Appendices Appendix 1 List of Members1,2 Sherri Torjman (co-chair), Vice-President of the Caledon Institute of Social Policy, a national social policy research organization. Robert Brown (co-chair), tax policy and economic consultant, a former Chair of Price Waterhouse and former Clifford Clark Visiting Economist — a key advisory position in the Department of Finance — from 1998 until 2001. Brian J. Arnold, tax lawyer with Goodmans LLP and Professor Emeritus at the University of Western Ontario. Michael Bach, Executive Vice-President of the Canadian Association for Community Living, a national advocacy organization for persons with intellectual disabilities. Laurie Beachell, National Coordinator, Council of Canadians with Disabilities, a national advocacy association of persons with disabilities. Harry Beatty, lawyer and consultant specializing in disability law and policy. Gail Beck, M.D., C.M., F.R.C.P.C., Director, Youth Inpatient Psychiatry of the Royal Ottawa Hospital. Gary Birch, Executive Director, Neil Squire Foundation, a national non-profit organization providing education, technology and career development for people with physical disabilities. Lembi Buchanan, public relations consultant and Chair of the Coalition for Disability Tax Credit Reform. Karen R. Cohen, Ph.D., C. Psych., Associate Executive Director and Registrar Accreditation, Canadian Psychological Association. Yude M. Henteleff, C.M., Q.C., Senior Counsel to the Winnipeg law firm Pitblado and past President and current Honourary Solicitor of the Learning Disabilities Association of Canada. Guy Lord, Senior Partner of the law firm Osler, Hoskin & Harcourt LLP. 1 Dr. Claude A. Renaud, former Associate Secretary General and Chief Medical Officer with the Canadian Medical Association, was an original member of the Committee. 2 Members represent themselves as individuals and not the organizations with which they are associated. Appendix 2 List of Submissions To the Sub-Committee of the House of Commons Standing Committee on Human Resources Development and the Status of Persons with Disabilities Adèle Furrie Consulting Inc. Alzheimer Society of Canada ARCH: A Legal Resource Centre for Persons with Disabilities Canadian Alliance on Mental Illness and Mental Health Canadian Association for Community Living Canadian Hard of Hearing Association Canadian Medical Association Canadian Mental Health Association Canadian National Institute for the Blind Canadian Psychiatric Association Canadian Psychological Association Confédération des organismes de personnes handicapées du Québec Council of Canadians with Disabilities Multiple Sclerosis Society of Canada Learning Disabilities Association of Canada Lembi Buchanan Schizophrenia Society of Canada To the Technical Advisory Committee on Tax Measures for Persons with Disabilities Organizations ARCH: A Legal Resource Centre for Persons with Disabilities Autism Society of PEI British Columbia Coalition of People with Disabilities Canadian AIDS Society Canadian Association of the Deaf Canadian Association of Occupational Therapists Canadian Association of Speech-Language Pathologists and Audiologists Canadian Cystic Fibrosis Foundation Canadian Diabetes Association Canadian Hearing Society Canadian Labour Congress Canadian Life and Health Insurance Association Inc. Canadian National Institute for the Blind Canadian Paraplegic Association Canadian Physiotherapy Association Coalition for Disability Tax Credit (DTC) Reform Diabetes Advocacy Disability Services (University of Manitoba) Epilepsy Canada Mississauga Homes for Independent Living Multiple Sclerosis Society of Canada National Federation of the Blind NWT Council of Persons with Disabilities Office of the Commissioner of Review Tribunals (CPP/OAS) Ontario Brain Injury Association Opportunities through Rehabilitation and Work Society Planned Lifetime Advocacy Network Prince Edward Island Association for Community Living Richmond Hill Fibromyalgia and Chronic Fatigue Syndrome Wellness Support Group Schizophrenia Society of Canada Voice for Hearing Impaired Children Ontario (Health Committee) Individuals Monique Beaudoin Mark Bernier Kelvin Blais Carl Broughton Angela Falkowska Carolyn Forbes Marla Hayes Coleen Howey Margaret Kraak Anne Kramer Penny Leclair Rosemary Leslie John Macdonald Ellie McCaig Lori Montcalm Charlie Morgan Lauri Morris Kennedy O’Brien Eileen Reppenhagen Hans Rupprecht Gord Shapley Chris Stark Libby Thaw Beryl Williams M. Kathleen Williams Appendix 3 Research and Expert Consultation In order to obtain background information and input for its review, the Committee undertook an extensive program of research and expert consultation on the important issues identified in its mandate. These activities, carried out in the initial year of the Committee’s term, enabled us to benefit from work done by others in the field; new information, data and thoughts developed in the research process; and important input from experts and knowledgeable organizations. We undertook the research process by commissioning studies on four major areas of interest. The research papers developed in this process focused upon economic principles and positive options for the reform of disability tax measures; the role of federal tax measures in advancing the inclusion of persons with disabilities in Canadian society; disability-related federal tax measures supporting education, training and employment; and tax issues with respect to Aboriginal Canadians with disabilities. The research papers were prepared by leading experts in their respective fields, most of whom then met with the Committee to discuss their reports and recommendations. Officials from the Department of Finance and the Canada Revenue Agency were very helpful in providing relevant data and documentation requested by the Committee, and in supporting us in our work. Committee