Principal Issues: Whether social assistance received by (1) support home employees and (2) out-of-home respite support employees, under Alberta's Persons with Developmental Disabilities (PDD) Program are exempt from income tax under paragraph 81(1)(h)
Position: (1)The PDD program funding received by support home employees qualifies for the exemption under 81(1)(h). (2) The PDD Program funding received by respite support employees does not qualify for the exemption under 81(1)(h).
Reasons: (1) The cared-for individual resides in the support home employee's principal residence and the funding is received to cover the cared-for individual's basic needs such as food and shelter. Therefore, it is the type of social assistance payments ordinarily based on a means, needs or income test. (2) The cared-for individual does not reside in the respite employee's primary residence.
XXXXXXXXXX 2010-036663 Ann Townsend
September 10, 2010
Dear XXXXXXXXXX ,
Re: Social Assistance received by Adults with Developments Disabilities
I am writing in response to your letter dated April 14, 2010 asking whether the funding received from Alberta's Persons with Developmental Disabilities (PDD) program for Support Home and Out-of Home Respite Support qualifies for an exemption from income tax under paragraph 81(1)(h) of the Income Tax Act. A copy of your letter was forwarded to us by the Winnipeg Tax Center for reply.
It is our understanding that the XXXXXXXXXX maintains an employee/employer relationship with Support Home and Out-of Home Respite Support employees. The Support Home employees provide 24 hour care to persons with disabilities that live in the employee's principal place of residence. The Out-of Home Respite Support employees provide relief for the primary caregivers of the disabled individuals and are available to individuals living with their families or to Support Home employees.
Written confirmation of the tax implications inherent in a particular transaction is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. We are, however, prepared to offer the following general comments, which may be of assistance.
All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act").
Paragraph 81(1)(h) is generally regarded has a provision of the Act that exempts from income social assistance payments received by foster parents for the care of foster children that reside in their principal place of residence. However, it also exempts from income social assistance payments received by caregivers of developmentally handicapped adults that reside in the caregiver's principal place of residence. In order for the exemption to apply the payments must be received under a program provided for by an Act of Parliament or a law of a province, the caregiver and the cared-for individual cannot be related and the social assistance must ordinarily be made on the basis of a means, needs or income test. The type of social assistance ordinarily made on the basis of a means, needs or income test is the type of social assistance that is intended to provide the basic needs of an individual (i.e. food, shelter and clothing), such as welfare.
The PDD program is a provincial program that provides funding for residents of Alberta that are over the age of 18 and have severe developmental disabilities that began in childhood. The disabilities are characterized by a significant limitation in both intellectual capacity and adaptive skills.
Funding under the PDD program is not determined by an actual financial means, needs or income test. However, it is implicit that individuals who receive funding under the PDD program would not pass a means, needs or income test as they are not capable of financially supporting themselves or living independently. Consequently, it is our opinion that the requirement under paragraph 81(1)(h) for the social assistance to be ordinarily based on a means, needs or income test, is satisfied by an implicit test applicable to adults with severe developmental disabilities that began in childhood.
Therefore, the PDD funding that is intended to provide the basic needs of the cared-for individual (i.e. food, shelter and clothing) received by the Support Home employees for the individuals that reside in their principal place of residence, will qualify for the exemption under paragraph 81(1)(h). However, the PDD funding received by the Out-of-Home Respite Support employees will not qualify for the exemption under paragraph 81(1)(h) since the cared-for individual does not reside in the respite support employee's principal place of residence (an essential requirement for exemption).
We trust these comments are helpful.
Randy Hewlett
Manager
for Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch