff’d [1999] 3 C.T.C. 79,99 D.T.C. 5436 (F.C.A.).
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At the same time, however, courts have emphasized the limited scope of the
credit, observing that the provision is designed to provide “a modest amount of tax
relief to persons who fall within a relatively restricted category of markedly physically
or mentally impaired persons.”” In addition, several decisions have noted the restric-
tive impact of the 1991 amendments, which introduced specific statutory definitions
of the expressions “markedly restricted” in paragraph 118.4(1)(b) of the ITA and “a
basic activity of daily living” in paragraphs 1 18.4(1)(c) and (d).’
“‘ Radage, supra note 137 at 2528. See also Caudle v. M.N.?, [1995] 1 C.T.C. 2815 at 2819
(T.C.C.), Sarchuk J.T.C.C., observing that the statutory provisions are “narrow and restrictive”, and
concluding that “it is obvious that Parliament, as a matter of policy … intended to create … an ex-
treme level of disability in order to qualify”; Craven v. MN.., [1995] 1 C.T.C. 2883, 1995 Car-
swellNET 304 at para. 6 (TC.C.), online: TAXNET (TaxPARTNER Main), Bowman J.T.C.C., con-
cluding that “the inflexible tests in section 118.4” grant the court “no room to apply either common
sense or compassion in the interpretation of the disability tax credi’; Sincock v. MN.., [1995] 2
C.T.C. 2449 at 2453, 95 D.T.C. 535 (T.C.C.) [hereinafter Sincock cited to C.T.C.], McArthur J.T.C.C.,
referring to “the rigorous and onerous criteria set forth in the legislation”; Moore v. M.N.&, [1995] 2
C.T.C. 2538, 1995 CarswellNAT 522 at para. 17 (T.C.C.), online: TAXNET (TaxPARTNER Main)
[hereinafter Moore], Sobier
.C.C.J., describing “the stringent tests laid down by Parliament which
must be met by a taxpayer, even one with severe health problems, before he or she is entitled to suc-
cessfully claim the disability tax credit”; Trottier v. M.N.R. (1995), [1996] 2 C.T.C. 2425, 1995 Car-
swelINAT 1461 at para. 34 (T.C.C.), online: TAXNET (TaxPARTNER Main), Tremblay J.T.C.C.,
concluding from the “restrictive nature” of the statutory provisions that “Parliament’s purpose was
clearly to target an extremely limited class of persons, those severely affected by their disability in
their daily lives”; Renken, supra note 138 at para. 8, Mogan J.T.C.C., referring to the “stringent con-
ditions imposed by sections 118.3 and 118.4 of the Income TaxAct”; Kralik v. M.N.? (1996), [1997]
1 C.T.C. 2147 at 2151 (T.C.C.) [hereinafter Kralik], Rowe DJ.T.C.C., emphasizing that the disability
tax credit “is very narrow in its application:’
“‘ See e.g. Jeanlouis v. M.N.9, [1995] 2 C.T.C. 2200 at 2203 (T.C.C.) [hereinafter Jeanlouis],
Bowman J.T.C.C., observing that the 1991 amendments resulted in a “restrictive definition that leaves
die Court little flexibility to apply a compassionate and common sense interpretation”; Bdrubd v.
M.NR. (1996), [1999] 3 C.T.C. 2032 at para. 15 (T.C.C.), Tardif T.C.J., noting that “[s]ince 1991, the
Act has contained a very narrow definition which limits the Court’s ability to interpret the phrase [se-
vere and prolonged mental or physical impairment] with compassion, especially since any assessment
must take into account improvement in the condition resulting from the use of devices”; Finegan v.
MN.R., [1996] 2 C.T.C. 2609, 1996 CarswellNAT 1322 at para. 27 (T.C.C.), online: TAXNET (Tax-
PARTNER Main), Sarchuk J.T.C.C., concluding that the 1991 amendments made the provision “ex-
tremely narrow and restrictive” and “could only have been made … as a result of the intention of the
legislators, as a matter of policy, to tighten the availability of this section”; Power v. M.N.R., [1996] 2
C.TC. 2684, 1996 CarswellNAT 1347 at para. 4 (T.C.C.), online: TAXNET (TaxPARTNER Main),
Bowie J.T.C.C., concluding that the 1991 amendments demonstrated Parliament’s intention to limit
the credit “only to individuals who suffer the most extreme disabling conditions”; Campbell v.
M.N.R., [1996] 3 C.T.C. 2022, 1996 CarswellNAT 1477 at para. 35 (T.C.C.), online: TAXNET (Tax-
PARTNER Main) [hereinafter Campbell], Rowe DJ.T.C.C., observing that the amended legislation
“is designed to bar the claim for all but the most severely handicapped:’ Notwithstanding the state-
ment in budgetary documents accompanying the 1991 amendments that they were not intended to
“change the existing eligibility criteria,” several cases have concluded that a claimant was eligible for
the disability tax credit prior to 1991, but was rendered ineligible by the 1991 amendments (see e.g.
2000]
D.G. DUFF- DISABILITYAND THE INCOME TAX
Most striking is the volume of litigation, which exceeds a hundred reported cases
since 1994. While such a substantial number of reported cases may be attributed in
part to the relatively recent enactment of the relevant statutory provisions, particularly
those adopted in 1991, other factors likely include the relative imprecision of the
statutory language, the importance of detailed factual determinations in the applica-
tion of the rule, and widespread misunderstanding as to the purpose and scope of the
credit.
With respect to the statutory language, the condition that an individual require “an
inordinate amount of time” to perform an activity of daily living is particularly open-
ended. Although several decisions have referred to dictionary definitions to define
“inordinate” as “irregular” or “excessive”,’, 2 courts have differed widely on how “ir-
regular” or “excessive” the amount of time must be to qualify as a “marked restric-
tion” on a taxpayer’s ability to perform a basic activity of daily living within the
meaning of the relevant statutory provisions. In one case, for example, a taxpayer who
had “no control over her bowel function” was considered to have required an inordi-
nate amount of time to perform her bowel functions on the grounds that she was “re-
quired, on a continuous and constant basis, around the clock, to attend to her elimina-
tion needs by attending at washrooms and emptying the bag'” In other cases involv-
ing similarly disabled individuals, however, courts have held that the amount of time
devoted to elimination functions was not “inordinate”.'” Courts have also differed
over the standard whereby individuals may be said to require “an inordinate amount
of time” to walk,’45 or engage in other basic activities of daily living.” Other cases
(1995), [1996] 1 C.T.C. 2310 (T.C.C.); Brushett v. M.N.R., [1996] 3 C.T.C. 2323
Grey v. M.N..
(T.C.C.); Terrigno v. M.N.R., [1996] 3 C.T.C. 2801 (T.C.C.); De Francesco v. M.N.R., [1997] 3 C.T.C.
2649 (T.C.C.) [hereinafter De Francesco]).
1″ See e.g. Brookshaw v. M.N.R., [1994] 2 C.T.C. 2360 (T.C.C.) [hereinafter Brookshaw]; Murphy v.
M.N.R., [1995] 1 C.T.C. 2857, 1995 CarsweUNAT 299 (T.C.C.), online: TAXNET (Taxport or Main)
[hereinafter Murphy]. See also Johnston, supra note 137 at para. 18, where Ltourneau L.A. defined
“an inordinate amount of time” as “an excessive amount of time, that is to say one much longer than
what is usually required by normal people. It requires a marked departure from normality.”
“‘ Brookshaw, ibid. at 2360. See also Bearss v. M.N.R. (1996), [1997] 1 C.T.C. 2642 at 2644, 97
D.T.C. 190 (T.C.C.), where the court regarded the time devoted by the taxpayer to her elimination
functions (estimated at 10-15 minutes approximately 13 times a day for a total of 2.5 to 3 hours per
day, plus an additional 45 minutes every 2 days to change her colostomy pouch) as “inordinate”.
“‘ See e.g. Ratzlaffv. MN.R., [1995] 1 C.T.C. 2927 (T.C.C.) (1.5 hours a day plus 10 to 20 minutes
twice a day for 5 out of 7 days considered not an “inordinate” or “excessive” amount of time); Virage
v. M.N.R. (1995), [1996] 1 C.T.C. 2392 (T.C.C.) [hereinafter Wrage] (3 to 4 minutes, 12 to 15 times a
day, not an “inordinate amount of time”); Armit v. M.N.R. (1995), [1996] 1 C.T.C. 2393 (T.C.C.)
[hereinafter Armit] (3 to 4 minutes, 15 times per day, not an “inordinate amount of time”); Stewart v.
M.N.R. (1995), [1996] 1 C.T.C. 2394 (T.C.C.) [hereinafter Stewart 1995] (3 to 5 minutes, 10 to 15
times a day, not an “inordinate amount of time”).
” See e.g. ‘Conner v. M.N.R. (1994), [1995] 1 C.T.C. 2371 at 2372, 95 D.T.C. 198 (T.C.C.) (a tax-
payer required to rest after walking for 100 meters took an inordinate amount of time to walk); Mur-
phy, supra note 142 at para. 23 (the taxpayer who suffered from chronic fatigue syndrome required an
inordinate amount of time to walk because she could not “keep up a normal pace”, was required to
“stop periodically and rest’, had to “monitor her fatigue level so that she does not injure herself
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have grappled with the meaning of the words “perceiving, thinking, and remember-
ing” in subparagraph 118.4(1)(c)(i)” and the words “feeding and dressing oneself’ in
subparagraph 118.4(1)(c)(ii),” ‘ and with the requirement in paragraph 118.4(1)(b) that
physically,’ so that she “performs the activity with difficulty and in considerable pain and with fa-
tigue”); Jeanlouis, supra note 141 (the taxpayer, who took 30 minutes to walk a distance normally
covered in 7 to 8 minutes, was markedly restricted in ability to walk based on inordinate amount of
time test); Wodak v. M.N.R., [1996] 2 C.T.C. 2333 (T.C.C.) (the taxpayer, who took four times a nor-
mal amount of time to walk 100 to 200 yards, was markedly restricted in ability to walk); Wilson v.
M.N.R. (1995), [1996] 1 C.T.C. 2652 (the taxpayer, who was required to rest for 1 minute after walk-
ing 25 meters, did not take “an inordinate amount of time” to walk); Noseworthy v. MN.R, [1996] 2
C.T.C. 2006 at 2007 (T.C.C.) (the taxpayer who took 30 minutes to travel a distance “which shouldn’t
take more than five or ten minutes” took “an inordinate amount of time” to walk); St. Pierre v.
M.N.R., [1996] 2 C.T.C. 2709 (T.C.C.) (the taxpayer not markedly restricted in ability to walk even
though he was sometimes unable to walk 10 feet and was generally unable to walk more than 50
yards); Marshall v. M.N.R., [1996] 3 C.T.C. 2475 (T.C.C.) (the taxpayer, who took 25 minutes to
cover a distance normally covered in 4 to 5 minutes, took “an inordinate amount of time” to walk);
Spence v. M.N.R., [1996] 3 C.T.C. 2921 (T.C.C.) (the taxpayer able to walk 50 meters without assis-
tance, though having to stop every 50 or 60 feet, was markedly restricted in an activity of basic living
on the basis that he took an inordinate amount of time to walk); Valley v. M.N.R. (1996), [1997] 1
C.T.C. 2618 (T.C.C.) (the taxpayer did not require an inordinate amount of time to walk, even though
he walked with crutches and took four times the normal amount of time to walk 2 city blocks); Peters
v. M.N.R. (1996), [1997] 2 C.T.C. 2071 at 2074 (T.C.C.) (the taxpayer took “an inordinate amount of
time to walk any distance that would allow him to operate independently in every day life”); De Fran-
cesco, supra note 141 (the taxpayer, who was able to walk 100 yards with the aid of a leg brace, was
not markedly restricted in his ability to walk); Cameron v. MN.R. (1997), [1998] 2 C.T.C. 2081
(T.C.C.) [hereinafter Cameron] (the taxpayer, who took about 20 minutes to walk 100 to 200 meters,
did not take “an inordinate amount of time” to walk); Morin v. MN.R, [1998] 2 C.T.C. 2722 at 2724
(T.C.C.) (the taxpayer who suffered from severe back pain and was unable to walk more than 25-30
feet without resting was markedly restricted in ability to walk); Johnston, supra note 137 at para. 26
(5 minutes to cover a distance of only 50 feet considered “inordinate”).
” See e.g. Mantle v. M.N.R., [1995] 1 C.T.C. 2918 at 2922 (T.C.C.), Kempo J.T.C.C., concluding
that the juvenile diabetes affecting the taxpayer’s son impaired all of his activities of basic living by
requiring an inordinate or excessive amount of time for them to be performed. For contrary decisions
in which juvenile diabetes did not qualify as an eligible disability under ss. 118.3 & 118.4, see Salvail
v. M.N.R. (1995), [1996] 1 C.T.C. 2680 (T.C.C.); Moore, supra note 140; Sanders v. M.N.R. (1995),
[1996] 1 C.T.C. 2617 (.C.C.); Oliver v. M.N.R,
[1996] 3 C.T.C. 2271 (T.C.C.); McGonegal v.
M.N.R., [1997] 2 C.T.C. 2646 (T.C.C.).
“7 See e.g. Radage, supra note 137 at 2526-27, Bowman J.T.C.C., concluding that “perceiving” in-
volves “the reception and recognition of sensory data in a manner that conforms reasonably to com-
mon human experience”; that “thinking” involves “a rational comprehension, marshalling, organiza-
tion and analysis of that which the person has perceived and the formulation of conclusions therefrom
that are of practical utility or theoretical validity”; that “remembering” involves “both the acquisition
of the memory and its retrieval” and that although s. 118.4(1)(c)(i) uses the words disjunctively, “the
activities of perceiving, thinking and remembering are closely connected.”
‘ ‘ See e.g. Hodgin v. M.N.R., [1995] E.T.C. 515 at para. 6, 1995 CarswellNAT 2038 (T.C.C.), on-
line: TAXNET (TaxPartner Main) [hereinafter Hodgin], Bonner T.C.J., interpreting the words “feed-
ing oneself” to involve “something more than eating a meal prepared by another person” but also “the
ability to prepare a reasonable range of food and not just to prepare and set out snacks, junk foods or
frozen dinners”; Johnston, supra note 137 at para. 32, where L6toumeau J.A., affirming this interpre-
2000]
D.G. DUFF- DIsABILITYAND THE INCOME TAx
an individual’s ability to perform a basic activity of daily living be restricted “all or
substantially all of the time.””
In addition to the broad phraseology of the statutory language, the application of
the provision to the circumstances of individual claimants involves detailed factual
questions regarding the existing and likely duration of their impairment, and the ef-
fects of their impairment on one of the basic activities of daily living specified in
paragraph 118.4(1)(c). Not surprisingly, given the applicable statutory tests, courts
must devote considerable time and effort to determining whether, with therapy and the
use of appropriate devices and medication, claimants are unable or require an inordi-
nate amount of time to perceive, think and remember,”,5
to feed and dress them-
selves,”‘ to speak or hear so as to be understood by or understand a familiar person in
a quiet setting, 2 to eliminate (bowel or bladder functions),” or to walk.'”
tation, added that “[t]he notion of feeding … also involves the ability to prepare a meal which con-
forms to a medically prescribed diet and medication which maintains one’s state of health or prevents
its deterioration” and further concluded (at para. 37) that “the notion of dressing oneself includes the
ability to perform basic and elementary personal hygiene associated with it, such as shaving and
bathing”.
’49 See e.g. Sarkar v. M.N.R., [1995] 2 C.T.C. 2750 at paras. 20, 21, 1995 CarswellNAT 583
(T.C.C.), online: TAXNET (TaxPartner Main), Sarchuk J.T.C.C., accepting that the taxpayer took an
inordinate amount of time to walk when subject to a bout of chronic fatigue syndrome, but disallow-
ing the taxpayer’s claim on the basis that she did not experience this restriction “all or substantially all
of the time” during the relevant year. Defining the words “substantially all of the time” as “almost all
or essentially all of the time”, the Court held that “intermittent bouts of illness, even causing a severe
impairment on a sporadic basis” do not satisfy the requirements of the disability tax credit. For a
similar result, relying on the decision in Sarkar, see Campbell, supra note 141.
” See e.g. Radage, supra note 137. See also Larivire v. MN.R, [1995] 2 C.T.C. 2742 (T.C.C.);
Maillet v. MN.R., [1996] 2 C.T.C. 2656 (T.C.C.); Thomas v. MN.R?,
[1996] 2 C.T.C. 2714 (T.C.C.);
Friis v. MN.R., [1996] 3 C.T.C. 2172 (T.C.C.); Lamothe v. MN.A., [1996] 3 C.T.C. 2423 (T.C.C.);
Luxton v. M.N.?, [1996] 3 C.T.C. 2449 (T.C.C.); Parsons v. M.N.R., [1996] 3 C.T.C. 2672 (T.C.C.);
Bradbury v. MN.R. (1996), [1997] 1 C.T.C. 2051 (T.C.C.); Kralik, supra note 140; Hill v. M.N.R.
(1996), [1997] 1 C.T.C. 2477 (T.C.C.); Desbiens v. M.N.R. (1996), [1997] 1 C.T.C. 2653 (T.C.C.);
Robillard v. MN.R. (1996), [1997] 2 C.T.C. 2067 (T.C.C.); Dallaire v. M.N.R. (1996), [1997] 3
C.T.C. 2480 (T.C.C.); Shaw v. MN.R., [1997] 3 C.T.C. 2623 (T.C.C.); Lever v. M.N.R., [1998] 4
C.T.C. 2460 (T.C.C.); Stewart v. MN., 1999 CarswellNAT 1097 (T.C.C.), online: TAXNET (Tax-
Partner Main).
‘ ‘ In addition to Hodgin, supra note 148, and Johnston, supra note 137, see Sincock, supra note
140; Edwards v. MN.R., [1995] 2 C.T.C. 2574 (T.C.C.); Farkas v. M.N.R., [1996] 3 C.T.C. 2054
(T.C.C.); Dippel v. M.N.R., [1996] 3 C.T.C. 2202 (T.C.C.); Corbisiero v. MN.A, [1997] 3 C.T.C.
2108 (T.C.C.); Lareau v. M.N.? (1995), [1997] 3 C.T.C. 2704 (T.C.C.); Hagen v. M.N.R., [1997] 3
C.T.C. 3128 (T.C.C.); Lacroix v. MN.R. (1996), [1998] 1 C.T.C. 2213 (T.C.C.); McMaster v. MN.R.
(1998), [1999] 1 C.T.C. 2658 (T.C.C.).
… See e.g. Da Silva v. M.N.R. (1994), [1995] 1 C.T.C. 2255 (T.C.C.); Labelle v. MN.R. (1994),
[1995] 1 C.T.C. 2576 (T.C.C.); Laforce v. MN.R. (1995), [1996] 1 C.T.C. 2696 (T.C.C.); Adams v.
MN.?. (1994), [1995] 1 C.T.C. 2801 (T.C.C.); Rioux v. MN.R. (1994), [1996] 1 C.T.C. 2139
(T.C.C.); Cooper v. MN.R., [1996] 3 C.T.C. 2189 (T.C.C.); Bowles v. M.N.R. (1996), [1997] 1 C.T.C.
2045 (T.C.C.).
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With respect to misunderstanding about the purpose and scope of the credit,
courts themselves have raised questions about the extent to which taxpayers and
medical practitioners appreciate the limited categories of disabled persons for which
the credit is intended.’5 In one case, for example, the court found it necessary to ex-
plain that a person may be “in receipt of a disability pension regarding her work and
not be entitled to the disability tax credit provided for in subsection 118.3(1) of the
Act:”‘ While evidence suggests that many disabled Canadians do not claim the DTC
either because they are not aware of the credit or believe that they would be refused,”7
the number of reported cases in which courts have dismissed the taxpayer’s appeal
also suggests that a number of Canadians whose disabilities do not satisfy the specific
requirements of the statutory provision continue to claim credits for which they are
ineligible.
4. Evaluation and Recommendations
In evaluating the DTC, commentators have tended to focus on the eligibility crite-
ria in sections 118.3 and 118.4, the manner in which the credit is administered, the
dollar value of the credit, and its non-refundability. The Council of Canadians with
Disabilities, for example, has made the following proposals for reform:
(1) Eligibility for the credit should be liberalized by
(a) reconsidering the requirement in paragraph 118.4(1)(b) that a “marked
restriction” in a basic activity of daily living be determined only after
taking into account “therapy and the use of appropriate devices and
medication”;”
(b) amending the statutory definitions of speech and hearing impairments to
eliminate the “artificial” tests based on communication in “a quiet set-
ting” with “another person familiar with the individual”;”‘
‘ See the cases cited at supra notes 143, 144.
‘”‘See the cases cited at supra note 145.
‘”See e.g. Wirage, supra note 144; Amit, supra note 144; Stewart 1995, supra note 144.
“” Cameron, supra note 145 at 2087.
‘”Federal Task Force on Disability Issues, supra note 1 at 90.
‘ See Council of Canadians with Disabilities, supra note 79 at 2, observing that this test “does not
allow for the possibility that the ‘appropriate devices and medication’ may actually not be available to
the person, or (with respect to the medication) may involve a significant risk to the person’s health.”
See also Shillington, supra note 86 at 25, suggesting that this requirement “seems contrary to the
factor which we [the disability tax credit] are trying to measure; cost implications.” The 2000 Federal
Budget, supra note 35, responds to this recommendation by making the DTC available to persons
who would be markedly restricted in their ability to perform a basic activity of daily living all or sub-
stantially all of the time but for certain kinds of essential therapy (see supra note 121).
‘”9 Council of Canadians with Disabilities, ibid at 2, suggesting that “[t]he test should be whether
the person can speak or hear satisfactorily in typical situations from day to day life, where not all set-
tings are quiet and people have to speak with and hear strangers.”
2000]
0D.G. DUFF- DIsABILITY AND THE INCOME TAX
833
(c) repealing the qualification in paragraph 118.4(1)(d) that “no other activ-
ity [other than those listed in paragraph 118.4(l)(c)], including working,
housekeeping or a social or recreational activity, shall be considered as a
basic activity of daily living”;
(d) repealing the qualification in paragraph 118.3(1)(c) which renders an in-
dividual ineligible for the disability tax credit where remuneration for an
attendant or care in a nursing home in respect of the individual is
claimed as a medical expense under section 118.2 (other than under
paragraph 118.2(2)(b.1));.’ and
(e) allowing the credit to be claimed by any supporting person, regardless of
their relationship with the disabled individual.’6″
(2) The form (T2201) by which qualifying medical practitioners are to certify
that “the individual’s impairment is a severe and prolonged impairment the
effects of which are such that the individual’s ability to perform a basic ac-
tivity of daily living is markedly restricted” should be amended to
(a) refer to the key condition in paragraph 118A(1)(b) that an individual’s
ability to perform an activity of daily living is “markedly restricted”
“0Ibid., explaining that this paragraph “directly excludes many people from the DTC who are se-
verely limited in their day-to-day functioning by their disabilities, although their disabilities do not fit
easily into any of the categories listed in [paragraph (c)]” See also Federal Task Force on Disability
Issues, supra note 1 at 89, observing that the list of ‘Activities of Daily Living” in s. 118.4(l)(c) does
not include “breathing”. Notwithstanding the absence of any such amendment, the Tax Court decision
in Fillion, supra note 138, interpreted the statutory rules as if “breathing” were a basic activity of
daily living.
161 Council of Canadians with Disabilities, ibid at 4 [emphasis in original], explaining that
this rule penalizes people who have very significant disabilities, and who are making
high expenditures out of their own pockets to keep themselves or their family members
in the community, as opposed to being in institutions at much greater public expense.
Individuals who have attendant care costs over $10,000 [the maximum amount that
may be claimed under paragraph 118.2(2)(b.1) without disqualifying the individual
from the disability tax credit] have other disability-related expenses which are equal to
or higher than other persons with disabilities. Accordingly, they should be allowed to
claim the DTC.
,62 Ibid. at 5, explaining that the current limitation to specified relatives is ‘ufair to other relatives
and friends who provide actual support to the person” See also Federal Task Force on Disability Is-
sues, supra note 1 at 90, recommending that the DTC should be transferable to “any supporting per-
son” As indicated earlier, the 2000 Federal Budget, supra note 35, extends the list of relatives who
may claim the DTC to include siblings, aunts and uncles, and nieces and nephews (see supra note
124).
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where the individual requires “an inordinate amount of time’ to perform
the basic activity of daily living;’ and
(b) delete the example of unimpaired walking as “at least 50 meters on level
ground.””
