Disability Tax Credit Promoters Restrictions Regulations: SOR/2021-55

Canada Gazette, Part II, Volume 155, Number 8

Registration
SOR/2021-55 March 29, 2021

DISABILITY TAX CREDIT PROMOTERS RESTRICTIONS ACT

P.C. 2021-213 March 26, 2021

His Excellency the Administrator of the Government of Canada in Council, on the recommendation of the Minister of National Revenue, pursuant to section 9 of the Disability Tax Credit Promoters Restrictions Act ^{footnote a}, makes the annexed Disability Tax Credit Promoters Restrictions Regulations.

Disability Tax Credit Promoters Restrictions Regulations

Maximum Fee

Setting of maximum fee

1 (1) For the purposes of subsection 3(1) of the Disability Tax Credit Promoters Restrictions Act, the maximum fee for a disability tax credit request made by a promoter is set at

• (a) $100, for a request for a determination of disability tax credit eligibility under subsection 152(1.01) of the Income Tax Act;
• (b) $100 per taxation year, for a request made in respect of a deduction under subsection 118.3(1) or (2) of the Income Tax Act; or
• (c) $100 per taxation year, for a request made in respect of any deduction or overpayment of tax under the Income Tax Act that is contingent upon the eligibility for a deduction under subsection 118.3(1) or (2) of that Act.

Total fee accepted or charged

(2) If more than one disability tax credit request is made in respect of a claimant for a taxation year under either paragraph (1)(b) or (c), or both, the total fee that a promoter accepts or charges must not exceed $100.

Adjusted Maximum Fee

Inflationary adjusted year

2 (1) In this section, inflationary adjusted year means 2025 and every fifth year after that year.

Maximum fee adjusted on December 1

(2) Subject to subsections (3) and (4), the maximum fee set out in section 1 is to be adjusted on December 1 of a particular inflationary adjusted year so that the maximum fee is equal to the greater of

• (a) the fee determined by the formula

  A × B

  where

  A

  is the maximum fee on November 30 of the particular inflationary adjusted year, and

  B

  is the amount determined by the formula in subparagraph (i) or (ii), whichever is applicable, rounded to the nearest one-thousandth, or, if the amount is equidistant from two consecutive one-thousandths, rounded to the higher one-thousandth,

  • (i) if the particular inflationary adjusted year is 2025,

    C/D

    where

    C

    is the Consumer Price Index for the 12-month period ending on September 30, 2025, and

    D

    is the Consumer Price Index for the 12-month period that ended on September 30, 2019,

  • (ii) for any other particular inflationary adjusted year,

    E/F

    where

    E

    is the Consumer Price Index for the 12-month period ending on September 30 of the particular inflationary adjusted year, and,

    F

    is the Consumer Price Index for the 12-month period ending on September 30 of the last inflationary adjusted year in which the maximum fee was adjusted; and

• (b) the fee referred to in the description of A in paragraph (a).

Application of adjustment

(3) The adjustment referred to in subsection (2) is to be applied only if the amount determined under that subsection exceeds the amount of the maximum fee described in the description of A in paragraph (2)(a) by $5 or more.

Rounding

(4) If the adjustment referred to in subsection (2) is applied, the maximum fee determined under that subsection is to be rounded to the nearest dollar or, if the result is equidistant from two consecutive dollar amounts, to the higher dollar amount.

Consumer Price Index

(5) In this section, the Consumer Price Index for any 12-month period is the result arrived at by

• (a) aggregating the Consumer Price Index for Canada, as published by Statistics Canada under the authority of the Statistics Act, for each month in that period;
• (b) dividing the aggregate obtained under paragraph (a) by 12; and
• (c) rounding the result obtained under paragraph (b) to the nearest one-thousandth or, if the result obtained is equidistant from two consecutive one-thousandths, to the higher one-thousandth.

Coming into Force

S.C. 2014, c. 7

3 These Regulations come into force on the day on which the Disability Tax Credit Promoters Restrictions Act comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues

The fees charged by some promoters for their assistance in completing a DTC request are considered excessive and contrary to the policy intent of the Income Tax Act of providing disability-related tax credits and benefits to persons with disabilities and their supporting family members. The Government of Canada decided that measures were needed to protect Canadians living with disabilities and their supporting family members from being charged more than what is considered reasonable compensation for the services rendered. The Act was enacted to limit the fees that can be charged or accepted, directly or indirectly, by persons who assist persons with disabilities or their supporting family members in completing a DTC request. The Regulations set out the prescribed maximum fee that can be charged or accepted. The Act remains inoperative until regulations are made to establish the maximum fee.

