Date: 20010105
Docket: 1999-4517-IT-I
BETWEEN:
LYNN WALSH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Rowe, D.J.T.C.C.
[1] The appellant appeals from an assessment of income tax for the 1999 taxation year. The Minister of National Revenue (the "Minister") notified the appellant that she was no longer entitled to receive the Child Tax Benefit commencing September, 1998 as her two children were no longer in her care and the Minister recalculated the amount of the benefit and sought return of an overpayment in the sum of $2,300.92 for the period between September, 1998 and January, 1999.
[2] The appellant testified she resides in Mackenzie, British Columbia and is the mother of two children, Nathan, born May 2, 1992, and Haxton, born March 23, 1994. She married Bradley Walsh in 1991 and they were living in Tumbler Ridge, British Columbia until they separated in December, 1996. Following the breakdown of the marriage, the children travelled back and forth between the residences of the appellant and her estranged husband in accordance with his work schedule. In the fall of 1996, the appellant went to college at Tumbler Ridge to upgrade her education. At this time, there were no written separation agreements or Court Orders in effect. However, on August 27, 1998, Judge Cleaveley, Provincial Court of British Columbia, issued an Order - Exhibit A-1 - the relevant portion of which reads as follows:
"THIS COURT ORDERS that the primary residence of the children ... shall be with the Applicant, Bradley WALSH on an INTERIM BASIS.
THIS COURT FURTHER ORDERS that the children shall spend three (3) weekends per month with the Respondent, Lynn WALSH, as agreed upon between the parties."
[3] Included in the said Order, was the review date of November 19, 1998 where the matter would again be considered at a sitting to be held in Tumbler Ridge. When the Order was issued, the appellant had recently relocated to Dawson Creek, British Columbia, a city located one and one-half hours - by vehicle - from Tumbler Ridge. Nathan - now 6 - began school in Tumbler Ridge and his father - Bradley Walsh - continued working in the Bullmoose coal mine. The two children were picked up by a friend of the appellant on Friday afternoon and driven to Dawson Creek where they remained with the appellant at her residence until her friend returned them to Tumbler Ridge early Monday morning. The work schedule of the children's father required him to work 4 days per week - 12 hours per day - and to then have four days off or, sometimes, to work for two days - with a 24-hour break - followed by two more days work. However, at the end of September, 1998, Bradley Walsh was discharged by his employer and afterwards he remained at home until January, 1999. On May 18, 1999, the previous Order - Exhibit A-1 - was reviewed by Judge Cleaveley and resulted in the Court ordering the primary residence of the two children to be with Lynn Eileen Walsh, the appellant in the within appeal. The Order provided that Bradley Walsh could have reasonable access to the children. The appellant explained that during the period from September 1, 1998 to May 18, 1999, the children lived in her home - at Dawson Creek - three weekends each month and the long weekend at Thanksgiving together with one week at Christmas. Prior to the separation from her husband, she had always been the primary caregiver and when she no longer lived in the matrimonial home she continued to look after the children, including matters concerning day-care, school, travel, recreational activities and attending events such as soccer games even after she had moved to Dawson Creek. During the period between the first part of December, 1995 - when she separated from her husband - and September 1, 1998 - when she moved to Dawson Creek - she maintained a separate residence in Tumbler Ridge and the children lived in both homes, with their own room, clothes, furniture and toys in each residence. The appellant stated she attended parent-teacher meetings and interviews with teachers, gave the children direction and advice and fulfilled her parental responsibilities at all times by means of maintaining very close contact. The appellant filed - as Exhibit A-3 - photocopies of a bundle of receipts for expenditures made by her on behalf of the children during the period from July, 1998 to January, 1999. The purchases included gasoline for the vehicle used to transport the children, camping supplies, summer camp fees, recreational items, toys and entertainment. The appellant calculated that during the period at issue in the within appeal the children were with her between 38 and 50% of the time. While living in Dawson Creek, she arranged for counselling for the children in Tumbler Ridge relating to problems arising from her separation from their father. In addition, she was in contact with her son's skating teacher. She pointed out that most children - in a two-parent family - still spend a substantial amount of time in the care of teachers, counsellors, coaches or caregivers.
