| 19(1) | File No. 5-9236 |
| J.A. Szeszycki | |
| (613) 957-2103 |
January 18, 1990
Dear Sirs:
Re: Payments to Foster Parents
We are responding to your letter of September 18, 1989 addressed to the District Taxation Office in Vancouver which was forwarded to this office for consideration and reply. Your letter describes payments made to foster parents caring for special needs children and you request clarification as to the correct treatment of these payments for tax purposes.
The payments received are over and above the regular foster home maintenance payments and are described as special rate payments intended to compensate foster parents for the extra hours involved in caring for special needs children. The payments are not made as a reimbursement for actual expenses incurred but rather as a fee for the extra service required by a special needs child.
The issue regarding payments received by foster parents has recently been the subject of a comprehensive review by the Department of Finance in response to concerns expresses by provincial agencies and foster parents alike. As a result of that review, the Minister of Finance, the honourable Michael H. Wilson, has indicated his intention to amend the Income Tax Act to clarify that payments to foster parents, as well as caregivers responsible for developmentally handicapped adults, will be exempt where the payments are made directly to foster parents or caregivers by a province or an agent of the province, and the foster children, or developmentally handicapped adults reside in the foster parent's or caregivers' homes. Such an amendment will be introduced at the earliest opportunity and will be made retroactive to taxation years ending after 1981. The payments to be affected include those described in your correspondence.
We trust the foregoing provides the clarification you requested.
Yours truly,
P.D. Fuoco for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. J.D.K. McGuire Chief E. & O.E. Vancouver, D.O. Provincial and International Relations Division