(3) The dollar value of the credit should be increased to compensate for inflation
over the last eight years and should be fully indexed to offset future infla-
tion.”‘
(4) The DTC should be made fully refundable, beginning with a measure like
the refundable medical expense supplement which is available only where
individuals earn at least $2,500 in the year through employment or busi-
ness.’
Other commentators have suggested more significant amendments to the eligibility
criteria for the DTC, such as replacing the current “severe and prolonged mental or
physical impairment” standard with the less restrictive “mental or physical infirmity”
criterion utilized in several other provisions of the /TA.”
a. Purpose
In order to evaluate these and other possible reforms, it is essential to reconsider
the purpose of the DTC, not only as part of the current income tax, but also under a
restructured system in which itemized disability-related expenses might be recognized
under a separate disability expenses tax credit or deduction without any threshold. As
“‘ Council of Canadians with Disabilities, ibid at 3 [emphasis in original], noting that “[m]ost of
the questions are phrased in an ‘all-or-nothing’ manner which implies, to the health professional, that
someone who can do these activities at all is not eligible:’
‘m Ibid. at 3, observing that “[iln the real world, people have to walk more than 50 meters as part of
their activities of daily living, and they have to walk up and down stairs. These implied limitations
have clearly been put by Revenue Canada into the T2201 form to limit eligibility more narrowly than
the statutory language would indicate?’
” 4Ibid. at 4. See also Shillington, supra note 86 at 26-27; Federal Task Force on Disability Issues,
supra note 1 at 90; Don Gallant and Associates, supra note 108 at 17. Although the 2000 Federal
Budget announced a return to full indexing for income tax provisions like the DTC, it did not increase
the value of the credit to compensate for inflation in the 1990s.
“‘ Council of Canadians with Disabilities, ibid. at 3-4. For other proposals to make the DTC re-
fundable, see Standing Committee, supra note 33 at 13-14; Shillington, ibid. at 22-24; The Tax Sys-
ten, supra note 79 at 18; Don Gallant and Associates, ibid at 17.
167 The Tax System, ibid. at 13-14. Other provisions employing this criterion include the infirm de-
pendants credit in the JTA, supra note 4, s. 118(l)(d), the definition of an “eligible child” for the pur-
pose of the child care expense deduction in s. 63, and the medical expense credit for remuneration
paid to a full-time attendant in a patient’s home in s. 118.2(2)(c). See also Baker & Beatty, supra note
79 at 4, recommending that the eligibility criteria for the DTC be reviewed “in consultation with the
disability community, aimed at making persons eligible who have indirect, hidden or cumulative costs
of disability.”
2000]
S.G. DUFF- DIsABILITYAND THE INCOME TAX
the Department of Finance explains, the original disability deduction was designed to
provide “more complete relief’ than did the medical expense deduction at the time for
the additional expenses that blind persons must incur “including those under the de-
ductible [medical] expenses threshold of 5 per cent of income.”” In addition, it sug-
gests, the deduction “may also have been intended to compensate for time expended
by unpaid family members” instead of paid attendants whose remuneration could be
claimed as a medical expense.” The Royal Commission on Taxation, however, op-
posed the existence of a separate disability deduction, questioning “the need for the
alternative treatment” to that provided under the medical expense deduction, and not-
ing that the deduction “is used only when the actual deductible expenses are less than
$500. ,7o
The argument that a separate disability deduction or credit provided more com-
plete relief than the general deduction or credit for medical expenses may have justi-
fied a separate provision at a time when eligible medical expenses were more limited
in scope. Today, however, this justification is much less persuasive as the list of eligi-
ble medical expenses has expanded to cover numerous disability-related expenses, in-
cluding those involving a significant element of personal consumption, such as air and
water filters or purifiers,”‘ air conditioners,'” wheelchair-accessible vans,” expenses
to move to a physically accessible dwelling,'” and allowable home renovations.'”
Likewise, since a separate credit was recently introduced for in-home care of an aged
or disabled relative,’76 the second argument that a separate disability credit or deduc-
tion is necessary to compensate for time expended by unpaid family members is also
questionable. Moreover, it is arguable that the rationale for such a provision would
“s Disability Tax Credit, supra note 76 at 10.
16/bid.
“o Royal Commission on Taxation, supra note 24 at 220.
,. Regulations, supra note 11, s. 5700(c. 1), applicable to 1992 and subsequent years.
‘ “Excerpts from Budget Papers” in Stikeman Elliott, Canadian Federal Budget 1997: Budgetary
Proposals of the Hon. Minister of Finance with Comments by Stikeman Elliott (Toronto: Carswell,
1997) [hereinafter 1997 Federal Budget] 2-1 at 2-3, proposing to allow taxpayers to claim “the lesser
of 50% of the cost of an air conditioner prescribed by a medical practitioner as being necessary to as-
sist an individual in coping with the individual’s severe chronic ailment, disease or disorder, and
$1,000:’
‘”‘ TA, supra note 4, s. 118.2(1)(.7), added by the Income TaxAmendmentsAct, 1997, S.C. 1998, c.
19, s. 23(2), applicable to 1997 and subsequent years [hereinafter 1997Amendments].
,41TA, ibid., s. 118.2(1)0.5), added by 1997 Amendments, ibid, applicable to 1997 and subsequent
years.
‘ “1TA,
ibid, s. 118.2(1)0.2), added by An Act to amend the Income Tax Act, the Federal-Provincial
Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act, the Old
Age Security Act, the Public Utilities Income Tax Transfer Act, the War Veterans Allowance Act and a
related Act, S.C. 1990, c. 39, s. 25, applicable to 1988 and subsequent years [hereinafter 1989
Amendments]. For cases dealing with the application of this provision, see supra notes 68, 70.
‘ 61TA, ibid, s. 118(1)(c.1), added by Income Tax Amendments Act, 1998, S.C. 1999, c. 22, s. 32(2),
applicable to 1998 and subsequent years [hereinafter 1998 Amendments]. This provision is examined
below.
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disappear altogether if the !TA were amended to introduce a separate disability ex-
penses tax credit or deduction without any threshold and (as recommended earlier) to
allow disabled individuals to claim remuneration for attendant care provided by a
spouse or other family member.'”
Notwithstanding this possible conclusion, there is a further rationale for the exis-
tence of a separate disability credit or deduction even if these amendments were
made: to the extent that disabilities impose various kinds of costs, some of which are
indirect and difficult to itemize, these are appropriately recognized through a credit or
deduction equal to a fixed dollar amount.'” Where, for example, a disability necessi-
tates extra laundry, bedding or heating costs, or results in greater wear and damage to
clothing or household items, these additional undocumented costs are effectively rec-
ognized through a fixed credit or deduction. Likewise, to the extent that restricted ac-
cess to the marketplace and society at large causes disabled persons to incur higher
costs for basic goods and services like groceries, a fixed credit or deduction recog-
nizes these additional costs.'” In this respect, the disability tax credit can be likened to
an additional personal exemption to recognize non-discretionary but difficult-to-
itemize costs associated with a mental or physical disability. For this reason, it might
be more appropriate to include the disability tax credit along with the other “personal
credits” found in section 118, rather than with the other non-refundable tax credits in
sections 118.1 (charitable donations) to 118.7 (employment insurance and CPP/QPP
premiums).’
Having identified this rationale for a separate provision recognizing the indirect
and non-itemized costs associated with mental or physical disabilities, it remains to
reconsider the eligibility criteria for this recognition, the appropriate dollar amount,
and whether these additional costs should be recognized through a non-refundable
credit, a refundable credit, or a deduction. Further comments address the administra-
tion of the provision.
b. Eligibility
Beginning with the eligibility criteria, the basic purpose of the provision to recog-
nize indirect and non-itemized costs associated with a mental or physical disability
suggests that paragraph 118.3(1)(c) (excluding from the DTC individuals in respect of
whom an amount is claimed as a medical expense for attendant or nursing home care
under any of paragraphs 118.2(2)(b), (c), or (d)) should be repealed, that the statutory
‘”See text accompanying notes 85-88.
‘”See e.g. Disability Tax Credit, supra note 76 at 15, explaining that the disability tax credit “rec-
ognizes expenses that are difficult to itemize’
‘ See e.g. The Tax System, supra note 79 at 7, observing that “a disabled person might rely heavily
on a local grocer because of the difficulty in travelling to larger more competitively priced retailers”
and explaining that one rationale for the DTC is “to offset these [indirect] costs through a non-
itemized, flat tax credit:’
‘”‘ These personal credits are examined in Part II.D, below.