Background

The Act, which received royal assent on May 29, 2014, was enacted to limit the fees that can be accepted or charged, directly or indirectly, by a promoter who makes a DTC request to the CRA on behalf of a claimant (i.e. an individual who is the subject of a DTC request or who has a dependant on behalf of whom a DTC request is made). The Act defines “promoter” as a “person who, directly or indirectly, accepts or charges a fee in respect of a disability tax credit request.” This definition includes tax preparers, tax consultants, financial services providers, accountants and lawyers, or any other person who charges a fee to assist a taxpayer to submit form T2201, DTC Certificate (DTC Certificate), or claim or transfer the disability-related tax deductions on their T1, Individual Income Tax and Benefits Return. Medical practitioners whose only role is to certify the extent of a patient's medical condition for the purposes of a DTC request are not considered “promoters” under the Act.

With a maximum fee established, the Act will come into force on November 15, 2021, immediately followed by the coming into force of the Regulations prescribing the maximum fee that can be charged for assisting with a DTC request.

The Income Tax Act provides for several tax credits and deductions for persons living with a severe and prolonged impairment in physical or mental functions. In appropriate circumstances, these tax credits can be transferred to the supporting family members of persons living with a qualifying disability. These credits and deductions include the disability tax credit (DTC) for mental or physical impairment for oneself or a minor or adult dependant (also referred to as the disability amount), the children's arts or fitness amounts (available for the 2012 to 2016 taxation years), the child-care expenses deduction and other important tax relief measures that are intended to compensate for some of the additional expenses carried as a result of living with a disability. The DTC and other non-refundable tax credits are claimed by the taxpayer on their T1, Individual Income Tax and Benefits Return, that is filed with the CRA at the end of each taxation year.

All provinces and territories also provide for their own disability-related tax credits. Residents of all provinces and territories, including Quebec, claim their federal tax credits on the federal T1, Individual Income Tax and Benefits Return; however, Quebec residents claim their provincial tax credits separately, on Quebec's income tax return. For the purposes of the Act, a DTC request relates to requests for federal disability-related tax credits and to provincial or territorial credits (excluding Quebec, where residents have to file a separate Certificate Respecting an Impairment directly with Revenu Québec).

The federal disability-related tax credits and the provincial or territorial credits serve to reduce the taxpayer's income tax payable (in some cases reducing it to zero), which results in an income tax refund where amounts deducted at source or previously remitted exceed the amount of tax payable. The Income Tax Act also allows a taxpayer to request a reassessment, for up to nine prior taxation years, in addition to the current taxation year, should they wish to amend a prior year's tax return, which may result in a refund of taxes paid in these previous years. This can be done by submitting a T1 Adjustment Request  –  T1ADJ or a signed letter to the CRA. The DTC Certificate has been simplified and modified to include the option to request automatic reassessments for prior years for their own disability claims and for dependants under the age of 18.

As at September 30, 2018, there were nearly 1.3 million individuals with an accepted DTC Certificate and close to 844 000 individuals who claimed the DTC. The total tax relief provided in relation to the DTC has been over $1 billion annually since 2014. For 2018, tax relief totalled $1.4 billion.

Determination of eligibility for disability-related tax credits

In order to request a determination of eligibility for the disability amount and other disability-related benefits and tax credits, an applicant or their representative must complete Part A of the DTC Certificate and sign it. The applicant or their representative is asked to provide the name and contact information of the person with a disability and, if applicable, answer a few questions regarding the supporting family member. If the applicant would like the CRA to automatically adjust their T1, Individual Income Tax and Benefits Return for prior taxation years in order to claim the disability amount or related benefits or tax credits for themselves or a dependant under the age of 18 residing with them, they can check the box in Section 3 of Part A of the DTC Certificate.

By signing the DTC Certificate, the applicant or their legal representative authorizes the medical practitioner to share or discuss with the CRA the medical information needed so that it can make a decision on eligibility. It also authorizes the CRA to adjust the T1 Individual Income Tax and Benefits Return, as applicable, if the “Yes” box has been ticked in Section 3.

The applicant's medical practitioner completes Part B of the DTC Certificate in order to attest to the effects of the person's impairment on their basic activities of daily living. The responsibility for completing most of the DTC Certificate rests with the medical practitioner. If the CRA requires additional information, it will contact the medical practitioner, the applicant or their representative.

