Various charities and non-profit organizations are eligible for a rebate on the sales tax they pay in the process of providing certain types of goods and services (“supplies”). This is called the Public Service Body rebate, and its percentage depends on the nature of the organization and its activities. Most charities qualify for a 50% rebate, and other types of organizations qualify for higher rates.[1]
One of the types of supplies with a higher rebate percentage are “facility supplies”, which qualify for an 83% rebate. Part of the definition of a facility supply is that it is made by a “public hospital or qualifying facility” and involves medically necessary health care. This used to be restricted only to hospital authorities, but in 2005 the law was expanded to include other organizations in recognition of the fact that some traditional hospital services are now being performed in other settings.
The details of the expanded parameters are obviously still fuzzy, because several long-term care facilities are currently embroiled in tax disputes on the issue.
One British Columbia non-profit organization, Elim Housing Society, is at the forefront of this battle. It operates a long-term facility called The Harrison. The CRA denied Elim’s claim for the facility supply rebate for The Harrison, and Elim has appealed this decision.
The legal requirements are quite convoluted, as is the case with most GST/HST issues, but essentially Elim was arguing that long-term care facilities qualify for a higher rebate because they provide a range of medically-necessary therapeutic health care services, reasonably expected to take place under the supervision of a physician. The Tax Court of Canada reviewed the details of The Harrison’s operations and determined that it did qualify for the rebate. In doing so, the Court had the following points (among others) to make:
- Disputed terms in the law, like “therapeutic” and “medically necessary”, should be interpreted broadly.
- Despite only providing nursing care and not employing physicians, a care facility can still qualify if physicians play an important role in the health care team
- The health care can be “medically necessary” under the law even if it is not determined to be so by a physician.
This is good news for the several other long-term care facilities that are in the middle of fighting this same fight. It will hopefully herald a shift in the CRA’s policies that will benefit assisted living facilities across Canada.
[1] This article exclusively discusses the rebates available on the federal portion of GST/HST, and not the provincial/territorial.