Principal Issues: Whether amounts paid for collection and storage of umbilical cord blood qualify as medical expenses for purposes of 118.2(2).
Position: No.
Reasons: Not a service relating to an existing medical condition or disease. Not a diagnostic procedure.
XXXXXXXXXX 2010-039098 Chrys Tzortzis, CA
January 26, 2011
Dear XXXXXXXXXX :
Re: Medical Expense - Collection and Storage of Umbilical Cord Blood
We are writing in response to your letter addressed to the St. John's Tax Centre and forwarded to us. In your letter, you inquire whether amounts paid for the collection and storage of umbilical cord blood are eligible medical expenses for the purposes of the medical expense tax credit ("METC").
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency publications can be accessed on the CRA Web site at www.cra-arc.gc.ca. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.
Medical expenses which are eligible for the METC are limited to those described in subsection 118.2(2) of the Income Tax Act (the "Act"). If a particular expenditure is not described as an eligible medical expense in subsection 118.2(2) of the Act, or if the conditions under which the expenditure would qualify are not met, the expenditure does not qualify for purposes of the METC, even though the expenditure may have been incurred for medical reasons.
Paragraph 118.2(2)(a) of the Act provides that eligible medical expenses include amounts paid to a medical practitioner, dentist or nurse or a public or licensed private hospital in respect of medical or dental services. Although it is a question of fact whether a particular service or procedure qualifies as a "medical service" for purposes of this provision, it is our view that to be regarded as such, the service or procedure must relate to an existing medical condition or illness. It is our understanding that umbilical cord blood extraction is a procedure performed as part of the childbirth process, whereby cord blood is collected after the birth of the baby and subsequently stored for possible future use in treating illness. Accordingly, since this procedure does not involve an existing medical condition or illness, it is our view that amounts paid for such services would not qualify as medical expenses under this provision.
We have also considered the application of paragraph 118.2(2)(o) of the Act which allows amounts paid for laboratory, radiological or other diagnostic procedures or services prescribed for a patient by a medical practitioner or dentist. Under this provision, the diagnostic procedures or services (together with the necessary interpretations) must be for maintaining health, preventing disease or assisting in the diagnosis or treatment of any injury, illness or disability. The reference to "other diagnostic procedures or services" is generally limited to diagnostic services or procedures of the same class as laboratory or radiological services. In other words, the procedures or services must assist a medical practitioner in making a diagnosis and formulating a course of treatment. As the umbilical cord blood extraction procedure is not for such purposes, we are of the view that the related expenses would not qualify as medical expenses under paragraph 118.2(2)(o).
Further information on medical expenses may be found in Interpretation Bulletin IT-519R2 (Consolidated), Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction, which is posted on the CRA Web site.
We trust that these comments will be of assistance.
Yours truly,
G. Moore
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch