Mullins v Mullins, 2016 ABQB 226

Court of Queen ’ s Bench of Alberta Citation: Mullins v Mullins, 2016 ABQB 226 Date: 20160419 Docket: 4801 146234 Registry: Calgary Between: Pamela Beryl Mullins Plaintiff - and - Brent Allan Mullins Defendant _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice P.R. Jeffrey _______________________________________________________ [ 1 ] The parties disagree on whether the income of Ms. Mullins, for purposes of determining the parties’ proportionate sharing of

section 7 expenses under the Federal Child Support Guidelines (the “ Guidelines ”), includes money she receives as certain non-taxable benefits from the government. [ 2 ] Ms. Mullins is the mother and primary care giver to two children of the parties’ marriage. In 2014, Ms. Mullins earned employment income of $28,645. In addition she received a Canada Child Tax Benefit (the “ CCTB ”), a National Child Tax Benefit Supplement (the “ NCBS ”) and a Child Disability Benefit (the “ CDB ”) (collectively, the “ Benefits ”). None of the Benefits was taxable.

The Benefits totalled $12,420.48, comprised of $3,339.00 as the CCTB, $3,691.48 as the NCBS, and $5,390.00 as the CDB. [ 3 ] Mr. Mullins says the Benefits amounts should be included in Ms. Mullins’ income when determining their proportionate shares of

section 7 expenses under the Guidelines , after being grossed-up to reflect the fact the Benefits are not taxable. He argues that such benefits “are to be considered as part of her income for the payments of ...

Section 7 expenses under Sections 7(3) and (4) of the” Guidelines . He also relies on Baum v Baum , 2000 BCSC 1835 , which he says held that “the parties’ incomes and means should not be narrowly defined at law and pursuant to the” Guidelines .

[ 4 ] Ms. Mullins says the Benefits amounts should not be included in the determination of her income. She argues that the references in sub-sections 7(3) and (4) relied upon by Mr. Mullins relate to determining the amount of an expense, not the income level of the spouse from which proportionate shares of individual expenses shall be determined. For example, sub-section 7(3) of the Guidelines states that “subsidies, benefits or income tax deductions or credits relating to the expense ” must be taken into account “in determining the amount of an expense ” (underlining added), but that is different she says from using those amounts in determining income. She says

section 7 expenses are shareable on a net (after tax) basis and that “generally employment income only is used” for determining income for Guidelines purposes. She also argues that there is no line on the T1 General Tax Form, referred to in

section 16 of the Guidelines , for recording the Benefits amounts. [ 5 ] The tax treatment of a source of funds (whether or not it is taxable) is not dispositive of this issue: Dahlgren v. Hodgson , 1999 ABCA 23 .

It is Parliament’s intention, said the Court of Appeal therein, at para 4: […] that in dealing with a parent’s obligation to support a child, it is fair and appropriate to take in to account many forms of income, or benefits, or compensation, or attributed income, benefits or compensation, etc. that would not otherwise be treated as taxable income under the Income Tax Act . [ 6 ] The Guidelines themselves expressly permit the Court to impute income to a party where a significant portion of their income is derived from sources that are exempt from tax (see paragraph 19(1)(

h) Guidelines ; see also Fraser-Tabak v Tabak , 2016 ABCA 79 at para 84 ). [ 7 ] The Guidelines define the term “income” very broadly. They set out the process and criteria for its determination in sections 15 to 20 of the Guidelines . For purposes of this dispute the starting point is

section 16, which states: 16 Subject to sections 17 to 20 , a spouse’s annual income is determined using the sources of income set out under the heading “Total income” in the T1 General form issued by the Canada Revenue Agency and is adjusted in accordance with