2000]
D. G. DUFF- DISABILITYAND THE INCOME TAx
837
definition of a “basic activity of daily living” in paragraphs 118.4(1)(c) and (d) should
be revised, and that the definition of a “marked restriction” in an individual’s ability to
perform a basic activity of daily living in paragraph 118.4(1)(b) should also be
amended. As well, since these undocumented disability-related costs may be borne by
supporting individuals as well as by disabled persons themselves, the earlier analysis
of the METC suggests that these individuals should be able to claim any unused por-
tion of the disabled person’s DTC regardless of their relationship with this person.”‘
With respect to paragraph 118.3(1)(c), an exclusion for individuals in respect of
whom attendant or nursing home care expenses are claimed under any of paragraphs
118.2(2)(b), (c), or (d) seems inconsistent with the modem purpose of the provision to
recognize indirect and difficult-to-itemize costs associated with a mental or physical
disability. Although the exclusion might be justified on the grounds that these addi-
tional costs are minimal or non-existent where the individual is cared for by a full-
time attendant or in a nursing home, this assumption is highly uncertain. On the con-
trary, there is no reason why these individuals might not incur even higher undocu-
mented disability-related expenses (e.g., for extra laundry, bedding or heating costs, or
for wear and damage to clothing or household items) than those incurred by individu-
als who are not cared for by a full-time attendant or in a nursing home.”
impairments
Turning to the statutory definition of a “basic activity of daily living”, one can
question the definition of speech and hearing
in subparagraphs
118.4(1)(c)(iii) and (iv), the failure to mention other activities that might reasonably
be included in paragraph 118.4(1)(c), and the specific exclusion of other activities in
paragraph 118.4(1)(d). Regarding speech and hearing impairments, it seems unrea-
sonable to establish a statutory test based on communication in “a quiet setting” with
“another person familiar with the individual”, rather than everyday situations which
are likely to give rise to additional undocumented costs which the DTC is designed to
recognize. For this reason, as the Canadian Council for Disabilities has suggested,
‘The test should be whether the person can speak or hear satisfactorily in typical
situations from day to day life, where not all settings are quiet and people have to
speak and hear strangers.””‘
As for other activities of daily living, it seems reasonable to add “breathing” to
the list in paragraph 118.4(1)(c) on the ground that individuals with these kinds of
“‘ See the earlier discussion at text accompanying notes 83-84. This recommendation was made by
the Federal Task Force on Disability Issues, supra note 1 at 90. See also Council of Canadians with
Disabilities, supra note 79 at 5. While the 2000 Federal Budget proposes to expand the list of eligible
relatives who may claim the DTC, eligibility continues to depend on a qualifying relationship with the
disabled person.
” See e.g. Council of Canadians with Disabilities, ibid. at 4 [emphasis in original], explaining that
individuals with attendant care expenses over $10,000 (the amount that may be claimed as a medical
expense under s. 118.2(2)(b.1) without disqualifying the individual from the disability tax credit)
“have other disability-related expenses which are equal to or higher than other persons with disabili-
ties”
“‘IbTid. at2.
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impairments are also likely to incur undocumented costs which should be recognized
for tax purposes. ‘ Likewise, although paragraph 118.4(1)(b) stipulates that an indi-
vidual’s ability to perform a basic activity of daily living is markedly restricted where
the individual is blind, it seems appropriate to add “seeing” to the list in paragraph
118.4(1)(c) to include individuals whose ability to see is markedly restricted even
though they are not blind within the meaning of paragraph 118.4(1)(b).
Regarding paragraph 118.4(1)(d), it seems odd to specifically exclude from the
“basic activities of daily living” recognized by the ITA all other activities “including
working, housekeeping or a social or recreational activity.” On the contrary, to the
extent that the purpose of the credit is to recognize additional but undocumented non-
discretionary costs incurred by disabled persons on account of their disabilities, there
is no reason why it should not apply where an impairment results in a marked restric-
tion in the individual’s ability to perform any one of these activities as much as it does
where the disability affects the individual’s ability to perform the specific “activities
of daily living” listed in paragraph 118.4(1)(c). For this reason, it seems reasonable to
repeal paragraph 118.4(1)(d) altogether, to add “working”, “housekeeping”, and “so-
cial or recreational activities” to paragraph 118.4(1)(c), and to replace the word
“means” in the opening words of paragraph 118.4(l)(c) with the word “includes” to
make it clear that the statutory list of basic activities of daily living is not exhaustive
but merely illustrative.
With respect to the concept of a “marked restriction” in an individual’s ability to
perform a basic activity of daily living, the stipulation in paragraph 118.4(1)(b) that
this exists “only where all or substantially all of the time, even with therapy and the
use of appropriate devices and medication, the individual is blind or is unable (or re-
quires an inordinate amount of time) to perform an activity of daily living” seems
overly restrictive. Although the purpose of the provision to recognize additional un-
documented disability-related expenses suggests that a “marked restriction” should be
determined only after taking into account “therapy and the use of appropriate devices
and medication” the costs of which are properly recognized as itemized medical or
disability-related expenses,’
the other requirements seem certain to exclude persons
incurring otherwise unrecognized disability-related costs. While these costs might be
expected to be somewhat less for individuals who are neither wholly “unable” nor re-
quire “an inordinate amount of time” to perform a basic activity of daily living but are
significantly restricted in their abilities to perform one or more activities of daily liv-
it would be preferable to make this inclusion explicit in the statute.
” Although the Tax Court decision in Fillion, supra note 138, recognized this activity in any event,
” For this reason, the objection expressed by Shillington, supra note 86 at 25, that this requirement
“seems contrary to the factor which we [the disability tax credit] are trying to measure; cost implica-
tions” appears to be misplaced. With respect to the concern expressed by the Council of Canadians
with Disabilities, supra note 79 at 2, that appropriate devices or medication “may not actually be
available to the person, or (with respect to the medication) may involve a significant risk to the per-
son’s health,” these concerns seem adequately addressed by the use of the adjective “appropriate” to
qualify the words “devices and medication”.
2000]
D.G. DUFF- DISABILITY AND THE INCOME TAX
ing, or for individuals whose ability to perform a basis activity of daily living is re-
stricted not “all or substantially all of the time” but on a recurring but intermittent ba-
sis, they are no less real nor any less deserving of tax recognition. For this reason,
paragraph 118.4(l)(b) might be amended to provide that an individual’s ability to per-
form an activity of daily living is markedly restricted where, even with therapy and
the use of appropriate devices and medication, the individual is blind or significantly
restricted in his or her ability to perform an activity of daily living a substantial
amount of the time.
c. Dollar Amount
Turning to the appropriate dollar amount, the rationale for a separate provision
recognizing indirect and non-itemized costs associated with mental or physical dis-
abilities suggests that it should be set at a level reflecting a reasonable estimate of the
annual non-itemized costs generally associated with different kinds of disabilities. To
the extent that these costs are likely to differ based on the severity of the disability,
one approach might be to establish different dollar amounts for mild, moderate, and
severe disabilities.'” Instead of attempting to define different categories of disabilities,
an alternative approach might vary the dollar amount based on the extent to which the
individual’s ability to perform a basic activity of daily living is restricted (e.g., “no-
ticeably”, “substantially”, or “extremely”), and/or the amount of time during which
the individual is so restricted (e.g., “some of the time”, “a substantial amount of the
time”, or “all or substantially all of the time”). Under yet another approach, the dollar
amount might differ according to the number of basic activities of daily living that the
individual is markedly restricted in his or her ability to perform.”‘
In incorporating one of these differentiated approaches, such an amended provi-
sion would reduce the tendency of the current DTC to “undercompensate in many
cases and overcompensate in othersI “” and would also lessen the tax consequences of
disputes at the margin, thereby reducing incentives for litigation. Once these amounts
are established, of course, they should be fully indexed for any loss in real value
through inflation.
d. Credit or Deduction
With respect to the manner in which these additional non-itemized costs should
be recognized for tax purposes, the logic of the earlier analysis of the METC suggests
For a recommendation to this effect, see Shillington, ibid. at 35. Although these categories might
be difficult to define, they are used in Statistics’ Canada’s Health and Activity Limitation Survey
(‘HALS”). This survey was employed to estimate the size of the severely disabled population in a
study of the disability tax credit by the Federal Department of Finance (see Disability Tax Credit, su-
pra note 76 at 17-27).
This alternative has been suggested by Cam Crawford of the Roeher Institute.
‘”Standing Committee, supra note 33 at 13.
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that this should be in the form of a deduction in computing taxable income, as was the
case prior to the conversion of the disability deduction to a non-refundable credit in
19 88.’ While deductions are often criticized on the basis that they are worth more to
high-income taxpayers than they are to low-income taxpayers and worth nothing to
taxpayers whose income is too low to pay any tax, the appropriate tax treatment of
disabled individuals is a matter of horizontal equity, not vertical equity. In order to
determine the taxable income of disabled individuals, it is appropriate to deduct all
non-discretionary costs associated with their disabilities, both itemized and direct and
non-itemized and indirect.
e. Social Policy
As for the question of refundability, the analysis in Part I of this paper suggests
that this is properly viewed as a matter of social policy rather than tax policy more
narrowly defined. To provide refundable credits for disability-related expenses,
whether itemized or not, is to provide a form of social insurance for these expenses
based on the rate of the credit, not to recognize non-discretionary disability-related
expenses in computing an individual’s taxable income. While it may be desirable to
reimburse disabled persons or supporting individuals for some part or all of these dis-
ability-related expenses, this social insurance goal must be distinguished from the tax
policy objective to levy an equitable income tax based on taxpayers’ relative abilities
to pay. Likewise, while it might be desirable to implement a guaranteed annual in-
come for disabled individuals in the form of a refundable tax credit the value of which
diminishes as the recipient’s income increases, this social policy measure cannot ful-
fill the tax policy goals of a separate deduction for non-itemized disability-related ex-
penses in computing taxable income. While all of these objectives might be pursued
through the ITA, they and the specific provisions by which they are implemented
should be clearly distinguished.
f. Administration
Having set out the structure of an amended provision recognizing non-itemized
disability-related expenses, it is useful to make two final comments regarding the ad-
ministration of this proposed provision. First, assuming as this proposal does that the
provision would continue to require a qualifying medical practitioner to certify that
“the individual’s impairment is a severe and prolonged impairment the effects of
which are such that the individual’s ability to perform a basic activity of daily living is
markedly restricted”‘
the form by which this certification is made would have to be
revised to reflect amended definitions for a “basic activity of daily living” and a
‘” See the discussion in the text accompanying notes 106-17.
‘s’ As alternatives to this method, neither centralized administration nor self-assessment seem par-
ticularly attractive, since the former is likely to be intrusive and costly while the latter is vulnerable to
a large number of illegitimate claims. For an evaluation of the cost implications of a more centralized
administration of the DTC, see Disability Tax Credit, supra note 76 at 37.
2000]
D.G. DUFF- DISABILITY AND THE INCOME TAX
“marked restriction” on an individual’s ability to perform a basic activity of daily liv-
ing.’ Second, where employed individuals have a severe and prolonged impairment
the effects of which can reasonably be expected to last throughout the year, it should
be possible to obtain an adjustment to income taxes withheld by the employer at
source in order to account for the expected tax reduction resulting from the credit or
deduction. A similar adjustment might also be available where the individual is able to
establish a continuous pattern of disability-related expenses which can reasonably be
expected to continue throughout the year.
C. Disability Expenses Tax Credit
1. Description
After examining the way in which the Canadian income tax deals with disabled
individuals, at least two government reports have recommended the introduction of a
disability expenses tax credit as a supplement or replacement to the existing medical
expense and disability tax credits. According to the Standing Committee, this credit
should be separate from the METC, based on a more general list of expenses than
those available under the METC, available without any threshold, and refundable. 2
According to the 1996 Federal Task Force on Disability Issues, such a credit should
be refundable at a rate of 17% in general but 29% for low-income taxpayers, and
should “combine the best features” of the medical expenses and disability tax credits
by comprising a “base amount” reflecting “an ‘across-the-board’ estimate of undocu-
mented costs,” and a supplementary amount “based on disability-related “out-of-
pocket’ expenditures” including “medically-necessary expenses and increases in em-
ployment-related expenses due to disability.”‘3
2. Evaluation and Recommendations
Based on the earlier analysis of the METC, the recommendation for a separate
disability expenses tax credit or deduction would appear to have considerable merit.
Abandoning a narrowly medical model of disability, these proposals rightly empha-
size the additional involuntary costs of disabilities as appropriate subjects for tax rec-
ognition. For this reason, such a provision might reasonably include a more general
list of allowable expenses (such as a share of transportation costs made necessary by
an individual’s disability), the full amount of which should presumably be recognized
for tax purposes without any annual threshold. Having settled on this basic character-
istic of a disability expenses tax credit or deduction, additional issues concern the cri-
teria by which an individual would be eligible to claim these amounts, the relationship
… For this reason, there is no need to address specific criticisms of the current form (2201) by the
Council of Canadians with Disabilities, supra note 79 at 3. See also text accompanying notes 163-64.
‘” Supra note 33 at 14.
9’ Federal Task Force on Disability Issues, supra note 1 at 97-99.
MCGILL LAW JOURNAL / REVUE DE DROITDE MCGILL
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between this measure and a disability tax credit or deduction designed to recognize
non-itemized expenses, the question of refundability, and the rate at which eligible
expenses might be claimed.
a. Eligibility
In many cases, the eligibility criteria could be based on the provisions of the cur-
rent METC. Full-time attendant care in a disabled individual’s home, for example,
could continue to be recognized under a new provision where
the [individual] is, and has been certified by a medical practitioner to be, a per-
son who, by reason of mental or physical infirmity, is and is likely to be for a
long-continued period of indefinite duration dependent on others for the [indi-
vidual’s] personal needs and care and who, as a result thereof, requires a full-
time attendant.'”
Likewise, expenses for the full-time care of an individual in a nursing home might be
recognized where the individual “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 … personal needs and care”‘ 5,
while expenses “for the care, or the care and training” of a disabled individual “at a
school, institution or other place” could be recognized where the individual
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 suf-
fered by the [individual]. ‘9
Since other METC provisions recognizing the costs of attendant or nursing home
care, remuneration for the care or supervision of an individual in a group home, and
remuneration for specific kinds of therapy depend on the patient’s eligibility for the
DTC,” recognition of these expenses under a separate disability expenses tax credit
or deduction might also depend on the individual’s eligibility for an amended disabil-
ity tax credit or deduction as outlined earlier.”
In addition to the costs of attendant or nursing home care, other expenses cur-
rently included in the METC that might be recognized under a separate disability ex-
penses tax credit or deduction include
‘ See ITA, supra note 4, s. 118.2(2)(c)(i).
‘ Ibid., s. 118.2(2)(d).
1Ibid., s. 118.2(2)(e).
’97 See ibid., ss. 118.2(2)(b), 1 18.2(2)(b.1); 1999 Federal Budget, supra note 65.
1’9 See text accompanying notes 181-85.
2000]
0D.G. DUFF- DIsABILITYAND THE INCOME TAX
* the cost to acquire and maintain an animal specifically trained to assist an indi-
vidual who is blind or profoundly deaf or suffers from a severe and prolonged
impairment that markedly restricts the use of his or her arms or legs; 9
” reasonable expenses related to renovations or alterations to an individual’s
home, including the driveway, for individuals with severe and prolonged mo-
bility impairments;’
” up to $2,000 in expenses for an individual with a severe and prolonged mobil-
ity impairment to move to a physically accessible dwelling;20′
” reasonable expenses related to rehabilitative therapy to adjust for the individ-
ual’s hearing or speech loss, including training in lip reading and sign lan-
guage;-‘
” the cost of sign language services for an individual with a speech or hearing
impairment;
203
” reasonable expenses for training a caregiver who is related to the individual and
is a member of the individual’s household, if the training relates to the mental
or physical infirmity of the individual;-‘
* remuneration for tutoring services provided to a person with a learning disabil-
ity or a mental impairment who is certified by a medical practitioner to be a
person who requires these services on account of the disability or impair-
ment;-‘ and
” the cost of various kinds of disability-related devices, including artificial limbs,
kidney machines,’6 devices for incontinence,.
a portion of the cost of a wheel-
chair-accessible van,’ and other devices designed to assist individuals who are
blind or suffer from diabetes, heart disease, or specified kinds of speaking,
hearing, breathing, or mobility impairments.’