[4] In cross-examination, the appellant stated her husband - Bradley Walsh - agreed to pay support for the children and did make the payments. Following separation, the appellant attended the college - at Tumbler Ridge - for 8 months studying business administration. Her husband entered into a common-law relationship with a woman and later moved into her house. The appellant stated she realized that to obtain better employment she would have to move from Tumbler Ridge. She obtained a job as a para-legal in Dawson Creek and worked from 8:30 a.m. to 4:00 p.m. - Monday to Friday - until the end of December, 1998 at which time she found other employment in Dawson Creek. After her move to Dawson Creek, she rented a house and her sons each had a dresser, bed and toys. In the appellant's view, the Order - Exhibit A-1 - was based largely on the familiarity of the children with the school and community of Tumbler Ridge. She was aware the Order of August 27, 1998 was granted on an interim basis as otherwise she would have moved back to Tumbler Ridge - even if it meant living on social assistance - in order to have permanent care of her children. The co-parenting with her husband was difficult at times and the fact he had entered into a new relationship - fraught with domestic disputes - was not conducive to a healthy environment for her children. Even after the children moved to Dawson Creek on June 1, 1999 to live with her - pursuant to the Order dated May 18, 1999 – Exhibit A-2 - she continued to drive them to play soccer and attend school events at Tumbler Ridge until the end of the school year in June. The children spent one month with their father at Tumbler Ridge but by September 1, 1999 their lives were now centred in Dawson Creek. Their father moved to southern British Columbia and thereafter was able to visit the children only on an irregular basis. While she was living in Dawson Creek - and the children were living with her husband at Tumbler Ridge - the appellant stated there were some days during the winter when she could not travel to see them. She remained in contact with the children's physician in Tumbler Ridge as she found she could not always rely on her husband to communicate any health concerns to her. Her husband paid for day-care costs but she paid for skating lessons and soccer registration.
[5] The appellant submitted that she provided a substantial amount of care to her children during the period she was living in Dawson Creek and - despite the physical separation - remained primarily responsible for their care and upbringing, carrying on the same function since their birth.
[6] Counsel for the respondent submitted the focus of the children's life during the period under appeal was at Tumbler Ridge and that their father had been recognized by the Provincial Court as the provider of their primary residence. As a result, the appellant was not entitled to the Child Tax Benefit because she was not an "eligible individual" as defined in section 122.6 of the Income Tax Act (the "Act").
[7] In paragraph 122.6(g) of the Act, there is reference to regulations made by the Governor in Council on the recommendation of the Minister of National Health and Welfare and the relevant regulation is 6302.
[8] The combined effect of the relevant provisions - section 122.6 of the Act and Regulation 6302 is as follows:
"122.6 "eligible individual" in respect of a qualified dependant at any time means a person who at that time
(a) resides with the qualified dependant,
(b) is the parent of the qualified dependant who primarily fulfils the responsibility for the care and upbringing of the qualified dependant,
(c) is resident in Canada, ...
and, for the purposes of this definition,...
(h) factors to be considered in determining what constitutes care and upbringing may be set out in regulations made by the Governor in Council on the recommendation of the Minister of National Health and Welfare;
Regulation 6302:
For the purposes of paragraph (h) of the definition "eligible individual" in section 122.6 of the Act, the following factors are to be considered in determining what constitutes care and upbringing of a qualified dependant:
(a) the supervision of the daily activities and needs of the qualified dependant;
(b) the maintenance of a secure environment in which the qualified dependant resides;
(c) the arrangement of, and transportation to, medical care at regular intervals and as required for the qualified dependant;
(d) the arrangement of, participation in, and transportation to, educational, recreational, athletic or similar activities in respect of the qualified dependant;
(e) the attendance to the needs of the qualified dependant when the qualified dependant is ill or otherwise in need of the attendance of another person;
(f) the attendance to the hygienic needs of the qualified dependant on a regular basis;
(g) the provision, generally, of guidance and companionship to the qualified dependant; and
(h) the existence of a court order in respect of the qualified dependant that is valid in the jurisdiction in which the qualified dependant resides."
[9] In the case of M.N.R. v. Stephen Marshall and Victoria Marshall, [1996] 3 C.T.C. 2106, the Honourable Judge Bell, Tax Court of Canada, dealt with the redetermination of a matter pursuant to the direction of the Federal Court of Appeal arising from a judicial review of his earlier decision in which he found each of the parents to have been an eligible individual within the meaning of section 122.6 of the Act on the following basis as stated at p.4 beginning at paragraph 9 of his judgment, as follows:
"9. I found, as stated in my oral reasons for judgment,
Who is entitled to the benefit? Both are. Each of Stephen and Victoria was an "eligible individual" under section 122.6 of the Income Tax Act. Each resided with the two boys during the period under appeal and each, while residing with them, primarily fulfilled "the responsibilities for the care and upbringing of the" boys.
10. This conclusion was based upon the definition of "eligible individual" which provided that "eligible individual" at any time means a person who at that time "resides with the qualified dependant" and also upon the evidence that each parent cared for the boys in all ways when the boys were with that parent.
11. The Federal Court of Appeal, in its Reasons for Judgment on judicial review of this matter, stated that it was the female parent who, on the facts as found by this Court, was the person who "primarily fulfils the responsibility for the care and upbringing" of the children of the marriage and that only that parent may be properly regarded as the person entitled to child care benefits as provided for in section 122.6 of the Act and section 6302 of the Regulations. That Court stated further,
This section of the Act contemplates only one parent being an "eligible individual" for the purpose of allowing the benefits. It makes no provision for prorating (sic) between two who claim to be eligible parents. Only Parliament can provide for a prorating (sic) of benefits but it has not done so.
12. The matter of residence of each parent with the boys was not mentioned in the Reasons for Judgment of the Federal Court of Appeal. It must have decided that Victoria Marshall was the only parent who resided with the boys. Although no basis for that decision was given it is assumed that it was made on the basis that she spent more time with them than did Stephen Marshall."
[10] In the case of Piorkowski v. Her Majesty the Queen, 2 C.T.C. 2308, the Honourable Judge Dussault, Tax Court of Canada, considered the appeal of a taxpayer who had lived common law with the father of two children sharing joint custody with the mother and a dispute arose over the entitlement to the child tax benefit. At page 7 - and following - of his judgment - commencing at paragraph 28 Judge Dussault stated:
"28. I am faced here with two parties, the mother of the children on the one hand and their father (and his new spouse) on the other, who undoubtedly did their best to give their utmost attention to the care of the children and to be involved in their upbringing in a difficult joint custody situation. Each provided attention, each participated, and each got involved in his or her own way and according to this or her own means.
29. Where the evidence taken as a whole does not really tip the scales one way or another in any significant manner, one would want to find a solution that would be in line with the wish of the parties to share the custody of their children on an equal basis, which is what was essentially agreed to and adhered to in the present case.
30. Unfortunately, except where there is an agreement between the interested parties to share the child tax benefit on a six-month rotational basis, an arrangement accepted as an administrative practice by Revenue Canada, it is not possible to divide the benefit between the parents, as was decided by the Federal Court of Appeal in R. v. Marshall, [1996] 2 C.T.C. 92 (Fed. C.A.).
31. In light of the factors to be considered, which are based on care, attention, participation and involvement, and in view of the evidence adduced in the present case, I must conclude that the appellant has brought insufficient evidence to demonstrate, on a balance of probabilities, that she has satisfied the condition set out in paragraph (b) of the definition of "eligible individual" in section 122.6 of the Act, namely that she was, during the periods in issue, the parent who primarily fulfilled the responsibility for the care and upbringing of the two children.
32. Therefore, the appeals are dismisssed."
[11] In a recent decision - not yet available in English - Judge Lamarre-Proulx in the case of Vaillancourt et Sa Majesté La Reine (1999-3801(IT)I) held that in all periods under appeal - except one - the taxpayer was not the "eligible individual" having in mind the place where the children resided and who was the person primarily fulfilling the responsibility for their care and upbringing. In that decision, Judge Lamarre-Proulx stated she hoped the appellant could appreciate that even though the Court had to make a determination that one parent was primarily responsible for the care of the children this did not mean the other parent's considerable involvement was not essential for the well-being of the children.
[12] In the within appeal, there is no doubt the appellant was extremely concerned about the ongoing welfare of her children and that she expended a great deal of time and energy in maintaining close contact during the period under appeal even though she resided in a community 180 kilometres from where her children were living with their father. She spent a great deal of time with them and they stayed with her at her residence in Dawson Creek three weekends a month - weather permitting - and for longer periods during a long weekend and over the Christmas holiday. She remained involved with their schooling, recreation and other related activities and was still concerned with arranging their counselling and/or communicating with the family physician. She also expended her own funds in connection with activities of the children carried out in Tumbler Ridge and attended events there even though the trip from Dawson Creek and back involved at least a three-hour drive under good road conditions. However, when one examines the criteria set forth in Regulation 6302, there is no doubt that the father of the children - Bradley Walsh - provided the primary residence for the children, as designated by the Court Order - Exhibit A-1. In addition, he was primarily responsible for the maintenance of a secure environment in which the children resided and would have been required to carry out the supervision of the daily activities of the children and to attend to their hygienic needs on a regular basis as well as arrange for the transportation to school and athletic and other activities as contemplated by the wording of the Regulations taken as a whole. The children spent the majority of their time with their father and the provision of the Act relates to a quantitative measurement of time rather than a qualitative assessment of the capabilities of both parents in carrying out certain functions set forth in Regulation 6302. Certainly, the appellant was an important part of the ongoing process of caring for the children and they were very fortunate to have had such a dedicated mother despite the difficulties posed by her economic situation and the distance from the site of her employment and residence from Tumbler Ridge. She is to be commended for her efforts in obtaining additional education which permitted her to secure employment suitable for caring for her children on a permanent basis. However, on the evidence, I cannot find the Minister was incorrect in determining that Bradley Walsh - the appellant's husband - during the period under appeal was the eligible individual pursuant to section 122.6 of the Act. The appellant carried the burden of establishing her entitlement on a balance of probabilities. In recent times, joint or shared custody has become quite common, especially with both parents working - at one or more jobs - and there is a need for both to rely on a variety of instructors, teachers, coaches, trainers and caregivers - apart from the school system - in order to provide care for their children. In the recent case of Nelson v. A.G. of Canada, 2000 DTC 6556, the Federal Court of Appeal considered the case of a taxpayer who sought the equivalent to married tax credit even though he had made child support payments for his son and had been allowed the resulting deduction for those amounts. At page 6559 of her judgment, Sharlow J.A. - writing for the Court - stated:
"13. The premise underlying Mr. Nelson's argument is that Parliament should provide equal tax relief to all single parents who support their children in a shared custody arrangement. While that may be a laudable public policy objective, it is not one that can be advanced through a claim under subsection 15(1) of the Charter. Mr. Nelson's remedy lies with Parliament alone.
14. I note that the same conclusion was reached by the Tax Court in Werring v. Canada, [1997] T.C.J. No. 361 (QL); 97 DTC 3290. Mr. Nelson argued his case on a slightly different basis. He emphasized what he characterized as the rights of children, arguing that children are jeopardized by a tax system that provides less generous tax relief to joint custodial parents who have a legal obligation to pay child support than those who have no such legal obligation. The record discloses no factual foundation for that argument. Nor does the record establish whether, assuming there is such a disadvantage to children, the problem cannot adequately be addressed through an application to the family court for appropriate adjustments to the financial support obligations.
15. This application for judicial review should be dismissed."
[13] It is apparent some legislative changes are required. Given the opportunity to do so by the Act, the Minister is quite adept at determining matters involving the use of vehicles and other assets and making an apportionment between business and personal use. Similarly, the Minister can make a decision considering the appropriateness or otherwise of the division of partnership profits and losses between non-arm's length parties in accordance with the relevant circumstances. In instances where there is joint or shared custody - far removed from the structured reasonable access or visitation rights of two decades past - it would not be difficult to provide for the child tax benefit to be shared provided certain requirements were met. Once an apportionment was made by the Minister on the evidence provided, then that decision would stand unless and until it were interfered with by a court on appeal. Probably, there would be very little litigation arising out of those determinations made after reviewing the facts, as provided by the parties in responding to questionnaires or by supplying information through other means of communication.
[14] The appellant provided a measured and insightful look into the problems surrounding this legislation and it is unfortunate her efforts during the period under appeal cannot be recognized within the current regime of the Act. However, my jurisdiction is to determine whether or not the Minister was incorrect in deciding the appellant was not entitled to the child tax benefit. The Minister's decision was correct and the appeal is dismissed.
Signed at Sidney, British Columbia, this 5th day of January 2001.
"D.W. Rowe"
D.J.T.C.C.