Principal Issues: [TaxInterpretations translation] Can a taxpayer claim the METC for medical expenses incurred once the time to file a claim with the taxpayer’s insurer has expired? If the insurer reimburses the taxpayer in part for the medical expenses incurred in 2010 and 2011, how should the taxpayer claim the METC? Finally, how should the reimbursement of the RAMQ contributions that initially gave entitlement to the METC be treated under paragraph 118.2(2)(q)?
Position: Yes. The taxpayer will have to make a request to the Minister to have the taxpayer’s past tax returns amended. The METC for the years 2010 and 2011 will have to reflect the medical expenses incurred in each of those years. The reimbursement of contributions to the RAMQ will reduce the amount of the METC that the taxpayer will be entitled to receive.
Reasons: The Income Tax Act.
January 27, 2012
Jonquière Tax Services Office, Headquarters T1 Customer Service Business and Trusts Division Attention: Caroline Labrecque
2011-042883
Medical Expense Tax Credit
This is in response to your e-mail of November 23, 2011 regarding the above subject.
Unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act (the “Act")
You described a situation where a taxpayer incurred drug costs in 2007, 2008, 2009, 2010 and 2011 for which reimbursement by the Régie de l'assurance-maladie du Québec ("RAMQ") was received. However, in the course of employment, the taxpayer was also covered by a group insurance plan for drugs (the "Plan"). According to the taxpayer's claims, the taxpayer was unaware of the existence of that plan, and has therefore never filed a claim with the taxpayer’s insurer under the Plan.
In 2011, the RAMQ learned that the taxpayer benefited from the protection of a group insurance plan for medications by virtue of employment and required the taxpayer to reimburse the amounts paid by the RAMQ for the years 2007 to 2011 inclusively.
The taxpayer therefore submitted a claim to the taxpayer’s insurer for medical expenses incurred. The insurer refused to compensate the taxpayer for part of those expenses (the deadline for submitting a claim having expired) but agreed to do so for the costs incurred during the years 2010 and 2011.
Finally, you indicated that the taxpayer had paid a RAMQ contribution for each of the years 2008, 2009 and 2010 but that Revenue Québec reimbursed the taxpayer for the contributions paid in error to the RAMQ for those years.
Questions
With respect to the situation described above, you asked the following questions:
(1) Would the medical expenses incurred by the taxpayer during the years 2007, 2008 and 2009, which the insurer refuses to reimburse, qualify for the METC and, if so, for which taxation year(s)?
(2) With respect to the medical expenses incurred in 2010 and 2011, how do we calculate the METC to which the taxpayer is entitled?
(3) For the purposes of the METC, how should the refund of contributions paid in error to the RAMQ be treated?
Our Comments
Paragraph 66 of Interpretation Bulletin IT-519R2 (Consolidated), Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction, states the following:
Paragraph 118.2(3)(b) provides that qualifying medical expenses of an individual do not include any expense for which the individual, the patient or the legal representative of either such person has been, or is entitled to be, reimbursed except to the extent that the amount is required to be included in income and cannot be deducted in computing taxable income. Thus, for example, an amount reimbursed under a public or private medical, dental or hospitalization plan would not qualify for purposes of the medical expense tax credit. However, an amount reimbursed by an employer that is included in the employee's income would qualify provided the employee is not able to deduct the amount in computing taxable income.
In the situation you described, the taxpayer incurred medical expenses in 2007, 2008, 2009, 2010 and 2011 and was initially compensated by the RAMQ. In 2011, the taxpayer repaid the amounts he had received from the RAMQ. For medical expenses incurred in 2007, 2008 and 2009, the insurer refuses to reimburse the taxpayer for the medical expenses incurred because the time to file a claim has expired.
Based on the facts described to us, we are of the view that the taxpayer could claim the METC for the medical expenses incurred in 2007, 2008 and 2009 in that the taxpayer no longer has the right to be reimbursed for these expenses as part of the group drug insurance plan. Since the METC must be claimed for medical expenses paid in the year, the taxpayer should make an application to the Minister of National Revenue pursuant to subsection 152(4.2).
That subsection provides the Minister with the discretion to reassess beyond the normal reassessment period for a statute-barred taxation year where an individual or a testamentary trust so requests in order to determine a refund or reduce the tax payable.
For more information, we invite you to consult information circulars IC75-7R3 and IC07-1 by clicking on the following link: http://www.cra-arc.gc.ca/menu/ICSC-e. html.
With respect to the medical expenses for which the taxpayer received reimbursement from the Plan, you indicated that the taxpayer wishes to claim the METC for the portion of medical expenses that have not been reimbursed (the Plan reimburses only 80% of the expenses incurred). In such a situation, we believe that the METC for a taxation year must be claimed in the year in which the medical expenses were incurred.
With respect to the refund of contributions paid in error to the RAMQ, we have assumed that those contributions gave entitlement to the METC for the years in which they were paid by the taxpayer, pursuant to paragraph 118.2(2)(q). We agree with you that the tax filings of the taxpayer for the years 2008, 2009 and 2010 should be amended to reduce the amount of medical expenses that may qualify for the METC.
Access to Information
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Ms. Celine Charbonneau at (613) 957-2137. In such cases, a copy will be sent to you for delivery to the taxpayer.
We hope that these comments are of assistance.
François Bordeleau, Advocate
Manager
Business and Trusts Section
Income Tax Rulings Directorate