McNeilly v The King: Canada’s Medical Expense Tax Credit
The case of McNeilly v The King questioned whether or not a cisgender gay man was eligible to claim the Medical Expense Tax Credit (METC) for costs incurred during the process of surrogacy. This case required the Court to assess the way in which the Income Tax Act (ITA) should be interpreted amid an evolving landscape with new modern reproductive methods.
Overview of the Case
Kenneth McNeilly, a Canadian taxpayer, incurred medical expenses in 2015 as part of a surrogacy process with the intent to start a family. The METC is available to taxpayers and provides a tax credit to those who incur medical expenses, generally with respect to the treatment of themselves or dependents. McNeilly filed a claim for the METC, but the Canada Revenue Agency (CRA) rejected this claim, arguing that the tax credit only applies to medical expenses in specific circumstances.
Notably, the medical expenses ought to pertain to a taxpayer’s spouse, common-law partner, or dependent. In this case, the surrogate mother did not fall into any of these categories with respect to their relation to McNeilly, which prompted the CRA to reject the claim and insist that his expenses were not eligible for the METC.
McNeilly’s Argument
McNeilly appealed this decision and brought a motion for confidentiality order under Section 16.1 of Tax Court of Canada Rules (General Procedure). McNeilly insisted that the ITA ought to be interpreted in a manner which includes surrogacy expenses by adjusting to modern family-building practices.
In his argument, he proposed that denying the METC for surrogacy expenses violated the principles of fairness and equality, and that the ITA should adapt to societal norms as they change. McNeilly also argued that our law should not discriminate on the method and manner in which a family is created. In his view, surrogacy ought to be recognized in a similar manner to other reproductive options available to the general public. Interpreting the law in a rigid manner that excludes surrogacy expenses results in the unfair treatment certain individuals and is inconsistent with the growing recognition of diverse family structures and non-traditional types of parenthood.
The CRA’s Argument
In response to McNeilly’s arguments, the CRA insisted that the ITA left no room for ambiguity. Instead, the ITA clearly fought to restrict the METC tax credit to medical expenses pertaining only to a taxpayer’s spouse, dependent, or common-law partner. As the surrogate mother in McNeilly’s case failed to meet any of these requirements, the CRA firmly stood by its decision to deny the tax credit.
Decision at the Tax Court of Canada
Ultimately, the Tax Court of Canada (TCC) ruled in favor of McNeilly. The TCC decided that, by strictly interpreting the ITA, the CRA was being unduly restrictive and had failed to accommodate the evolving landscape of family structures and parenthood. The TCC emphasized the need for our tax laws to be interpreted and applied in a manner that is both fair and inclusive.
The TCC interpreted the METC provision broadly and decided that flexibility ought to be granted in providing the tax credit to individuals like McNeilly. In its view, our laws should not restrict tax benefits to traditional families. Rather, our law should recognize and accommodate different family-building methods including surrogacy.
In its decision, the TCC also provided relief upon the broad constitutional principle of equality. The Court decided that the decision to exclude surrogacy expenses from the METC may discriminate against individuals who use surrogacy to achieve reproduction.
Implications of the Decision
The TCC’s decision recognizes the growing diversity of family structures and options for individuals to achieve reproduction. The decision has implications for Canada’s tax laws as it suggests that the interpretation of the ITA should properly reflect societal developments over time.
A precedent has now been set that the METC applies to surrogacy expenses, which will certainly benefit taxpayers who wish to utilize the alternative reproductive methods available to them. This decision supports the notion that our tax laws must not unfairly disadvantage any individuals or families based simply on their choices regarding reproduction and family-building.
***Disclaimer: This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions, you should consult a lawyer.
Matthew Pollock