Once the DTC Certificate has been completed and signed, the applicant or their representative sends it to the CRA by addressing it to the Disability Tax Credit Unit of the applicant's tax centre. The CRA reviews the application in order to determine if the person meets the eligibility requirements of the Income Tax Act for the DTC based on the information provided by their medical practitioner. If the application is approved, the CRA will send the applicant a Notice of Determination identifying the taxation years for which the applicant is eligible for the DTC. If the applicant is eligible for the DTC for prior taxation years for which they have already filed their T1 Individual Income Tax and Benefits Return, the applicant can request a reassessment for up to nine prior taxation years. Applicants do not need to submit a new DTC Certificate every year, unless the CRA requests one.

If the applicant receives a Notice of Determination stating that their DTC request for a determination of eligibility was denied, the Notice of Determination will explain why. If the applicant disagrees with the CRA's decision, they can

1. call the designated telephone numbers on the CRA webpages to ask questions or to discuss the DTC request;
2. request a review of the decision by contacting the CRA in writing. The request for a review must include any relevant medical information not previously submitted; and
3. file a formal objection, by completing a form T400A, Notice of Objection – Income Tax Act to request a formal review of the initial decision no later than 90 days after the Canada Revenue Agency mails the Notice of Determination. An applicant can file an income tax objection online, through their representative, by mail, or by delivering the Notice of Objection in person to a tax services office or tax centre.

If the applicant is still not satisfied with the CRA's decision, their next recourse is to file a Notice of Appeal with the Tax Court of Canada.

A request for a determination of eligibility for the disability amount and other disability-related benefits and tax credits includes completing and filing the DTC Certificate; it does not include filing a Notice of Appeal to the Tax Court of Canada or any representation related thereto.

Estimate of the fees charged

As with any taxpayer, persons with disabilities or their family members can complete their income tax return, or request a reassessment to a prior year's tax return, either on their own or with the assistance of another person. Over the last several years, the CRA has observed an increase in the number of specialized service providers or promoters that approach individuals, or their supporting family members, who are potentially eligible for disability-related tax credits, to offer their services in the preparation of the DTC Certificate and the related requests for reassessments. These promoters often contend that completing the necessary forms and claiming the various tax credits is difficult, and offer their services on a contingency fee basis — charging between 15% and 40% of the resulting income tax refund.

For example, for the 2019 calendar year, a DTC-eligible adult, residing in Ontario, could be entitled to a combined federal-provincial income tax refund of $1,694 for claiming the disability amount for themselves. As the DTC may be claimed for a maximum of 10 years, the claimant can also request a reassessment of each of the 9 prior taxation years. If eligible for the DTC for those years, the combined income tax refund for all years could reach approximately $15,700. Income tax refunds generated by claims for the DTC with respect to minors residing in Ontario can range from $2,682 for the 2019 calendar year to approximately $24,900 for that taxation year plus nine prior eligible taxation years. A promoter that charges an adult claimant the most commonly used contingency fee of 30% of the disability-related tax refunds would currently be compensated from approximately $510 to $4,720 for their services. In the case of a minor eligible for the DTC, a 30% contingency fee can generate fees ranging from approximately $800 to $7,470.

These services include the relatively straightforward task of assisting the adult applicant with completing Part A of the DTC Certificate and then assisting in claiming disability-related credits on their T1 Individual Income Tax and Benefits Return for the current taxation year and requesting a reassessment for all eligible previous taxation years.

In 2018, the CRA received about 240 000 ^{footnote 1} new applications for a determination of eligibility for the DTC. It is estimated that 5% or 12 000 applications are prepared with the assistance of promoters each year. The CRA statistics show that many taxpayers request reassessments of prior taxation years. It is therefore estimated that the 12 000 determinations of DTC eligibility per year prepared with the assistance of promoters could result in approximately 24 000 reassessments for prior years, for a total of 36 000 DTC requests per year being third-party assisted.

Objective

The objective of the Regulations is to support the implementation of the Act by setting the maximum fee permitted to be charged for services relating to a DTC request.

Description

The Regulations establish the maximum fee that a promoter can accept or charge in respect of a DTC request as

• (a) $100 for a DTC request made for a determination of disability tax credit eligibility; and
• (b) $100 per taxation year for a DTC request in respect of a deduction for an individual or for a dependant, or in respect of any deduction or overpayment of tax under the Income Tax Act that is contingent upon DTC eligibility for that individual or for a dependant.

The fee restriction does not apply to time spent by promoters preparing the portions of their client's income tax return that are not disability related; nor does it apply to the provision of tax advice unrelated to the adjustments required for claiming the DTC. Lastly, the fee restriction does not apply to services rendered in relation to appealing the CRA's redetermination to the Tax Court of Canada.

