Keehn v. The King, 2023 TCC 1
Keehn v. The King is the perfect illustration of the principle that there is no equity in tax law and of the tax courts choosing to enforce the 'letter of the law', regardless of how inequitable it may appear. It also provides an insight into the court's position on the intersection of the Income Tax Act, s. 15(1) of the Canadian Charter of Rights & Freedoms, and public policy.
Facts- Keehn v. The King and medical expense deduction
This case is particularly fascinating to tax commentators due the simplicity of its facts. Mr. Keehn appealed the reassessments made for his 2018 taxation year in which the Canada Revenue Agency ("CRA") disallowed $853 claimed as 'medical expenses' under s.118.2 of the Income Tax Act. Mr. Keehn's wife received kidney dialysis treatment three times a week at the Royal Alexandra Hospital in Edmonton. Mrs. Keehn would drive from her home to the hospital located approximately 22 kilometers from her house. Upon reaching the hospital she would park her car and pay for parking. Overtime, these parking bills accrued to $853. Mr. Keehn argued that the Income Tax Act discriminates by not considering parking expenses for medical treatment within a roundtrip distance of 80 kilometers.
The Income Tax Act's Bright-Line Test for Medical Expense Tax Credits
Mr. Keehn claimed the parking expenses in addition to various other medical expenses. The CRA allowed $6,342 of medical expenses but refused the parking costs. The CRA's denial of the parking costs as a medical expense was based on paragraph 118.2(2)(g) and (h) of the Income Tax Act.
(2) [Medical expenses] For the purposes of subsection (1), a medical expense of an individual is an amount paid
(g) to a person engaged in the business of providing transportation services, to the extent that the payment is made for the transportation of
- the patient, and
- one individual who accompanied the patient, where the
patient was, and has been certified in writing by a medical
practitioner to be, in capable of traveling, without the assistance
of an attendant
from the locality, where the patient dwells to a place, not less than 40 km from that locality, where medical services are normally provided, or from that place to that locality, if
- substantially equivalent, medical services are not available in that locality,
- the route travelled by the patient is, having regard to the circumstances, a reasonably direct route, and
- the patient travels to the place to obtain medical services for himself or herself, and it is reasonable, having regard to the circumstances, for the patient to travel to that place, to obtain those services;
(h) for reasonable travel expenses (other than expenses described in paragraph (g)) incurred in respect of the patient and, where the patient was, and has been certified in writing by a medical practitioner to be, incapable of travelling, without the assistance of an attendant, in respect of one individual who accompanied the patient, to obtain medical services in a place that is not less than 80 km from the locality, where the patient dwells if the circumstances described in subparagraphs (g)(iii) to (v) apply;
The Canadian tax litigation lawyer for CRA argued that the legislature had introduced a bright-line test which prevented taxpayers from claiming these expenses as deductible if the taxpayer had not travelled 80 or more kilometers (roundtrip) to the hospital.
Mr. Keehn argued that the denial of his claim for parking expenses amounted to discrimination against individuals who needed to travel less than 80 kilometers roundtrip for necessary medical treatment. He contended that s.118.2(2) of the Income Tax Act which specifies the minimum travel distance of 80 kilometers as a prerequisite for claiming parking expenses was unfairly excluding those who travel shorter distances.
It is not the Tax Court's job to provide equitable relief.
The distance articulated in s. 118.2(2)(h) of the Income Tax Act does not account for hardship of travel, travel time, or the frequency of travel. It creates a bright line test that fails to account for individual circumstances of the taxpayer. Even though the court acknowledged the necessity of Mrs. Keehn's medical treatment, it concluded that the disallowance of parking expense did not amount to discrimination.
The tax court also articulated that discrimination based on individual travel distances is not covered under the Canadian Charter of Rights & Freedoms. Under s.15(1) of the Charter - which pertains to equality rights, there are no protections for distance travelled since it is not based on inherent differences between taxpayers. The Charter primarily deals with immutable differences such as age, ethnicity, or religion. Furthermore, the tax court cited Ali v. R (2008) where the Federal Court of Appeal held that the legislature was allowed to create social programs as it deems fit. It was the purview of the legislature to ascertain the public policy goals it wished to pursue.
Pro-Tax Tips - Make sure you know what to deduct to prevent a reassessment.
Not all medical expense deductions are as straight forward as they seem. Deductibles that are easy to characterize such as prescription medication, eyeglasses, and medical devices etc. may lead to less scrutiny by the CRA when issuing a refund. However, non-prescription and over the counter medicine are not tax deductible. Medical expense tax credits are articulated in s.118.2 of the Income Tax Act and can provide a road map for taxpayers that choose to file their own taxes. Furthermore, taxpayers may benefit from considering other potential deductions for which they can receive tax credits. Consult a top Canadian tax lawyer to help explore all your options so the CRA are less likely to reassess your tax returns.
I live 75 kilometers away from my hospital and drive to receive treatment. Can I successfully claim parking expenses at the hospital as tax deductible?
The Income Tax Act does not include the method used for computation of the distance travelled by the taxpayer. It is possible that your house is located less than 40 kilometers away 'as the crow flies' but the only accessible road increases the distance travelled to over 80 kilometers for the roundtrip Get in touch with a Toronto tax lawyer who is familiar with medical expense tax credits to receive a more accurate understanding of your situation.
I drive my mother over 80 kilometers one-way, to the hospital since she is incapable of driving herself. Can I claim a parking expense with the CRA even if I am not the patient or the one receiving treatment?
According to the Income Tax Act s. 118.2(2), it may be possible to deduct parking expenses if the patient is incapable of traveling without the assistance of an attendant. As your mother's attendant you may be able to claim parking expenses. However, the deductions must be accompanied by a series of other conditions such as the unavailability of substantially equivalent medical services in the patient's locality, a reasonably direct travel route, and the need for the patient to travel to the hospital or medical services provider. Consult a knowledgeable Canadian tax lawyer for a holistic analysis of your specific situation.
I am about to file my taxes claiming multiple medical expense tax credits. What can I do ensure the success of my claim?
While there is no sure-shot way to ensure all your medical expense claims will be accepted by the CRA, taxpayers may benefit from being prepared if the CRA challenges deductions by way of a review letter. Ensure you keep accurate records, receipts, invoices, and other documents that clearly demonstrate the nature of the expenses, the date, and the amount paid. Proper record-keeping will ensure you have corresponding 'proofs' if the CRA disputes your deductions. To better understand the eligibility criteria for medical expense deductions or to prepare an explanation for the CRA, reach out to a Canadian tax lawyer.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.