118.2(1), 118.2(2), Income Tax Act, Medical Expense Credit, Tax Court of Canada

Medical Expense Tax Credit – Surrogate Expenses

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Medical Expense Tax Credit – Certification Requirement

Warnock v The Queen, 2014 TCC 240

The taxpayer claimed, and the Minister disallowed some of, a medical expense tax credit related to the expenses associated with a surrogacy agreement. There were three types of services:

  1. medical services provided to the taxpayer;
  2. medical services provided to the surrogate; and
  3. legal expenses associated with a mandatory surrogacy contract.

The MNR disallowed expenses for the latter two types.  The TCC agreed with the MNR, and held that legal expenses of a surrogacy do not qualify for the credit, and that a surrogate is not a “patient” for purposes of the credit.

The taxpayer referred to Zieber v The Queen, 2008 TCC 328, where similar types of expenses were allowed. The Minister referred to an unreported decision in Carlson v The Queen, 2012-3063(IT)I, where such expenses were not allowed.  

The TCC referred to the following provisions as relevant: 118.2(1); 118.2(2)(a), (l.1), (n) and (0).

In Zieber, the court allowed the legal expenses under paragraph 118.2(2)(l.1) as expenses “incurred on behalf of a “patient,” as defined, the patient requires an organ transplant, and the expense is reasonably incurred to arrange for the transplant”. The TCC here held that the court in Zieber did not consider the requisite elements and was an informal decision, and went on to hold that surrogacy contracts do NOT qualify under this paragraph (para 13).  This is because the person receiving the “organ” (if an embryo is an organ) is the surrogate and not the taxpayer, and the surrogate is not a “patient” as required by that paragraph.  

The medical expense of the surrogate (ultrasound and prescriptions) did not fall within the scope of paragraphs 118.2(2)(n) and (o), as the word “patient”, identifying the taxpayer entitled to the credit, makes it clear that the expenses must be prescribed to the person claiming the credit (para 17).

– Sas Ansari, JD LLM PhD (exp)

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