Regulatory development

Consultation

During public consultations held from November 4 to December 15, 2014, the CRA heard from nearly 900 Canadians. Over 80 individuals participated in the in-person sessions held in Vancouver, Toronto, Montréal and Halifax. Over 750 submissions were received online, and over 50 submissions were received in writing. These stakeholders were Canadians with disabilities, supporting family members, promoters, tax professionals, medical practitioners, associations representing persons with disabilities and members from the general public. The Disability Tax Credit Public Consultations report, available on the CRA website, provides a summary of the public consultation input received. As part of these consultations, participants discussed various topics, including the fee structures and proposed options for the maximum fee, such as

• a percentage-based fee structure ranging from 1% to 40% of the generated tax refund;
  • many participants felt current rates (15% to 40%) are too high,
  • others felt current rates are appropriate and the market would regulate itself;
• a maximum fee similar in structure as it is currently used in the Tax Rebate Discounting Act ^{footnote 2} with a maximum fee of 15% on the individual's first $300 of income tax refund and 5% on a refund exceeding $300;
• fixed fee options ranging from no fee to a maximum of $1,000 when claiming the full range of credits for the 10 years;
• combinations such as an upfront fixed fee of $10 to $300, plus an additional amount of $25 to $75 for each tax year reassessed; and
• maximum hourly rates ranging from $35 to $130 for professionals such as accountants, lawyers, etc.

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, the hourly rate of pay for some professionals, and whether any promoters, such as accountants and lawyers, should be exempt from the new reporting criteria. Although people dislike the term “promoter,” it is the term used in the Act. The proposed maximum fees take into account these broad consultations and represent fair market value for the type of services being offered.

In October 2018, the CRA presented a number of options for setting the maximum fee to the newly re-established Disability Advisory Committee (DAC). The DAC is made up of 12 members and 2 co-chairs, and includes professionals from various fields, including health professionals, lawyers, accountants, and tax professionals, as well as advocates of the disability community, representatives of Indigenous communities, and persons with disabilities. The role of the DAC is to provide advice to the Minister of National Revenue (the Minister) and the Commissioner of the CRA on

• the administration and interpretation of the laws and programs related to disability tax measures;
• ways in which the needs and expectations of the disability community can be better taken into consideration;
• increasing the awareness and take-up of measures for people living with disabilities;
• how to better inform people living with disabilities and various stakeholders about tax measures and important administrative changes; and
• current administrative practices and how to enhance the quality of services for people living with disabilities.

The DAC discussed the need to strike a balance between ensuring that vulnerable populations (such as individuals with disabilities) are not financially disadvantaged and adequately compensating those that assist them in receiving the benefits to which they are entitled. Overall, the DAC was of the view that the fee should be set at an affordable rate for the applicant, should be simple to communicate and understand, and ensure that promoters are adequately compensated for their time to ensure legitimate businesses can continue to operate and provide affordable services to this vulnerable community. It also recognized that while most applications require little effort, others might require additional work on the part of the promoter.

After considering the advantages and disadvantages of each of the options presented, the DAC indicated that the fixed dollar amount option was the preferred option. Although the majority of the DAC members preferred this option, some expressed concern that this approach still allowed promoters to charge too much, while other DAC members expressed concern that the cap might be too low.

Prepublication in the Canada Gazette, Part I (CGI) — June 2019

The draft Regulations were published in the Canada Gazette, Part I, on June 1, 2019, followed by a 30-day comment period. During this period, the CRA also posted questions and answers on the Canada.ca website in order to provide the public with additional information on the Act, the draft Regulations and their application.

During the comment period, the CRA received a total of 259 written submissions from a variety of stakeholders, including persons with disabilities and their caregivers; promoters and related associations; health professionals, professional associations and disability-related associations; and Members of Parliament. The written submissions were comprised as follows:

Claimants table 1 note a	Promoters table 1 note b	Professional associations table 1 note c	Members of Parliament	Total
207	36	10	6	259
Table 1 note(s) Table 1 note a Includes persons with disabilities or their caregivers who are requested a determination of eligibility or tax credits. Return to table 1 note a referrer Table 1 note b Includes individual providing assistance with DTC requests as well as corporate promoters and their associations. Return to table 1 note b referrer Table 1 note c Includes health professionals, tax professionals and their associations and disability related associations. Return to table 1 note c referrer

The comments provided from the 259 stakeholders were categorized as follows:

Support fee cap (in some form)	Do not support fee cap	Do not support any fee	Requested clarification / provided comment	No comment provided	Total
159	53	1	39	7	259

Many of the comments received are similar to those that were submitted during the Disability Tax Credit Public Consultations undertaken by the CRA in 2014.

