Workplace Accessibility Tax Incentive

Introduction

In the 1998 Budget, Ontario announced the Workplace Accessibility Tax Incentive (the “WATI”) to support businesses that hire new employees with a disability. The rules discussed in this bulletin are contained in section 13.3 of the Corporations Tax Act (CTA) and subsection 8(15.3) and section 8.4 of the Ontario Income Tax Act. This bulletin is provided as a guide for taxpayers. It is not intended as a substitute for the legislation. For precise details, the reader should consult the appropriate statute.

Table of Contents

• General
• Tax Incentive
  • Corporations
  • Unincorporated businesses
• Qualifying Expenditures
  • Job Coach
  • Intervenor
  • Attendant
• Qualifying Employee
  • Acceptable Qualification under Existing Disability Program
  • Qualified Medical Practitioner
• Partnerships
• Reduction of Non-capital Loss
• Documentation

1. General

The WATI is available to businesses that incur qualifying expenditures after July 1, 1998 to accommodate newly hired employees with disabilities. The business must operate out of a permanent establishment in Ontario and be subject to tax on its income, i.e., non-profit businesses and other tax-exempt businesses do not qualify.

For corporations, the incentive is a deduction in computing income, and for unincorporated businesses, it is a refundable tax credit. This incentive is in addition to any deductions in respect of the qualifying expenditures that the businesses may claim for income tax purposes.

2. Tax Incentive

The incentive is based on two types of expenditures. The first are expenses incurred by a business in a taxation year to provide the support services of a sign language interpreter, an intervenor, a note-taker, a reader or an attendant that are required by an applicant during a job interview. The second are the qualifying expenditures (up to $50,000 per employee) incurred by a business in a taxation year to accommodate qualifying employees.

2.1 Corporations

For a corporation, the WATI is a deduction from Ontario source income. Therefore, where a corporation allocates part of its taxable income to another jurisdiction, the deduction is grossed-up to provide a full deduction from Ontario source income. This is achieved by dividing the deduction otherwise calculated by the Ontario allocation factor.

Example:

A corporation incurred the following amounts in a taxation year:

1. Expenses for support services during job interviews are $500.
   
2. Qualifying expenditures of $100,000 made up of $60,000 for Qualifying Employee “A” and $40,000 for Qualifying Employee “B”.

The corporation's Ontario allocation factor is 50%.

The corporation's deduction is calculated as follows:

$(500 + 50,000* + 40,000)/50% = $181,000

Note *$50,000 is the maximum allowed in respect of Qualifying Employee “A”.

The gross-up allows the corporation a deduction of $181,000 in computing income. However, after applying the Ontario allocation factor in computing the corporation's portion of taxable income attributed to Ontario, the actual deduction from Ontario income is $90,500 (181,000 x 50%).

2.2 Unincorporated Businesses

For unincorporated businesses, the WATI is a 15% refundable tax credit in respect of expenses incurred by the individual for support services during a job interview and qualifying expenditures incurred by the individual in the taxation year to accommodate qualifying employees. The credit is claimed on the Ontario Tax Credit form T1C(ONT.) and reported on line 39 of that form.

Example:

An individual incurred the following amounts in a taxation year:

1. Expenses for support services during job interviews are $500.
   
2. Qualifying expenditures of $100,000 made up of $60,000 for Qualifying Employee “A” and $40,000 for Qualifying Employee “B”.

The tax credit of the individual is calculated as follows:

$(500 + 50,000* + 40,000) × 15% = $13,575

Note *$50,000 is the maximum allowed in respect of Qualifying Employee “A”.

3. Qualifying Expenditure

A business's qualifying expenditures in respect of a qualifying employee are expenditures incurred by the business in Ontario after July 1, 1998 to accommodate the employee to perform his or her job functions. Qualifying expenditures are as follows:

1. An expenditure that is incurred not more than three months before and not more than 12 months after the date of commencement of the qualifying employee's employment and that meets one of the following descriptions:

(a) An expenditure that is deductible in computing income under paragraphs 20(1)(qq) and (rr) of the Income Tax Act (Canada) and is an amount paid :

- for the installation of an interior or exterior ramp or a hand-activated electric door opener; or for a modification of a bathroom, elevator or doorway to accommodate an employee with a mobility impairment.

- to acquire an elevator car position indicator, e.g., a braille panel or an audio signal for an employee with a sight impairment.

- to buy a visual fire alarm indicator, a listening device for group meetings or a telephone device for an employee with a hearing impairment.

- to buy a disability-specific computer software or hardware attachment.

(b) An expenditure incurred for the installation of a passenger elevator, vertical platform lift, inclined platform lift or stairway lift to accommodate an employee with a mobility impairment.

(c) An expenditure incurred to acquire any of the following devices or equipment that is required by an employee to perform his or her job functions:

- An environmental control unit to operate a telephone and lights, a door opener or other office equipment modified to accommodate an individual with a mobility impairment.

- An ergonomic work station and seating, a customized filing system or other office furniture adapted to accommodate an individual with a mobility impairment.

- A telephone headset for use by an individual with a mobility impairment.

- Specialized lighting for an individual with a visual impairment or epilepsy.

-A real time captioning or alphanumeric pager for an individual with a hearing impairment.

- A tool, machinery or information communication system adapted for use by an individual with a physical or mental impairment.

- Computer hardware or a hardware attachment that is required to use disability-specific computer software.

