Principal Issues: 1) Can the CRA confirm that the Additional Subsidized Childcare Contribution in Quebec is deductible in computing an individual's income; 2) If yes, can the CRA confirm in which year an individual may deduct this additional contribution; 3) What documents should an individual provide to justify the deduction claimed with regard to the additional contribution on his/her income tax return?
Position: The CRA will issue a technical interpretation to respond to that question, subsequent to the 2015 annual conference of the Association de planification fiscale et financière. See F 2015-061423.
9 OCTOBER 2015 FEDERAL TAX ROUNDTABLE
2015 APFF CONFERENCE
Q. 5 Quebec subsidized child care contributions
Question 5 Additional contribution for subsidized child care in Quebec
Since April 22, 2015, a new measure has changed the rates for subsidized child care in Quebec. The amended rates (for the period from April 22, 2015 to December 31, 2015) include a core contribution of $7.30 per day, per child, which is paid directly for child care, and an additional contribution scaled to family income (of up to $12.70 per day, per child), which will be payable to the Québec Revenue Agency ("ARQ") when filing income tax returns for 2015 (in the spring of 2016).
Under section 173 of Bill 28 (of the Quebec government) which was approved on April 21, 2015, a new educational fund for childcare services will be established and will be used exclusively to finance subsidized educational childcare. The additional contribution paid by affected individuals will be credited to this fund.
On December 2, 2014, the Minister of National Revenue confirmed that the additional contribution for subsidized child care would be deductible in computing the income of an individual as federal child care expenses.
In terms of the year in which the additional contribution will be deducted federally, our understanding is that it should be for the year 2015, the year in which the care was provided to the child. Even if the additional contribution will be paid in 2016, the wording of section 63 of the Act seems absolutely clear on this point. The expenses that can be deducted in computing the individual's income appear to be the expenses incurred for services rendered during the year. The only clarification regarding the payment is that fees must be paid by the taxpayer or the supporting person of the child for the year. Nothing indicates that the fees must be paid in the year (eg, 2015) to be deductible in that year (2015).
Moreover, in this regard, Quebec's interpretation 05-010573 of October 19, 2005 states that the amount appearing on the RL-24 slip is the actual amount paid on the date of issuance of the slip. Although this is a Quebec interpretation, after a comparison of the federal and Quebec legislation relating to the definition of "child care expense" (as well as subsection 63(2.3) of the Act), the conclusion should be the same federally. Federally, it refers to an expense incurred in a taxation year for the purpose of providing child care services. The federal legislation, as with the Quebec legislation, does not expressly state that the amount is to be paid in the year or during the year.
Questions to the CRA
(a) As the Quebec bill was approved after the announcement of the Minister of National Revenue in December 2014, can the CRA confirm that the additional contribution for subsidized child care in Quebec will in fact be deductible in computing the income of an individual?
(b) If the additional contribution is deductible in computing the income of an individual, would the CRA specify in which year an individual may deduct the additional contribution? For example, would the additional contribution paid in the spring of 2016 in respect of child care received in 2015 be deductible in 2015 or 2016?
(c) What documents must an individual provide to support the deduction claimed for the additional contribution in his or her income tax return?
CRA Response
The CRA will respond to this question after the 2015 Congress by way of a technical interpretation. [See 23 October 2015 External T.I. 2015-0614231E5 F.)
Income Tax Rulings Directorate Officer:
Anne Dagenais
(613) 670-9050
2015-059565