10 February 2009 External T.I. 2008-0297761E5 - Employer-Provided Emergency Elder and Child Care

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether employer-provided funding for elder and/or child care in the event of an emergency such as a pandemic is a taxable benefit.

Position: Elder and child care are generally personal expenses, however there may be some very limited exceptional situations.

Reasons: Where an employee is required to be away from home due to unusual overtime demands and as a result is unable to supervise young children or provide physical care for dependant family members, has no choice but to incur an expense for such care and the employer pays the incremental cost, it may not be an employment benefit.

2008-029776
XXXXXXXXXX Kathryn McCarthy CA
(613) 828-9377
February 10, 2009

Dear XXXXXXXXXX :

Re: Employer-Provided Elder or Child Care Funding During an Emergency

This is in response to your letter of October 16, 2008, and further to subsequent telephone conversations (McCarthy/XXXXXXXXXX ) in January of 2009. You asked if funding provided by an employer to an employee to pay for the cost of hiring a caregiver for family members (i.e. elders or children) to enable a key employee to work extra hours necessitated by an emergency such as a pandemic is a taxable benefit under the Income Tax Act ("the Act").

Our Comments

The situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. It is not this Directorate's practice to comment on proposed transactions involving a specific taxpayer other than in the form of an advanced income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the Internet at www.cra-arc.gc.ca. Should the situation involve a specific taxpayer and transactions that have already been completed, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the CRA website. We are, however, prepared to provide the following comments which may be of assistance.

Generally, paragraph 6(1)(a) of the Act includes in an employee's income the value of any benefit received or enjoyed by the employee in respect of his or her employment. Where a personal expense such as elder or child care is paid by an employer, the employee will normally be considered to have received a taxable employment benefit. The CRA has an administrative position with respect to employment benefits from employer-provided child care, which is described in the T4130, "Employers Guide - Taxable Benefits".

We acknowledge that circumstances may arise such that an employee is required to be away from home due to unusual overtime demands and as a result be unable to supervise young children or provide physical care for dependant family members. Where the employee has no choice but to incur an expense for such care and the employer pays the incremental cost, it may not be an employment benefit.

We trust the above comments are of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch