Not surprisingly, one of the most common categories for Disability Tax Credit (DTC) cases appealed to the Tax Court of Canada involves individuals suffering from severe mental illness. Although the Canada Revenue Agency (CRA) is very specific about determining whether or not an individual is markedly restricted in his or her mental functions by establishing a mathematical model, defining "all or substantially all of the time" as being at "least 90% of the time," the Tax Court of Canada (TCC) has ruled otherwise in numerous cases.
The claimant in Philip Steele v. The Queen suffered from bipolar disorder and had been hospitalized numerous times. Mr. Steele maintained that he was unable to remember substantially all of the time and indeed cannot remember from one day to the next and required to have everything written down. In his ruling dated June 24, 2002, Judge Campbell Miller noted the following question regarding Mr. Steele's mental functions in the follow-up clarification letter, as well as the doctor's response:
Q. For the year 1999, what percentage of time was your patient UNABLE to think, perceive and remember?
Not surprisingly, the CRA denied the DTC because Mr. Steele did not meet the 90% threshold.
Nevertheless, Judge Millar ruled in favour of the claimant because there is a 40% chance that he will forget it, stating: "What a tremendous handicap that is, not knowing for every bit of information received whether your brain will or will not be able to store and retrieve it."
Other TCC justices have also acknowledged that the 90% threshold is not a suitable guideline for severe mental illness. In Albertin v. The Queen, Judge Gerald J. Rip noted that Mrs. R.'s "mental problem was not continuous; her erratic behaviour was not constant." He estimated that she was impaired only 50% of the time. However, he said, "she was unpredictable… her decisions were not rational decisions… (Mrs. R.) was exhibiting a course of conduct that was potentially dangerous to her. Her conduct was unpredictable.
"The fact is that her erratic behaviour could be triggered without warning at any time during a lucid period. This, in my view, makes the impairment continuous for the purposes of paragraph 118.4(1)(a) and markedly restricted her ability to perceive, thinks and remember, even during periods of lucidity."
In Bruno Maltais v. The Queen, Judge Alain Tardiff also recognized that individuals living with psychotic illnesses did not exhibit these symptoms continuously. Instead, he ruled that Mrs. M. was eligible for the DTC stating that:
"The vulnerability for a relapse was always present even though the outward signs are not always visible or apparent. Moreover, a person who has such a disability may break down at any time without there being any indications or warning signs."
In Bergeron v. The Queen, another claimant with a psychiatric history was also denied the DTC because he did not meet the narrow and technical interpretation of the legislation by CRA. Judge Lucie Lamarre allowed the appeal because of the risk of a relapse. "It is true," she stated the following in her ruling:
"… at certain times, the Appellant regains a certain psychological balance… He can do odd jobs around the house or even play on the computer. But the evidence is sufficient to say that this balance is fragile and that the possibilities for relapse into a psychotic state are always there. Moreover, in the event of doubt, the courts have agreed to grant the benefit of the doubt to the taxpayer."
Cumulative effect of mental illness and physical conditions must be taken into consideration
In Cochrane v. The Queen, Justice Bruce Russell said the government "erroneously denied" Cochrane's 2016 application even though her doctor noted in a letter of support that she:
“ ...has severe anxiety and panic attacks and [was] diagnosed in 2005 with clinical depression. She was forced into involuntary retirement as a result of her medical condition. Many modes of treatment have all failed. She is house bound by this condition and when she must leave for appointments she must avoid contact with others. She is overwhelmed in any crowded situation [and] confined areas such as elevators and vehicles. She has other phobias as well, resulting in panic attacks. She has other medical conditions [such as] adult ADHD, osteoporosis, hearing loss and overactive bladder. Her symptoms of depression, mental anguish, difficulty sleeping and unexplained pain in hand, feet [and] lower back indicate fibromyalgia. She also has frequent headaches and becomes overwhelmed with her normal day to day routines.”
Inability to live and function independently and competently
The requirement for the DTC for people markedly restricted in mental functions in 1999 was the inability to manage personal affairs and care without supervision. Judge Diane Campbell disagreed. In Buchanan v. The Queen, she concluded that the Appellant's bipolar disorder was severe enough to allow the credit, providing the following explanation:
"Although the Appellant is certainly able to operate adequately in some areas, his impairment permeates his entire existence. The facts support that while engaged in some seemingly rational activity to an outsider, all other thought processes are exploding in an array of erratic, bizarre and potentially harmful activities. However, the Appellants' ability to perceive, think and remember, although not non-existent, is of such a severity that his entire life is affected to such a degree that he is unable to perform the necessary mental tasks required to live and function independently and competently."