Of the 159 respondents who indicated support for a fee cap in some form, 88 were in favour of the proposed $100 fee cap, 30 felt the fee cap should be higher, 5 felt the fee cap should be lower and 36 indicated support for a fee cap but did not specify a preference for how much.

Questions asked related to when the new legislation will come into force; what services are included in a “request”; how will the new legislation impact promoters and their clients who currently have a contract in place which stipulates that a higher fee will be charged; what will happen to the various DTC requests that are currently in progress but not completed; who will assist the claimants if their promoters are forced to close their businesses because the proposed maximum fee is too low.

Persons with disabilities and their caregivers (claimants)

Support fee cap (in some form)	Do not support fee cap	Do not support any fee	Requested clarification / provided comment	No comment provided table 3 note a	Total
125	43	0	32	7	207
Table 3 note(s) Table 3 note a Email communication from these respondents included a subject line but no text in the body of the email. Return to table 3 note a referrer

Of the 43 opponents, 12 claimants stated that they opposed the proposed fee cap because it was too low and will cause many of the promoters who are offering needed services to close.

The 32 claimants who did not express an opinion either in support or against the proposed fee cap, used this opportunity to provide the CRA with comments or suggestions on how to simplify the application process; how to increase the level of awareness of the DTC and its process; or simply to express their satisfaction with the services provided and the fees charged by their promoters.

Of the 207 respondents, 12 claimants stated that before they accepted the services of a promoter, they had no knowledge of the DTC, its eligibility criteria or the application process and added that were it not for the services provided, they would not be receiving the DTC.

Promoters and related associations

Support fee cap (in some form)	Do not support fee cap	Do not support any fee	Requested clarification / provided comment	No comment provided	Total
21	10	1	4	0	36

Seventeen promoters and related associations shared their concern that the proposed $100 fee cap was too low and could lead to the discontinuance of DTC-related services by some businesses. This would result in limited access for disabled persons, or their caregivers, in need of assistance with the DTC certification process.

The promoters and related associations also expressed concern that if the $100 fee was charged upfront, it could incentivize certain promoters who do not work on a contingency-fee basis to submit incomplete claims in order to collect their fee without providing the claimants the level of assistance that they need.

Promoters and their associations also voiced their dissatisfaction with the CRA's analysis of the proposed maximum fee. They were concerned that the CRA significantly underestimated the amount of time and work necessary to educate claimants and their family members, and also medical practitioners, about DTC eligibility requirements and the level of effort involved in managing CRA questions, clarification letters and the DTC process in general. These respondents called upon the CRA to keep working on simplifying the DTC and its application process, and educating the general public of the same. The CRA was also encouraged to reach out to medical practitioners and their associations to raise awareness about the DTC and also to inform this group of the eligibility requirements and additional specific information required from the medical practitioners.

Health professionals, professional associations and disability-related associations

Support fee cap (in some form)	Do not support fee cap	Do not support any fee	Requested clarification / provided comment	No comment provided	Total
9	0	0	1	0	10

The respondent seeking clarification asked when the new legislation will come into force, what services are included in a “request,” how will the new legislation impact promoters and their clients who currently have a contract in place which stipulates that a higher fee will be charged, what will happen to the various DTC requests that are currently in progress, yet not completed.

The legislation and the Regulations will come into force on November 15, 2021. The lead time between the publication of this notice and the implementation of the Act and Regulations is intended to allow promoters to complete existing contracts and organize their affairs in order to facilitate compliance with the legislation. Any contracts in place upon the coming into force of the Act and the Regulations will be subject to the prescribed maximum fee cap.

Members of Parliament

Support fee cap (in some form)	Do not support fee cap table 6 note a	Do not support any fee	Requested clarification / provided comment	No comment provided	Total
4	0	0	2	0	6
Table 6 note(s) Table 6 note a This was communicated as concerns raised by constituents. Return to table 6 note a referrer

All four members who indicated support for a fee cap were of the view that the proposed $100 fee cap was too low. The remaining two members did not express an opinion on the proposal, but communicated their constituents' concerns that the fee cap was too low.

