Serious money on the line when the DTC is disallowed

May 6, 2019

No doubt about it.

It has become an institutional tactic employed by the CRA to challenge taxpayers on questionable grounds and rely on the fact that the system is too complicated or expensive for people to fight their decisions.

In a recent column in the Financial Post, Jamie Golombek writes about “how the CRA, can be overly aggressive in pursuit of small sums.” In this case, CRA was denying a modest support payment for an ex-spouse of $2,056, a potential windfall of $600 for the government coffers.  The taxpayer filed an objection with the appeals branch and when that was unsuccessful, he appealed to the Tax Court of Canada. The judge agreed with the taxpayer.

Golombek quotes Thomas McDonnell, Q.C., a tax lawyer with over 50 years of experience, who suggested that it was just “another example of how the inherent complexity of the tax rules and the sometimes rigid approach to them taken by CRA forces taxpayers to go to unreasonable lengths to maintain what is otherwise a very reasonable position.”

In recent years, CRA has also become more aggressive with its rigid and inflexible interpretation of the Income Tax Act as far as the eligibility criteria for the DTC. Among the victims are children with autism and other mental impairments..

Now, we are talking serious money.

The DTC is no longer merely a modest annual tax credit of approximately $1,500 for the supporting parent. The government is also on the hook for the Child Disability Benefit of up to $2,575 and contributions up to $3,500 for the child’s Registered Disability Savings Plan (RDSP).

Children diagnosed with autism spectrum disorder, severely restricted in several aspects of everyday life and unable to initiate and respond to social interactions, have always been eligible for the DTC.  

However, there is mounting evidence as these children become adults, their marked restrictions in mental functions are no longer relevant if these children are able to use the toilet without assistance as well as dress and feed themselves. The fact that their memory is severely impaired seems to be inconsequential as long as they know their name and address.

"Autism Canada is deeply concerned about the challenges Canadian families living with autism and autistic adults are facing when applying for, or renewing, their Disability Tax Credit," says Executive Director, Michelle Colero. "While this is not a new problem, it is our position that these challenges have become more frequent, more onerous and more inconsistent over the last several years."

In October 2017, Autism Canada put out a call to Canadians asking them to share their DTC experiences.  We received over 360 responses. The majority of parents and adults on the spectrum expressed frustration with what could only be described as a broken system of unnecessary bureaucratic red tape. 

The guidelines available to the CRA staff are clear.

But no one, not even appeals officers, seems to be paying any attention to them and parents are left to their own resources.

Fortunately, the odds are heavily in their favour even if their objection fails.  

Although appealing to the Tax Court of Canada is the last resort, chances are, there won’t even be a formal hearing before a judge if the medical evidence supports the claim for the DTC.

The lawyer acting on behalf of the CRA may not be prepared to side with The Queen if the determination to deny the DTC is not based on the parliamentary and legislative intent of the Income Tax Act.

In one of the most important and influential decisions relating to the DTC is Radage v. The Queen, the Honourable Donald G.H. Bowman, former Chief Justice of the Tax Court of Canada provided the following sensible, practical and compassionate interpretation of the legislation:

"The legislative intent appears to be to provide a modest amount of tax relief to persons who fall within a relatively restricted category of markedly physically or mentally impaired persons… The court must, while recognizing the narrowness of the tests enumerated in sections 118.3 and 118.4, construe the provisions liberally, humanely and compassionately and not narrowly and technically."

The Notice of Appeal for John Doe provides a road map for others seeking justice when CRA disregards the rule of law and jurisprudence in its determination to disallow the DTC.

For more information on recent Tax Court of Canada cases, visit "It pays to fight for fairness."