B.C. court grants injunction on incoming DTC advisor fee-cap rules

The Supreme Court of British Columbia has granted an injunction stopping the federal government from imposing a $100 fixed-fee schedule on advisors who help individuals apply for the disability tax credit (DTC) — a cap that was set to become effective Nov. 15.

Shane Nercessian and True North Disability Services Ltd., the DTC consulting firm Nercessian owns, sought a pre-trial injunction from the court to stop the imposition of the fee cap on constitutional grounds.

The applicants argued that the regulation of a profession was properly a provincial matter and outside of the federal government’s jurisdiction. They also said the fee cap violated Canadians’ charter rights to access professional advice, as it would make it difficult for providers to continue to offer DTC application services.

With the injunction, the regulation imposing the $100 fixed-fee schedule is suspended, pending the court’s determination as to the constitutionality of the legislation.

In an emailed response to Investment Executive, Nercessian said he and True North intend to file with the court after Nov. 15 to have the case tried on the two constitutional questions.

Parliament enacted the Disability Tax Credit Promoters Restrictions Act in 2014 to prevent consultants from charging what lawmakers regarded as excessive contingency fees of 30% or more of a client’s DTC claim.

However, the legislation remained inoperative until regulations setting out maximum fees became effective. After consulting, the government released proposed regulations in June 2019 and final regulations in April 2021, the latter of which were effective Nov. 15.

Under the regulations, consultants would not be able to charge more than $100 to help claimants complete Form T2201:Disability Tax Credit Certificate, a form that determines their DTC eligibility.

Consultants may also charge $100 per taxation year for assisting claimants in requesting reassessments, for up to nine prior years and the current taxation year.

In the decision released Thursday, the court found that the question of whether the regulations were outside of the scope of the federal government’s jurisdiction was “a serious issue to be tried,” and granted the injunction — without addressing the constitutional validity of the legislation or the regulation under the charter.

The court also found it “significant” that the DTC Promoters Restrictions Act would effectively prevent individuals eligible for the DTC from accessing “representation by professionals, lawyers and accountants, whom members of the public are generally able to retain to represent their interest with branches of government in relation to taxation, including eligibility for the DTC.”

It added: “The importance to the public of their services tips the balance in favour of the remedy sought on this application.”

Furthermore, the court found that the federal government would not suffer harm by the issuing of an injunction before a determination was made regarding the constitutionality of the regulation.

The DTC is a non-refundable tax credit with a value of $1,299 for 2021. A valid DTC certificate also is a gateway to more than a dozen tax-related programs and benefits. To be eligible for the DTC, a person must have a DTC certificate confirming they have a severe and prolonged impairment — which is present all or substantially all of the time — in physical or mental functions that restricts their ability to perform basic activities.

The federal government has acknowledged that DTC eligibility rules can be unclear and complex. In recent years, the CRA has adjusted its guidance and administration with the goal of making the program easier to navigate.

In October, the CRA released a revised T2201 application form.