2. An expenditure that is incurred not more than six months after the date of commencement of the qualifying employee's employment to provide the support services of a job coach, note-taker, sign language interpreter, intervenor, reader or attendant for the employee, if the services are required by the employee by reason of a physical or mental impairment.

3. An expenditure that is incurred not more than 12 months after the date of commencement of the qualifying employee's employment to train the employee or his or her coworkers to use equipment described in 1(c) above.

If the business has received or expects to receive government assistance in respect of the qualifying expenditures at the time it is required to deliver its tax return, the qualifying expenditures for the taxation year must be reduced by this government assistance. The repayment of any portion of such government assistance in a subsequent taxation year may be treated as a qualifying expenditure for the taxation year in which the repayment is made, to the extent that the total of qualifying expenditures claimed in respect of the qualifying employee does not exceed the $50,000 limit.

The amount of qualifying expenditures must be reasonable in the circumstances, and the same expenditure cannot be claimed twice in respect of two different qualifying employees. For example, if a business spends $50,000 to install a ramp to accommodate two qualifying employees with a mobility impairment, it cannot claim $50,000 for one employee and then claim the same amount again for the other employee.

3.1 Job Coach

A job coach means an individual who assists a newly-hired qualifying employee to attain productivity in the workplace that matches other employees by working on-site with the qualifying employee to help him or her,

1. 1. become oriented in the workplace,
   
   
2. learn the specific work tasks required by the position,
   
   
3. develop communication skills for interacting with supervisors and co-workers, and
   
   
4. adjust to the work environment.

3.2 Intervenor

An intervenor means an individual who acts as a communication link by providing information, facts and support to a person who is deaf and blind.

3.3 Attendant

An attendant means an individual who provides personal support services to a person with a physical disability under the direction of the person on a pre-scheduled visitation basis.

4. Qualifying Employee

A qualifying employee is an individual who meets all of the following conditions.

1. The individual is not related to the business for the purposes of section 251 of the Income Tax Act (Canada), i.e., a person who is related by blood, marriage or adoption to the owner or the principal shareholder of a business will not be a qualifying employee of that business.
   
   
2. The individual was not employed by the business in the 12 months prior to the current employment with the business.
   
   
3. The individual works at least 60 hours per month and for a term of at least three months for the business.
   
   
4. The individual either is an individual described in paragraph 4.1 below or is certified by a qualified practitioner that,
   
   
   1. his or her impairment is continuous or recurrent and expected to last for at least one year, and
      
      
   2. in the opinion of the practitioner, the impairment creates a substantial barrier to competitive employment without accommodations by the employer.

4.1 Acceptable Qualification under Existing Disability Program

An individual is considered to be qualified under an existing Federal or Provincial program for people with a disability if the individual :

1. Is allowed to claim a Disability Tax Credit under section 118.3 of the Income Tax Act (Canada);
   
   
2. Is eligible for income support or employment supports under the Ontario Disability Support Program Act, 1997, immediately prior to commencing employment with the business;
   
   
3. Qualifies for a Disability Benefits Canada Pension under the Canada Pension Plan Act, immediately prior to commencing employment with the business;
   
   
4. Is registered with the Canadian National Institute for the Blind; or
   
   
5. Is eligible to receive assistance from the Assistive Device Program administered by the Ontario Ministry of Health.

4.2 Qualified Medical Practitioner

A qualified medical practitioner is an individual described in section 3 of Regulation 223/98 made under the Ontario Disability Support Program Act , 1997 and is one of the following professionals:

1. An audiologist who is a member of the College of Audiologists and Speech- Language Pathologists of Ontario.
   
   
2. A member of the College of Chiropractors of Ontario.
   
   
3. A registered nurse who is a member of the College of Nurses of Ontario.
   
   
4. A member of the College of Occupational Therapists of Ontario.
   
   
5. A member of the College of Optometrists of Ontario.
   
   
6. A member of the College of Physicians and Surgeons of Ontario.
   
   
7. A member of the College of Physiotherapists of Ontario.
   
   
8. A member of the College of Psychologists of Ontario.

5. Partnerships

Corporate Partners

Where a corporation is a member of a partnership (other than a limited partnership) and the partnership qualifies for the WATI, it may claim its share of the partnership's WATI in computing its income based on its percentage of the income or loss of the partnership. If the partner operates inside and outside of Ontario, the gross-up of the incentive is applied at the level of the partner using the partner's Ontario allocation.

Individual Partners

Where an unincorporated business is a partnership, each member of the partnership may claim a tax credit equal to the member's reasonable share of the partnership's tax credit. Limited partners are prohibited from claiming the credit.

6. Reduction of Non-Capital Loss

Where a corporation's WATI creates a non-capital loss which is then applied to reduce the income of other taxation years, the amount of the non-capital loss may be subject to a reduction. Under section 35 of the CTA, the minister may reduce the non-capital loss applied if the Ontario allocation factor for the taxation year to which the loss is being applied exceeds 120% of the Ontario allocation factor for the taxation year in which the loss is incurred. This reduction is to prevent a corporation from applying grossed-up losses in a low allocation year to unduly reduce income in a high allocation year.

7. Documentation

To claim the credit in respect of a qualifying employee, a business must obtain relevant documentation (mentioned in paragraph 4 and 4.1) from the employee to substantiate his or her eligibility. This document is not required to be attached to the tax return but must be retained as part of the business' record and be available for review by the Ministry of Finance.