While the cost of other devices (e.g., eyeglasses) as well as prescribed drugs or sub-
stances might be included only under a medical expenses tax credit or deduction,’
these costs might also be recognized as disability-related expenses where the patient is
“9 ITA, supra note 4, s. 118.2(2)(1).
2″Obid., ss. 118.2(2)(1.2), 118.2(2)(l.6).
20 Ibid, s. 118.2(2)0.5).
2- !bicl, s. 118.2(2)01.3).
“hIbid., s. 118.2(2)0.4).
s. 118.2(2)01.8).
N !i,
-0 See 1999 Federal Budget, supra note 65.
ITA, supra note 4, s. 118.2(2)(i).
biii, s. 118.2(2)0.1).
/0 bid, s. 118.2(2)(1.7).
“‘Ibid., ss. 118.2(2)(i), 118.2(2)(k), 118.2(2)(m); Regulations, supra note 11, s. 5700.
2OITA, ibid., ss. 118.2(2)j), 118.2(2)(u).
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eligible for the disability tax credit or deduction, provided that the costs are not oth-
erwise claimed for tax purposes. Other expenses, such as disability-related transpor-
tation expenses and those identified by the Council of Canadians with Disabilities,2’
would have to be specifically defined.
In addition to these specific items, moreover, a separate disability expenses tax
credit or deduction might also include a more general criterion of eligibility for all
reasonable amounts to the extent that they are paid for the purpose of ameliorating the
effects of a severe and prolonged mental or physical impairment and/or enabling the
disabled individual to perform one or more of the amended basic activities of daily
living suggested earlier.”‘ As with the addition of a more general criterion of eligibil-
ity for the METC,2′” such a general statement of principle would allow disabled indi-
viduals to obtain tax recognition for novel therapies or technologies without having to
lobby Revenue Canada and the Department of Finance to expand the list of eligible
expenses. Still, in order to illustrate the kinds of expenses included and confirm the
inclusion of specific categories of expenses, the provision should retain a specific list
of eligible disability-related expenses.
As a final matter, it seems reasonable to allow these disability-related expenses to
be claimed not only by the disabled person or specified relatives, but also jby any sup-
porting individual who incurs the expenses. Although it might be argued that tax rec-
ognition for such expenses should be limited to amounts spent on behalf of disabled
persons whom the taxpayer has a specific legal obligation to support on the basis that
only these expenses are truly involuntary, the earlier analysis of the METC suggests a
broader recognition of expenses reflecting moral as well as legal obligations..2 ‘1
b. Relationship to Disability Tax Credit or Deduction
Considering the relationship between a credit or deduction for itemized disability
expenses and a credit or deduction for non-itemized costs of disabilities, it is difficult
to see much merit in the recommendation of the 1996 Federal Task Force on Disabil-
ity Issues that these provisions be combined. Since recognition of itemized expenses
depends on a variety of specific disability criteria,’
it seems unnecessary and con-
fusing to combine these criteria with those employed for general recognition of non-
21 See the list of recommended items at text accompanying note 93.
ITis formulation is based on a suggestion by Cam Crawford of the Roeher Institute.
211 See the discussion at text accompanying notes 96-97.
See the discussion at text accompanying notes 83-84.
.’. While some items depend on eligibility for the current disability tax credit (requiring that the in-
dividual has a severe and prolonged mental or physical impairment the effects of which are such that
the individual’s ability to perform an activity of daily living is markedly restricted), for example, oth-
ers depend on the less onerous standards of “mental or physical infirmity” (ss. 118.2(2)(c),
118.2(2)(1.8)), “lack of normal mental capacity” (s. 118.2(2)(c)), “physical or mental handicap” (s.
118.2(2)(e)), “illness, injury or affliction” (s. 118.2(2)(i.1)), or lack of normal physical development
(ss. 118.2(2)(.2), 118.2(2)(1.5)).
2000]
D. G. DUFF- DISABILITYAND THE INCOME TAx
845
itemized expenses. To the extent that a disability tax credit or deduction for non-
itemized disability-related expenses is viewed as a supplement to the personal exemp-
tions, moreover, it is more appropriate to recognize itemized and non-itemized dis-
ability-related costs through different statutory provisions.”‘
c. Refundability and Rates: Social Policy and Tax Policy
With respect to refundability and applicable rates, the analysis in Part I of this pa-
per suggests that these issues are properly regarded as questions of broad social policy
rather than tax policy more narrowly defined. Where a disability expenses tax credit is
made refundable, for example, the credit functions as a social insurance program
which reimburses a portion of otherwise privately borne disability-related expenses
based on the rate of the credit. From this perspective, the 1996 Federal Task Force on
Disability Issues recommendation to introduce a refundable disability expenses tax
credit computed at 17% for high-income taxpayers and 29% for low-income benefici-
aries amounts to a social policy proposal to reimburse 17% of otherwise privately
borne disability-related expenses of high-income taxpayers and 29% of privately
borne disability-related expenses of low-income taxpayers.
While social policy considerations might favour a larger and more direct federal
role in the reimbursement of disability-related expenses than is currently the case
through the Canada Health and Social Transfer, this purpose and the refundable tax
credit through which it might be implemented should be distinguished from the more
narrow tax policy goal of achieving horizontal equity among taxpayers with and
without disability-related expenses. For the latter purpose, as this paper has argued
earlier, a deduction in computing taxable income is the most appropriate policy re-
sponse.
D. Personal Tax Credits
1. Description
In computing basic federal income tax payable, the ITA allows individuals to de-
duct non-refundable “personal credits” in addition to other non-refundable credits
such as the medical expenses and disability tax credits. These credits (set out in sub-
section 118(1) of the !TA) include the infirm dependants credit, the caregiver credit,
and the wholly dependent person credit. According to this provision, individuals may
claim as a personal tax credit an amount equal to 17% of an aggregate amount de-
pending on the individual’s marital status, living arrangements, and support for de-
pendent relatives..2
” Taking provincial income tax into account, the combined value of
“t” See notes 178-80 and accompanying text.
2.7 See the descriptions of A and B in ITA, supra note 4, s. 118(1), and the definition of the words
“appropriate percentage” in s. 248(1).
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the credit for individuals with tax otherwise payable is roughly 25% of the aggregate
amount determined.2′
According to paragraph 118(1)B(c) of the /TA, the basic personal amount for a
single individual is $7,231 for 2000, resulting in a basic personal credit of $1,245.2’9
For individuals who are “married” within the extended meaning of the /TA and sup-
the basic amount is increased by up to $6,140, resulting in
port a cohabiting spouse,’
an additional credit of $1,044 for a combined credit of $2,289.”2 As an alternative to
this “married status” credit, individuals who are either “unmarried” within the ex-
tended meaning of the /TA, or who neither lived with nor supported their spouse and
were not supported by the spouse at any time in the year, may claim an equivalent
“wholly dependent person” credit where they (alone or with one or more other per-
sons) maintain a self-contained domestic establishment in which they support a per-
son who is
(A) except in the case of a child of the individual, resident in Canada,
(B) wholly dependent for support on the individual, or the individual and the
other person or persons, as the case may be,
(C) related to the individual, and
(D) except in the case of a parent or grandparent of the individual, either under
18 years of age or so dependent by reason of mental or physical infir-
mite 2
In addition to these amounts, other provisions allow individuals to claim addi-
tional amounts if they support infirm dependants over the age of 18 (infirm depend-
ants credit),” or share accommodation with parents or grandparents over the age of
65 or specified relatives who are over the age of 18 and dependent on the individual
2″, As before, this assumes a provincial tax rate equal to approximately 45% of basic federal tax.
Actual provincial income tax rates are outlined at note 36.
2,9 This amount was increased pursuant to the announcement in 2000 Federal Budget, supra note
35, restoring full indexing to selected income tax provisions.
2′ See ITA, supra note 4, s. 252(4), which defines spouses to include persons of the opposite sex
who cohabit at the relevant time in a “conjugal relationship”. Either they have so cohabited through-
out a twelve-month period before that time or are parents of a child so that it defines marriage to in-
lude such “common law” relationships.
221 Ibid., s. 118(1)(a). Where the spouse’s income exceeds $614, the additional amount on which this
“married status” credit is calculated is reduced on a dollar-for-dollar basis, disappearing when the
spouse’s income reaches $6,754. As with the basic personal amount, these amounts were increased
pursuant to the announcement in 2000 Federal Budget, supra note 35, restoring full indexing to se-
lected income tax provisions.
