Principal Issues: Whether amount paid for collection and storage of umbilical cord blood qualifies as a medical expense for purposes of 118.2(2).
Position: No.
Reasons: Not a service relating to an existing medical condition or disease. Not a diagnostic procedure.
2005-013778
XXXXXXXXXX Eliza Erskine
(613) 954-3199
September 14, 2005
Dear XXXXXXXXXX:
Re: Medical Expense - Collection and Storage of Umbilical Cord Blood
We are writing in reply to your letter of June 21, 2005, regarding the above-noted subject matter. You requested our comments on whether the retrieval and storage of umbilical cord blood qualifies for the medical expense tax credit pursuant to subsection 118.2(2) of the Income Tax Act (the "Act").
Our Comments
Section 118.2 of the Act provides rules for determining the amount that may be claimed as a tax credit in respect of medical expenses. The credit applies to qualifying medical expenses, in excess of defined limits, incurred in any 12-month period ending in the taxation year.
Paragraph 118.2(2)(a) of the Act provides that 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. It is a question of fact whether a particular service or procedure qualifies as a "medical service" for purposes of this provision, however, we are of the view that, in any event, the service or procedure must relate to an existing medical condition or illness. The expenses described in your letter do not involve an existing medical condition or illness, rather they are preventive in nature. Accordingly, in general terms, 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 deals with 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 procedures or services (together with the necessary interpretations) must maintain health, prevent disease or assist in the diagnosis or treatment of an 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.
It is our understanding that umbilical cord blood extraction is a procedure performed as part of the childbirth process, where blood is extracted from the placenta subsequent to the baby's birth and then stored for possible future use in treating illness. As the procedure does not in itself maintain health or prevent disease, and is not designed to assist a medical practitioner in making a diagnosis, we are of the view that the related expenses are not qualifying medical expenses under paragraph 118.2(2)(o).
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, these comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency.
We trust that our comments are of assistance to you.
Yours truly,
Eliza Erskine
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch