Regulations that were to come into force next week to cap the fees that disability tax credit (DTC) promoters can charge for assisting people with applying for this valuable credit were suspended at the 11th hour by a judge in British Columbia, pending a constitutional challenge to be heard at a later date.
The fee cap was set to take effect on Nov. 15, a little more than nine years to the day that the original legislation was introduced in the House of Commons by long-serving Ottawa-area Conservative MP Cheryl Gallant.
The DTC is perhaps the most valuable tax assistance available to persons living with a disability. It’s a non-refundable tax credit that’s intended to recognize the impact of various non-itemizable, disability-related costs. For 2021, the value of the federal credit alone is $1,299. Add the provincial or territorial tax savings, and the combined tax savings can be worth between $1,609 (Quebec) and $2,793 (Alberta).
Families caring for eligible children with severe and prolonged impairments may be able to claim an additional amount as a supplement to the credit, making the DTC even more valuable.
Qualifying for the DTC is also the gateway to being eligible to open up a registered disability savings plan (RDSP), which offers generous government grants (up to $70,000) and government bonds (up to $20,000).
To qualify, you must complete Canada Revenue Agency Form T2201, Disability Tax Credit Certificate. The form, which was totally revamped last month, is used by a taxpayer or a supporting family member to confirm that the taxpayer has a “severe and prolonged impairment in physical or mental functions” that qualifies them for the DTC.
But, as regular readers of this column can attest, getting the Canada Revenue Agency to allow the DTC can be an ordeal some parents must fight in court. That’s why some Canadians turn to DTC consultants for assistance.
Some DTC consultants, however, have reportedly charged persons with disabilities upwards of 30 per cent of the tax refunds generated upon successful application of the DTC. Given that you can apply for the current tax year and nine prior years, the fees could exceed $8,000 for an Alberta taxpayer claiming nearly $28,000 of tax credits who is charged 30 per cent.
That’s why The Disability Tax Credit Promoters Restrictions Act, which would limit such fees, was introduced by Gallant back in 2012. The private member’s bill was unanimously supported by members of Parliament. Although it received royal assent in May 2014, the maximum fee that could be charged must be prescribed by regulation, and until that was done, the act remained inoperative.
During public consultations held in late 2014, the CRA heard from nearly 900 Canadians who discussed various topics, including the fee structures and proposed opinions for the maximum fee. Participants also made suggestions as to which cost elements should be considered in determining a fair maximum fee, such as the time it takes to fill out the forms and returns, and the hourly rate of pay for some professionals.
Fast forward to June 2019, and the draft Disability Tax Credit Promoters Restrictions Regulations were published, setting the maximum fee that a promoter can accept or charge at $100 for helping to complete the DTC application form, or at $100 per tax year where the fee is contingent upon the DTC claim succeeding.
The Regulatory Impact Analysis Statement accompanying the regulations stated that “(t)he proposed maximum fee was developed taking these extensive consultations into account and reflects fair market value for the type of services being offered.”
On April 14, 2021, the final regulations were published and were set to come into force on Nov. 15.
The fee cap was met with strong opposition, both by DTC consultants, who feared the decimation of their livelihood, and by some disability advocates, who felt it would limit some Canadians’ access to professional advice, especially on complex DTC applications that require substantial work.
To stop the fee cap from coming into force, a legal challenge was mounted by True North Disability Services Ltd., a company founded in 2014 to assist eligible Canadians in accessing the DTC. The company’s website reads: “RECOVER UP TO $40,000+ FROM THE CANADIAN GOVERNMENT THROUGH THE DISABILITY TAX CREDIT!” For this service, the company charges a 20-per-cent contingency fee.
The company sought to have the regulations declared constitutionally invalid since they purport to regulate a profession, as well as property and civil rights, which is a power usually given to the provinces. It also argued that the fee cap discriminates against persons living with disabilities.
The judge, after a detailed analysis, granted an injunction and suspended the regulations that were to come into effect next week until the court has the chance to rule on the constitutional questions above.
“This is a huge win for all of us who support the right of these Canadians with disabilities to have access to professional and legal advice regarding their applications for the DTC,” said Lembi Buchanan, a passionate disability advocate, in an e-mail.
Buchanan provided testimony in support of the injunction and was a past member of the Disability Advisory Committee, which was established to advise the CRA on tax measures for Canadians with disabilities.
Gallant, on the other hand, is frustrated by the ongoing delay, now entering its 10th year since she introduced the original bill. “The DTC was intended to help people living with disabilities. It was never meant to provide a cottage industry for a group of business owners,” she said in a telephone interview from her constituency office.
On Monday, the CRA updated its website to read: “Due to a court injunction, the Disability Tax Credit Promoters Restrictions Regulations are suspended until further notice.”