222 ITA, ibid., s. 118(1)(b). Where the dependant’s income exceeds $614, the additional amount on
which this credit is calculated is reduced on a dollar-for-dollar basis, disappearing when the depend-
ant’s income reaches $6,754. As with the basic personal amount and the “married status” credit, these
amounts were increased by the announcement in 2000 Federal Budget, ibid., regarding indexation.
For a brief discussion of this credit, see Sherman, supra note 35 at 133-34.
“‘ ITA, ibid., s. 118(1)(d). For a detailed discussion of this credit, see Sherman, ibid. at 127-32.
2000]
D.G. DUFF- DIsABILITYAND THE INCOME TAx
because of mental or physical infirmity (caregiver credit).’
In these circumstances,
the individual may claim an additional amount of up to $2,386 for each qualifying
dependant or co-resident, resulting in an additional credit of $406.’
2. History
Although the caregiver credit was introduced in 1998,’6 most of these credits have
much earlier origins and are traceable to personal exemptions found in the first -ver-
sion of the 1917 Income War Tax Act.” According to this statute, individuals who
were either single or widowed and without dependent children were exempt from tax
on the first $1,500 of income, while those who were married or had dependent chil-
dren were exempt from tax on the first $3,000 of income.”
While the statutory language and dollar amounts of these exemptions have varied
considerably over the last eighty years, throughout most of this period the Canadian
income tax has contained a basic exemption for single individuals and additional
amounts for individuals supporting spouses and related dependants.’ In 1986, for ex-
ample, the /TA allowed individuals to deduct the following amounts in computing
their taxable income:
* $1,600 in the case of a single individual;’
* an additional amount of up to $1,400 in the case of married individuals sup-
porting a spouse or unmarried persons supporting a wholly dependent related
person;” and
* a further amount of up to $710 for each dependant under the age of 18, up to
$550 for each infirm dependant aged 18 years or older, and up to $1,420 for
each other dependant over the age of 18 years. 2
241TA, ibid., s. 118(1)(c.1). For the purpose of this credit, s. 118(1)B(c.1)(ii) specifies the qualifying
relatives as (A) the individual’s children or grandchildren, or (B) the individual’s parents, grandpar-
ents, siblings, aunts, uncles, nieces and nephews, provided that they are resident in Canada.
“L In the case of the infirm dependants credit, this amount is reduced on a dollar-for-dollar basis to
the extent that the dependant’s income exceeds $4,845, disappearing when the dependant’s income
reaches $7,231. In the case of the caregiver credit, this amount is reduced on a dollar-for-dollar basis
to the extent that the qualifying co-resident’s income exceeds $11,661.
226 See ‘Tax Measures: Supplementary Information” in Stikeman Elliott, Canadian Federal Budget
1998: Budgetary Proposals of the Hon. Minister of Finance with Comments by Stikeman Elliott (To-
ronto: Carswell, 1998) [hereinafter 1998 Federal Budget] 3-1 at 3-25, proposing the introduction of “a
new tax credit for caregivers” intended “[t]o provide additional tax assistance to Canadians providing
in-home care for elderly or infirm relatives”
27 S.C. 1917, c. 28.
m See ibidL at para. 4(1)(a).
2″ For a detailed history of these provisions up to the early 1960s, see McGregor, supra note 74.
23 ITA, supra note 4, former s. 109(1)(c).
2″, Ibid, former ss. 109(1)(a), 109(1)(b).
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Like the medical expenses and disability deductions in former paragraphs
110(l)(c) and (e), these deductions were converted to non-refundable credits in
1988.” With the introduction of the child tax benefit in 1993, ‘ the dependants credit
was amended to apply only where the dependant is 18 years of age or older and is de-
pendent by reason of mental or physical infirmity.’ As a result, except for parents eli-
gible for the child tax benefit and single parents eligible for the wholly dependent per-
son credit, the Canadian income tax no longer recognizes basic costs of supporting
dependent children in computing the tax payable by their parents. Nor does it recog-
nize the basic costs of supporting a disabled child, except where these costs are in-
curred by a single parent (in which case the parent can claim the wholly dependent
person credit) or in respect of an infirm dependant over the age of 18 (in which case
the parent can claim the infirm dependants credit and the caregiver credit if the child
lives with the parent).’
3. Evaluation and Recommendations
a. Purpose
In order to evaluate the personal credits and their potential reform, it is necessary
to consider the purpose of these credits and the deductions that they replaced. Al-
though personal exemptions contribute to the progressivity of the income tax and also
simplify tax administration by excluding low-income individuals from the tax rolls,
.2 Ibid., former s. 109(l)(d). For the purpose of this paragraph, former s. 109(6) defined a “depend-
ant” as a person who, during the year, was
(a) dependent upon the individual for support;
(b) in respect of the individual or his spouse,
(i) his child or grandchild,
(ii) his niece or nephew, if resident in Canada,
(iii) his brother or sister, if resident in Canada, or
(iv) his parent, grandparent, aunt or uncle, if resident in Canada; and
(c) either
(i) under 21 years of age, or
(ii) 21 years of age or over and
(A) dependent by reason of mental or physical infirmity, or
(B) a person referred to in paragraph (b) (other than subparagraph (iv) thereof)
in full-time attendance at a school or university.
“4 See the 1987Amendments, supra note 78, ss. 76, 92, repealing former s. 109 and enacting s. 118.
“M This provision is examined later in Part IIF, below.
“‘ See An Act to amend the Income Tax Act, to enact the Children’s Special Allowances Act, to
amend certain other Acts in consequence thereof and to repeal the Family Allowances Act, S.C. 1992,
c. 48, s. 8(1), amending ITA, supra note 4, s. 118(1)(d), applicable to 1993 and subsequent years, be-
ing Seh. VII to the 1993 Amendments, supra note 136 [hereinafter Sch. VI].
“” This 2000 Federal Budget proposal to provide a DTC supplement for disabled children under 18
years of age may provide further recognition for these costs (see supra note 127).
2000]
D.G. DUFF- DISABILITY AND THE INCOME TAX
the primary rationale for these exemptions is to adjust each individual’s tax burden in
accordance with his or her personal circumstances.’ As a result, like credits or de-
ductions for medical and disability-related expenses, these provisions are designed to
recognize non-discretionary expenses incurred both to provide for one’s own subsis-
tence and to support dependants to whom one is legally or morally obliged.
b. Credit or Deduction
Given this purpose, it follows that this recognition should, like that for medical
and disability-related expenses, take the form of a deduction in computing taxable in-
come rather than a credit in computing tax payable. Although the conversion of the
basic personal amount from a deduction to a credit is equivalent to a downward shift
in the marginal rate brackets and does not affect the relative position among different
taxpayers, ‘
the conversion of other personal exemptions from deduction to credits
undermines the horizontal equity of the income tax by failing to properly recognize
non-discretionary expenses in determining each individual’s ability to pay.
c. Amounts
Having determined the appropriate structure of a personal exemption, it remains
to determine an appropriate amount necessary to provide for an individual’s basic
subsistence, and which (if any) expenses beyond this basic amount are properly re-
garded as non-discretionary costs in computing the individual’s ability to pay. Moreo-
ver, to the extent that the individual supports a disabled person it is necessary to con-
sider the extent to which any additional costs incurred by the supporting person on
account of this person’s disability should be recognized in computing the supporting
individual’s personal exemption.
Beginning with the amount necessary to provide for an individual’s basic subsis-
tence, this would appear to depend on a view regarding the minimum standard of liv-
ing considered socially acceptable in contemporary circumstances.’ Taking Statistics
Canada’s “low-income cut-offs” (“LICOs”) as a possible standard, 1998 figures sug-
gest that individuals living on their own require approximately $12,000 to $17,500
per year, depending on geographical location, to escape “straitened circumstances”….
While these amounts may be higher than necessary for a basic personal exemption,
since low-income individuals may be expected to reduce living costs by sharing ac-
2 7 See e.g. McGregor, supra note 74 at 9; Goode, supra note 26 at 214-21.
” See Cloutier & Fortin, supra note 28 at 57-58.
2″ Goode, supra note 26 at 215.
Council on Social Development (“CCSD”), “Canadian Low-Income Cut-Offs” online:
lic98.htm> (last modified: 16 February 2000) [hereinafter
2Canadian
CCSD
