How can they do that?

October 5, 2020

I continue to be discouraged by the number of individuals unjustly denied the DTC even when they have previously received the tax credit for 10, 15 or more years. Although their medical condition has remained largely unchanged, or even deteriorated, and the legislation has not changed, they no longer qualify.


Almost ten years ago, CRA imposed its rigid interpretation of “all or substantially all of the time" as being "at least 90% of the time.”

How can they do that?

That was the question asked by the former Chief Justice of the Tax Court of Canada, the Honorable Donald G.H. Bowman during a telephone conversation in March 2016 with Peter Weissman and myself. We raised our concerns that an arbitrary percentage had become a major barrier for individuals living with medical conditions where a mathematical model is not a suitable form of measurement of disability. And as Justice Bowman explained, there is no basis in law or jurisprudence to interpret the legislation narrowly and technically.

Peter and I co-founded the Disability Tax Fairness Alliance and together we were successful in our efforts to have the Disability Advisory Committee (DAC) reinstated in December 2018.  Our priority was to help ensure that Canadians with disabilities are not being disallowed the DTC contrary to Subsection 118.4 of the Income Tax Act.

In its first Annual Report, Enabling Access to Disability Tax Measures released in May 2019, DAC asks that the CRA no longer interpret “all or substantially all” as 90% of the time stating, “While the 90% rule of thumb may be convenient to assessors and tax advisors, it is difficult to apply in practice.”

After all, the request is supported by CRA’s own guidelines that state the following:

While the words “substantially all” cannot be rigidly interpreted as referring to a specific percentage, the CRA will consider that the test is met if the 90% threshold is reached. This does not rule out the possibility that in a particular case, depending on the facts and circumstances, a level of less than 90% could still meet the “substantially all” requirement.

Just the same, the CRA continues to dig in its heels, even though there isn’t a single Tax Court of Canada case supporting the arbitrary 90% rule.

Instead, there is a wide range of interpretations of the legislation “depending on the facts and circumstances” of a particular case.

In Keefe v. The Queen, Justice Gerald Sheridan ruled that 81% comes within the meaning of "all or substantially all" since the circumstances of the claim did not lend itself to a simple mathematical formula.

In McDonald v. The Queen, Justice Gerald Rip determined that 85% of job-related travel was sufficient as far as meeting the statutory requirement.

In Reluxicorp Inc. v. The Queen, Justice Lucie Lamarre ruled that 75% was sufficient to meet the "all or substantially all" test in a complicated GST case.

In Albertin v. The Queen, Justice Gerald J. Rip noted that Mrs. R.'s "mental problem was not continuous and estimated that she was impaired only 50% of the time. However, he said, "she was unpredictable… her decisions were not rational decisions… (she) was exhibiting a course of conduct that was potentially dangerous to her. Her conduct was unpredictable.”

In Watts v. The Queen, Justice Bowman decided that an amount varying from 76% to 81% of the Appellant’s income that was taxable in Canada over a three-year period could qualify as “all or substantially all.” In his ruling he states the following:

"The 90% rule… has no statutory basis… The 90% rule, even if it had some basis in law, is itself defective because it leaves unanswered the question ''90% of what?'… The word 'substantially' is not defined in dictionaries as a fixed portion of a whole.

"…There are many cases in this Court that have considered the meaning of ''all or substantially all.' They consistently comment on the elasticity and ambiguity of the expression and on the inadvisability of using an arbitrary percentage, such as 90%... The so-called "90% rule" is a rule of thumb that is no doubt convenient to assessors and tax advisors... but it is difficult to apply in practice.

“Aristotle long ago pointed out that the degree of precision that is attainable depends on the subject matter."

As long as the CRA disregards the wisdom of the courts and the recommendations of its own Committee, too many eligible Canadians with disabilities are faced with the arduous and complicated process of appealing an unjust decision when there is no legal basis to deny the DTC.