Summary of CGI comments

After considering the feedback received after the prepublication in the Canada Gazette, Part I, consultation period, the CRA is confident that the $100 fee cap achieves an appropriate balance between the policy intent of supporting persons with disabilities and their caregivers and providing adequate compensation to promoters. The feedback received was consistent with feedback received during the 2014 public consultations from the general public, medical associations, persons with disabilities and promoters. Additionally, the fee cap was considered to be consistent with the DAC's recommendation that the fee be set at an affordable rate for the applicant, be simple to communicate and understand, and ensure that promoters are adequately compensated for their time recognizing that most applications will require very little effort in providing assistance to complete Part A of the DTC Certificate.

The CRA is of the view that with the significant improvements made in the DTC application process as a result of the 2014 public consultation feedback, other concerns raised during CGI consultations, such as the complexity of the process and the need for access to assistance in navigating it will be alleviated.

Improvement to the DTC application process

In recent years, the CRA has simplified and clarified the DTC application process which will greatly reduce the time spent in completing the necessary paperwork. Improvements include the following:

• A simplified and more user-friendly DTC Certificate:
  • Form T2201, Disability Tax Credit Certificate was shortened from 12 to 6 pages.
  • The DTC Certificate includes the option to request automatic reassessments for prior years for an eligible claimant and for dependants under the age of 18.
  • The CRA guide for disability-related credits and deductions (RC4064) has been revised to make it more user-friendly.
• A simplified application process:
  • Since the 2016 tax season, taxpayers and their representatives have been able to file a return that has a claim for the DTC electronically, even if there is no disability information on file.
  • Letters that are sent to medical practitioners to request additional information are clearer, and provide more time to return documents to the CRA (45 days instead of 30 days).
  • Supporting documentation requested by the CRA can be submitted electronically through My Account.
  • Since February 2019, taxpayers and their representatives can submit all disability-related information, including a DTC request, electronically through My Account.
• Improved communications and outreach:
  • Clearer and more comprehensive information about the DTC and how to apply is available on the CRA website and through federal, provincial and community partners, such as Employment and Social Development Canada, Service Canada, and various national medical practitioner associations.
  • The CRA website has a short video explaining the DTC and the application process.
  • The CRA holds in-person outreach visits, during which outreach officers present information on key benefits and credits, including the DTC, to community organizations and the clients they serve. During these visits, outreach officers explain the process and help vulnerable individuals apply for the DTC by assisting them in filling out Part A (personal information) of the DTC Certificate and distribute printed informational materials that explain the application process and how to obtain help from the CRA to fill out the DTC Certificate for free. These materials are also available in braille and large print.
  • The CRA has expanded its suite of information products tailored to persons with disabilities and shelter users, and established partnerships with key organizations serving these vulnerable groups, including Women's Shelters Canada, the Disability Foundation, and various chapters of the March of Dimes.
  • Through additional funding provided in Budget 2018, the CRA expanded the Community Volunteer Income Tax Program which will also help increase DTC awareness and access to free tax preparation services so that more Canadians can access the DTC and other benefits and credits.

The CRA will continue working with the disability community to further simplify the DTC application process and improve communication in order to better meet the needs of Canadians with disabilities and their supporting family members.

Modern treaty obligations and Indigenous engagement and consultation

In accordance with the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, a modern treaty implications assessment was conducted. As no new programs or services will be brought forward as a result of the Regulations, the assessment did not identify any potential modern treaty implications.

Instrument choice

The policy intent of the Act is to limit the fees charged to persons with disabilities and their supporting family members for requesting the tax credits and benefits that they are entitled to receive. The maximum fee will be prescribed by the Regulations. There are no non-regulatory options available for limiting these fees. The baseline scenario (i.e. maintaining the status quo, whereby there is no maximum fee) does not meet the policy intent of the Act. In addition, the Act would remain inoperative, which is contrary to Parliament's intent.

Based on the feedback received during the 2014 public consultations, the CRA analyzed and presented to the DAC several fee models. In subsequent discussions with the DAC, the flat fee option was determined to be the best option. The $100 fixed fee amount was determined to be a reasonable cost for the services provided by promoters, by means of

• comparing fees charged by professional accounting firms and tax preparers to complete similar tasks:
  • some large tax preparers publicize their fees for the services they provide, and some charge approximately $30 for a retroactive DTC claim;
• comparing maximum fee structures for similar services (i.e. discounting services governed by the Tax Rebate Discounting Act — approximately $90 for a DTC made for an adult);
• estimating an hour of work for professional tax services at $100 an hour:
  • a significant majority of claims involving the filling out of Part A of the DTC Certificate request would take less than an hour to complete; and
• confirming that the maximum fee represents approximately 10% of the actual dollar value of the federal portion of the disability amount ($1,235 for 2018).

