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.
90% threshold inappropriate measure of mental functions
The claimant (Philip Steele v. The Queen) suffered from bipolar disorder and had been hospitalized numerous times. Although Mr. Steele suffered from severe memory problems, the responses by his doctor in a follow-up questionnaire from CRA did not meet the 90% threshold. Nevertheless, Judge Campbell Millar ruled in favour of the claimant since he questioned whether “the medical profession had advanced to the point that the complexities of the brain’s receipt, storage and retrieval of data can be identified with such an accuracy that would allow a psychiatrist to proclaim that an individual is unable to remember 25%, 50% or 90% of the time.”
Unpredictable behaviour meets legal test
Other TCC justices have also acknowledged that the 90% threshold is not a suitable guideline for severe mental illness. Judge Gerald J. Rip (Albertin v. The Queen) 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.”
Risk of relapse meets legal test
Judge Alain Tardiff (Bruno Maltais v. The Queen) 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.”
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.”
Inability to live and function independently and competently
Although the requirement for the DTC for people markedly restricted in mental functions in 1999 included continuous supervision and inability to look after personal care, Judge Diane Campbell (Buchanan v. The Queen) disagreed. 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.”
Severe depression and panic attacks qualify for the DTC
The CRA recognized that Barbara Cohrane's diagnosis of clinical depression in 2005 along with severe anxiety and panic attacks were severe enough to qualify for the DTC. However, when she was asked to requalify for the tax credit, the CRA denied her claim even though the medical information in Form T2201 for 2016 was identical to the previous one and signed by the same doctor.
In Cochrane v. The Queen, the Honourable Justice Bruce Russell accepted her testimony and noted that she met the legal test for “all or substantially all of the time.”
“Dr. MacDonald has made a diagnosis of “severe depression & anxiety”, having the effect of “acrophobia & panic attacks [and] very restricted activity”. The prescribed form that Dr. MacDonald signed gives as one example of “markedly restricted in the mental functions necessary for everyday life” that “Your patient is unable to leave the house, all or substantially all of the time, due to anxiety, despite medication and therapy.”
“….All of this establishes that Ms. Cochrane at all relevant times has had a severe and prolonged impairment (severe depression and anxiety) causing her to largely be unable to leave her house. That is indicative of a marked restriction in mental functions necessary for everyday life, being a basic activity of daily living.