members themselves prepared discussion papers on a wide range of issues, including such topics as the design of new eligibility criteria for various tax provisions, the refundability of tax credits, administrative and communication issues relating to current tax provisions, the legal interpretation of terms, an overview of decisions arising from relevant court cases and dispute resolution procedures around current tax measures. The Committee also consulted with selected experts when we felt it necessary to explore certain issues in more depth. We met, for example, with a professor from the University of Ottawa to review the distinction between ‘physical and mental functions’ and ‘activities of daily living’ in order to create a conceptually rigorous eligibility screen for the disability tax credit. The Committee also sought opinions from seven independent specialists in mental function on possible reforms of the disability tax credit. An informal discussion was held with representatives from RBC Financial on their accommodation practices in hiring and retaining employees with disabilities. We also met with representatives from the Canadian Labour Congress to discuss various work-related tax provisions. We consulted with a Montreal-based lawyer who specializes in mediation and alternative dispute resolution. Members of the Committee also met informally with representatives of a number of organizations representing different segments of the disability community to discuss issues and concerns, and to review alternative proposals for reform. Finally, representatives of the Committee met in Quebec City with three researchers at Laval University who were carrying out a study on behalf of l’Office des personnes handicapées du Québec on disability-related income security programs and tax provisions. Two of these individuals subsequently made a presentation to our Committee. The research and expert consultations carried out by the Committee provided the basis for discussions on the issues that we addressed. We are grateful for this invaluable support, and we hope that this work will provide not only a foundation for our recommendations in this report, but also a useful bank of information for further studies and consideration. Appendix 4 Description of Federal Personal Income Tax Measures for Persons with Disabilities and Caregivers Disability Tax Credit The disability tax credit (DTC) provides tax relief to individuals who, due to the effects of a severe and prolonged mental or physical impairment, are markedly restricted in their ability to perform a basic activity of daily living as certified by a qualified health practitioner, or would be markedly restricted were it not for extensive therapy to sustain a vital function. Individuals are markedly restricted if, all or substantially all of the time, even with therapy or the use of appropriate devices and medication, they are blind or unable to perform a basic activity of daily living or require an inordinate amount of time to perform the activity. The basic activities of daily living are: walking; feeding or dressing oneself; perceiving, thinking and remembering; speaking; hearing; and eliminating bodily waste. The DTC recognizes the impact of non-itemizable disability-related costs on an individual’s ability to pay tax. For 2004, the credit is 16 percent of $6,486, which provides a federal tax reduction of up to $1,038. This credit can be transferred to a supporting spouse, parent, grandparent, child, grandchild, brother, sister, aunt, uncle, nephew or niece of the individual. The credit amount is fully indexed to inflation. DTC Supplement for Children Families caring for children with severe and prolonged impairments may receive additional tax relief through a supplement to the DTC. This additional tax relief was introduced in the 2000 budget. For 2004, the supplement provides an additional federal tax reduction of up to $605, or 16 percent of $3,784. The $3,784 supplement amount is reduced dollar-for-dollar by the amount of child care expenses or attendant care expenses claimed for tax purposes over $2,216. Both this income threshold and the supplement amount ($3,784) are fully indexed. Medical Expense Tax Credit The medical expense tax credit (METC) recognizes the effect of above-average disability-related and medical expenses on an individual’s ability to pay tax. For 2004, the credit equals 16 percent of qualifying expenses in excess of the lesser of $1,813 and 3 percent of net income. The net income threshold is used to determine above-average expenses and it is fully indexed to inflation. There is no upper limit on the amount of eligible expenses that may be claimed. The list of eligible disability-related and medical expenses is regularly reviewed and expanded in light of new technologies and other disability-specific or medically related items. Taxpayers may claim the medical expenses that they or their spouses incur. The 2004 budget proposed to allow caregivers to claim more of the medical and disability-related expenses they incur on behalf of dependent relatives. Specifically, for medical expenses paid on behalf of dependent relatives, such as a grandparent, niece or nephew, taxpayers will be able to claim qualifying medical expenses that exceed the lesser of 3 percent of the dependant’s net income and $1,813 (for 2004). The maximum eligible amount that can be claimed on behalf of dependent relatives will be $5,000. Caregiver Credit This credit was introduced in the 1998 budget to provide tax relief to individuals providing in-home care for a parent or grandparent 65 years of age or over, or an infirm dependent relative, including an adult child or grandchild, brother, sister, aunt, uncle, niece or nephew. For 2004, the maximum credit is $605 (16 percent of $3,784). The credit is reduced when the dependant’s net income exceeds $12,921 and is fully phased out when the dependant’s net income reaches $16,705. The caregiver credit amount and the income threshold at which the credit starts to be reduced are fully indexed to inflation. Infirm Dependant Credit The infirm dependant credit provides tax relief to individuals providing support to an infirm relative who lives in a separate residence. More specifically, the infirm dependant credit may be claimed by taxpayers supporting a child or grandchild 18 years of age or over, parent, grandparent, brother, sister, aunt, uncle, niece, or nephew, who is dependent due to a mental or physical infirmity. This non-refundable credit has a maximum value of $605 (16 percent of $3,784). The credit can be claimed by a supporting relative when the net income of the dependant is less than $9,152. The credit is reduced when the dependant’s net income exceeds $5,368. This credit amount and the income threshold at which the credit starts to be reduced are fully indexed to inflation. Disability Supports Deduction The 2004 budget proposed to replace the attendant care deduction with a broader disability supports deduction that will allow expenses in respect of disability supports (e.g., sign language interpreters and talking textbooks) to be deducted from income if they are incurred for education or employment purposes. As a result, income used to pay for these expenses will not be taxed and will not affect income-tested benefits. In the case of an employee, the deduction will generally be limited to the lesser of the amounts paid for eligible expenses and the taxpayer’s earned income. A similar limit also applies to students, except that they can claim the deduction against non-earned income, subject to the length of their education program. The list of expenses eligible for this deduction is specified. The need for some of these supports has to be certified by a medical practitioner. Individuals need not be eligible for the disability tax credit in order to claim expenses under the disability supports deduction. Expenses claimed under the disability supports deduction will not be claimable under the medical expense tax credit. Persons who purchase disability supports for purposes other than education or employment will still be able to claim them under the medical expense tax credit. Other Personal Income Tax Measures Persons with disabilities or those who care for them benefit from a number of special enhancements to other tax measures. Home Buyers’ Plan Persons with disabilities or their relatives may withdraw up to $20,000 from a registered retirement savings plan (RRSP) on a tax-free basis to buy a home that is more accessible for, or better suited for the care of, an individual with a disability, even if the purchaser is not a first-time home buyer. Amounts withdrawn under the Home Buyers’ Plan are required to be repaid to the individual’s RRSP over a period of 15 years. RRSP/RRIF Rollovers for an Infirm Child When the annuitant under a RRSP or registered retirement income fund (RRIF) dies, the existing income tax rules generally provide that the value of the RRSP or RRIF is included in computing the deceased’s income for the year of death. However, preferential tax treatment on RRSP or RRIF distributions made after death is provided in certain cases, including where the proceeds are distributed to a child or grandchild who was financially dependent on the deceased annuitant by reason of physical or mental infirmity. In this case, the RRSP or RRIF proceeds may be transferred without tax to the RRSP of the child or may be used to purchase an immediate life annuity. For 2004, a child or grandchild is considered to be financially dependent if the child’s income for the year preceding the year of death was below $14,035 (this threshold is indexed to inflation). A child with income above this amount may also be considered to be financially dependent, but only if the dependency can be demonstrated based on the particular facts of the situation. Education Amount Students with disabilities can claim the full-time education amount ($400 per month) for each month of part-time study at a post-secondary institution or occupational training program certified by the Minister of Human Resources and Skills Development. Eligible students include those who qualify for the DTC and those who cannot reasonably be expected to be enrolled as a full-time student because of a certified mental or physical impairment. In order to meet the part-time requirement, the student’s program must be at least three weeks long and involve at least 12 hours of coursework per month. Registered Education Savings Plans Generally, a student has to be registered full time at a qualifying post-secondary institution in order to receive a payment out of a registered education savings plan (RESP) to further his/her post-secondary education. The full-time requirement is waived for students who qualify for the DTC and those who cannot reasonably be expected to be enrolled as a full-time student because of a certified mental or physical impairment. Lifelong Learning Plans Under the Lifelong Learning Plan (LLP), participants can access up to $10,000 in a calendar year, and up to a maximum of $20,000, from their registered retirement savings plans (RRSPs). Withdrawals can be made over four consecutive years. These funds are not subject to tax upon withdrawal, as would usually be the case for RRSP withdrawals, and remain untaxed as long as they are repaid to the RRSP over a period of no more than 10 years after the conclusion of studies. In general, this provision applies only to full-time students. However, persons with disabilities are often unable to attend a post-secondary institution on a full-time basis because of their disability. Consequently, students who qualify for the DTC and those who cannot reasonably be expected to be enrolled as a full-time student because of a certified mental or physical impairment can be enrolled on a part-time basis and participate in the LLP. The program in which the student is enrolled must still be a qualifying educational program that normally requires a student to spend 10 hours or more per week on courses or work in the program. Child Care Expense Deduction The child care expense deduction (CCED) recognizes the child care costs incurred by single parents and two-earner families in the course of earning business or employment income, pursuing education or performing research. The child care costs of couples may also be recognized when one or both parents are pursuing education, or when one parent is incapable of caring for children due to a mental or physical infirmity. The infirmity needs to be certified in writing by a medical doctor. The CCED limit is more generous in respect of children who qualify for the DTC ($10,000), and DTC-eligible children are considered eligible for the purposes of the CCED at any age. For children who do not qualify for the DTC, the limit is $7,000 for children under 7 years of age and $4,000 for other children. Benefits delivered through the tax system Refundable Medical Expense Supplement The supplement improves work incentives for Canadians with disabilities and others with above-average medical expenses by helping to offset the loss of disability-related support when they enter the paid labour force. It provides assistance for above-average disability and medical expenses to low-income working Canadians. For 2004, the maximum supplement is the lesser of $562 and 25 percent of the medical expense tax credit and the disability supports deduction claims. The credit is available to workers with earnings above $2,809. To target assistance to those with low incomes, the credit is reduced by five percent of family income in excess of $21,301. Individuals claiming the refundable supplement may also claim the non-refundable medical expense tax credit and/or the disability supports deduction. This supplement was introduced in the 1997 budget and is fully indexed to inflation. Child Disability Benefit In recognition of the special needs of low- and modest-income families with a child with a disability, the 2003 budget introduced the Child Disability Benefit (CDB). The CDB is a supplement of the Canada Child Tax Benefit (CCTB), and is paid for children who meet the eligibility criteria for the DTC. For the July 2004 to June 2005 benefit year, eligible recipients receive their annual CDB entitlement of up to $1,653 per qualified child as part of their monthly CCTB issuance. The full $1,653 Child Disability Benefit is provided for each eligible child to families with net income below the amount at which the National Child Benefit (NCB) supplement is fully phased out ($35,000 in July 2004 for families having three or fewer children). Beyond that income level, the CDB is reduced based on family income at the same rates as the NCB supplement. For the 2004-2005 benefit year, benefits are reduced by 12.2 percent for one disabled child, 22.7 percent for two disabled children and 32.5 percent for three or more disabled children. Accordingly, the CDB will be reduced to zero as net family income reaches $48,549 for a family caring for one disabled child, $49,564 for a family caring for two disabled children and $50,258 for a family caring for three disabled children. The CDB amount and income thresholds are indexed to inflation. Appendix 5
The Disability Tax Credit and Horizontal Equity Assume there are two individuals: Paul who has a severe disability, and Anne who does not. Both Paul and Anne have a total income of $25,000. However, due to his disability, Paul incurs non-itemizable expenses of $6,486, leaving him with less disposable income than Anne. The principle of horizontal equity would suggest that because Paul incurs non-itemizable disability-related expenses that Anne does not, Paul should pay less tax than Anne. If there were no disability tax credit, this principle would be violated, since Paul would pay the same amount of federal tax as Anne. With the disability tax credit, Paul is able to receive tax relief for the non-itemizable disability-related expenses he incurs, lowering his tax bill relative to Anne’s. Thus, in this example, horizontal equity is achieved. How the Disability Tax Credit (DTC) Works
It should be noted that, in this example, horizontal equity is achieved only for individuals who pay tax at the lowest tax rate (i.e., who have incomes up to $35,000 in 2004). This situation arises because the tax relief offered by the disability tax credit is delivered as a non-refundable credit rather than a deduction. A credit ensures the same amount of tax relief regardless of income while a deduction, by contrast, affords greater tax relief for those with higher incomes. Appendix 6 T2201, Disability Tax Credit Certificate Your patient is considered markedly restricted in
elimination if, all or Appendix 7 Departmental and Agency Staff and Others Assisting in the Preparation of the Report Committee Secretary: Charles Smyth, Department of Finance Department of Finance and Canada Revenue Agency Ex-officio Participants on the Committee: Chris Forbes, Department of Finance Maureen Tapp, Canada Revenue Agency Research Staff: Annik Bordeleau, Department of Finance Christopher Camp, Consultant Galen Countryman, Department of Finance Pierre LeBlanc, Department of Finance Glenda Stark, Canada Revenue Agency Hope Walton, Canada Revenue Agency Administrative Staff: Christine Hamel, Department of Finance Marika Stamos, Canada Revenue Agency Editors: Maurice Michaud, NéoScript enr., Gatineau Judith Richer of the gordongroup, Ottawa Translation: Société Gamma Inc., Ottawa Graphic Design: Ryan/Smith Design Associates Inc., Ottawa Return to the Table of Contents |