Based on the Regulations, the maximum fee charged will range from $100 (for completing Part A of the DTC Certificate and a T1 Individual Income Tax and Benefits Return for the current taxation year) to $1,000 (for completing Part A, a T1 Individual Income Tax and Benefits Return for the current taxation year, plus a request for adjustments of previous taxation years to a total of 10).

It is important to note that the maximum fee does not apply to the portions of the T1 Individual Income Tax and Benefits Return that are not contingent on a determination of DTC eligibility. For example, fees charged by a promoter to claim the basic personal amount; Canada Pension Plan or Quebec Pension Plan contributions or employment insurance premiums paid through employment; charitable donations; and/or tuition amounts are not limited by these Regulations.

Consideration was given to exempting certain promoters from having to notify the Minister that they had accepted or charged fees in excess of the maximum fee. The Act provides that “exempt promoters” be prescribed in the regulations. To ensure that all persons assisting with a DTC request are compliant with the legislation, exemptions will not be prescribed at this time.

Regulatory analysis

Benefits and costs

A cost-benefit analysis was completed by the CRA for the Regulations. The results of the analysis estimated that in the 2018 calendar year, promoters assisted with approximately 29 880 claims for the DTC for adults with disabilities charging between $7.2 million and $19.2 million in service fees. It is estimated that promoters charged a further $2.3 million to $6.2 million for assisting with roughly 6 120 claims for the DTC in respect of minors with disabilities. Depending on what contingency fee is currently being charged by promoters, this represents an estimated $9.5 million to $25.4 million in total promoter revenues for assisting adults and minors with claims for the DTC.

These estimates were calculated based on the following:

• It is assumed that the CRA receives over 240 000 initial requests for a determination of DTC eligibility on average each year. Based on internal statistics gathered by the CRA, it is estimated that 5% of these requests are prepared with the assistance of promoters. It is therefore estimated that about 12 000 determinations of DTC eligibility per year are prepared with the assistance of promoters, resulting in approximately 24 000 reassessments for prior years, for a total of 36 000 DTC requests per year being third party assisted.
• The distribution of DTC requests between adult and minor claimants was 83% and 17% respectively as of December 31, 2017, and these proportions have been applied to the 2018 estimates of DTC requests.
• The amount of the federal DTC combined with the Ontario disability tax credit, given that the CRA statistics reveal that a large proportion of DTC claims are made by Ontario residents.
• The amount of income tax refund generated by the disability tax credit.
• The assumed contingency fees (15 – 40%) charged by these promoters, either per individual claim or as multiplied by the total number of claims or reassessment requests.

Following the implementation of the Regulations, which establish a maximum fee of $100 for each element of the DTC request, it is estimated that promoters' revenues could be reduced by an annualized average of between $5.1 million and $22.0 million. The implication of this would be that these amounts would remain in the hands of their clients (taxpayers with disabilities and their supporting family members).

These amounts represent the lowest and highest estimates of the fees charged by promoters for requests for a determination of eligibility for the DTC (at the lower end of the range) and for the assessment of one to 10 taxation years (on the higher end of the range).

No incremental administrative costs for persons with disabilities and/or their caregivers are anticipated. Form T2201, Disability Tax Credit Certificate has been shortened and streamlined to allow taxpayers to request an automatic reassessment of previous tax years upon determination of eligibility. In addition, the form has been modified to include a field where a taxpayer can disclose assistance received by a promoter.

Cost-benefit statement (measured in 2019 Canadian dollars)

• Number of years: 10 (2019 to 2028)
• Base year for costing: 2019
• Discount rate: 7%

Summary of monetized benefits and costs

Impact	Base year (2019)	Final year (2028)	Total (present value)	Annualized value
Total costs to promoters	$4.7M to $20.6M	$5.4M to $23.8M	$35.5M to 154.6M	$5.1M to $22.0M
Total benefits for persons with disabilities and/or caregivers	$4.7M to $20.6M	$5.4M to $23.8M	$35.5M to 154.6M	$5.1M to $22.0M
NET IMPACT	$0	$0	$0	$0

Quantified (non-$) and qualitative impacts

Positive impact

The positive impact of these Regulations is the greater retention of disability-related tax credits, benefits and income tax refunds by persons with disabilities and/or their caregivers.

Negative impact

The negative impact of these Regulations is the decrease in revenues earned by promoters. In some cases, this decrease may be significant enough to result in small business closures. While some will argue that this will result in a decrease in available DTC service providers, this is considered to be mitigated by improvements made in the DTC application process as well as improved service, communications and outreach offered by the CRA.

Small business lens

The Regulations are expected to result in a loss of revenue for promoters estimated at between $5.1 million to $22.0 million annually. This estimated reduction represents a corresponding increase in benefits/credits retained by the DTC claimant. There are no administrative costs associated with the Regulations for promoters.

The industry numbers provided by Statistics Canada's Business Register Division (December 2019 estimates for NAICS 54111 and 54112) show that approximately 59 000 businesses could be considered to meet the definition of “promoter.” Over 99% of these businesses are considered small businesses. Of that population, which includes tax preparers, tax consultants, financial services providers, accountants and lawyers, the actual number of businesses who would assist a taxpayer in making a DTC request in a given year is considered to be significantly lower. This is based on the estimate that, of the 240 000 new requests for a determination of eligibility for the DTC received in 2018, approximately 12 000 of these requests were made with the assistance of a third party.

It should be noted that some of these businesses may be forced to close their doors or reduce the level of service they provide as a result of the fee cap.

Small business lens summary

• Number of small businesses impacted: 59 000
• Number of years: 10 (2019 to 2028)
• Base year for costing: 2019
• Discount rate: 7%

Impact	Present value	Annualized value
Total revenue loss (all impacted small businesses)	$35.5M to $154.6M	$5.1M to $22.0M
Loss of revenue per impacted small business	$557 to $2,426	$79 to $345

One-for-one rule

The one-for-one rule does not apply, as the Regulations do not increase or decrease the amount of administrative burden imposed on businesses. Under the Act, if a promoter has charged a fee in excess of the prescribed maximum fee, the promoter is required to report this to the Minister. The Regulations do not require businesses to comply with any new reporting requirements.

Regulatory cooperation and alignment

Given that the Regulations only serve to set the maximum fee permitted to be charged for services relating to a DTC request, there is no regulatory cooperation or alignment component associated with it.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that the Regulations will not result in positive or negative environmental effects; therefore, a strategic environmental assessment is not required.

Gender-based analysis plus

A gender-based analysis plus (GBA+) was completed in respect of the Regulations. It is possible that taxpayers may benefit from this initiative differently based on various socio-economic factors, such as gender, sex, age, income level, disability, language, or Indigenous status. No GBA+ impacts (positive or negative) have been identified specifically with the setting of a maximum fee in the Regulations (in and of itself). However, following implementation of the Regulations, the Act will become operational and it is anticipated that this will have a positive impact on the disability community. While all Canadians completing a DTC request may benefit from the implementation of the Act and the Regulations, Canadians from certain demographic groups, such as seniors, women and low-income individuals, may experience greater direct benefits.

Implementation, compliance and enforcement, and service standards

Implementation

The Act will come into force on November 15, 2021, with the Regulations following immediately after. The lead time between the publication of this notice and implementation is intended to allow these businesses time to organize their affairs in order to facilitate compliance with the legislation.

Compliance and enforcement

The Act requires promoters who accept or charge fees in excess of the prescribed maximum to notify the Minister of this in writing. The administration of this reporting requirement and the penalty provisions of the Act will be carried out by the CRA through a multifaceted approach.

The CRA's compliance framework will include

• enhancing form T2201, Disability Tax Credit Certificate, to collect information relating to whether a promoter assisted a DTC applicant in completing their DTC request, whether the promoter charged a fee, and, if so, the amount of the fee;
• developing form T930, Disability Tax Credit Promoter Excess Fee Notification, a self-identification form for promoters to disclose excess fees charged (the deadline for submitting this form will be set out in the guidelines as an administrative measure outside of the regulatory framework);
• verifying information disclosed in forms T2201 and T930 with DTC applicants and promoters; and
• identifying and developing methods and means for the taxpayer to come forward and report suspected cases of non-compliance related to promoters.

In addition, enhanced communication products and expanded outreach activities have been implemented to help taxpayers, promoters and medical practitioners better understand the process of completing the DTC form.

Service standards

The Regulations set out the maximum fee a promoter can charge for assistance in claiming eligibility for the DTC using form T2201, Disability Tax Credit Certificate. The current published service standard of eight weeks for the processing of the T2201 remains unchanged by the Regulations. The same service standard will apply to the processing of the form T930, Disability Tax Credit Promoter Excess Fee Notification. The CRA aims to meet this standard 95% of the time.

Contact

Benefit Partnerships and Services Division
Canada Revenue Agency
Email: BPSDFPLSG@cra-arc.gc.ca