Schedule III. [ 8 ] None of sections 17 to 20 of the Guidelines have any application here, except perhaps

section 19 (imputing income) which I will come back to. [ 9 ] Contrary to the submissions of Ms. Mullins’ counsel, the Benefits are required to be recorded as a source of income under the heading “Total income” in the T1 General form issued by the Canada Revenue Agency (“ CRA ”). The Benefits fall within the category referred to on Line 145 as “Social Assistance”. Since the Benefits are not taxable, on Line 250 they may be recorded again and, as a result, removed back out of one’s “Taxable Income”. The fact remains, however, that Ms. Mullins’ annual income for

section 7 expense purposes is to be “determined using” all the Benefits amounts, because they are to be recorded as a source of income under the heading “Total income” in CRA’s T1 General form, subject to any adjustment in accordance with

Schedule III. [ 10 ]

Section 4 of

Schedule III, the “adjustments” to income determination, states: 4 Deduct any amount of social assistance income that is not attributable to the spouse. [ 11 ] If any of Ms. Mullins’ Benefits are not “attributable to” her, they must be deducted back out of her income for purposes of

section 7 expense sharing. [ 12 ] The CCTB is designed to help lower income parents with the cost of raising their children. A separate amount is received for each child in the recipient’s home. That amount reduces as the recipient’s income increases. [ 13 ] The NCBS supplements the basic CCTB, for those parents with very low incomes. Like the CCTB, it is received per child and reduces as the recipient’s income increases. [ 14 ] The CDB is designed to assist qualifying families caring for children who have a severe and prolonged impairment in physical or mental functions.

Families with children under 18 years of age that are eligible for the Disability Tax Credit are eligible to receive the CDB. Like the CCTB and NCBS, the CDB reduces as the recipient’s income increases. In 2014 Ms. Mullins received the maximum CDB. [ 15 ] In my view, the CCTB and the NCBS are both primarily income supplements for parents and are therefore “attributable to” Ms. Mullins. Therefore they are not deducted from her income for

section 7 purposes. [ 16 ] The CDB, however, is “not attributable to” Ms. Mullins, since it is primarily a function of her children having disabilities, not Ms. Mullins’ circumstances. If Ms. Mullins earned a (much) higher income, the CDB would reduce. That is a function of tax policy, not a function of to whom the social assistance is attributable. Therefore the CDB amount is to be deducted from Ms. Mullins’ income. [ 17 ] Since the CCTB and NCBS amounts remaining in Ms. Mullins income for

section 7 Guidelines purposes are not taxable, they must be grossed-up. In Dahlgren , at para 5 , the Court of Appeal said: More importantly, when dealing with any form of benefits or attributed benefits received by a parent that are not taxable for income tax purposes, it is essential that any such amount be grossed-up to take into account what it would have been had it been taxed. The purpose in doing so is to ensure that the apportionment of responsibility between the parents for child support is based on the same approach for both parents.

The guidelines are premised on division of financial responsibility based on gross before tax income. Therefore, to properly apportion that responsibility for child support between the parents, the same foundation must be used. In this regard, it would be wrong to equate non-taxable income in the hands of one parent with taxable income in the hands of the other without the appropriate gross-up. I also consider this to accord with the discretion I have under paragraph 19(1)(

h) of the Guidelines , since this is a significant portion of Ms. Mullins’ income, to impute income to Ms. Mullins to adjust for money received that is exempt from tax.

[ 18 ] Therefore I would include both the CCTB and NTBS amounts in the determination of Ms. Mullins’ income for

section 7 purposes, grossed-up for taxes in the manner suggested by Mr. Mullins’ counsel (for 2014, in subsequent years amended tax rates may apply to Ms. Mullins and of course those would need to be used where circumstances dictate), but not include the CDB in the determination of her income. [ 19 ] There remains one matter warranting comment, given this outcome. The effect of this

interpretation has the seemingly ironic effect of excluding from Ms. Mullins’ income, for

section 7 purposes, the very governmental funding support designed to offset the costs of raising a disabled child, yet certain of the special and extraordinary expenses incurred by Ms. Mullins are the result of their children’s disabilities. Arguably this governmental contribution should be shared by both spouses that share in paying those costs, not be available only to the primary caregiving spouse. [ 20 ] I used the phrase “seemingly ironic” because although I interpret the Guidelines as not including the CDB in the income calculation of a recipient spouse, I do not interpret the Guidelines to foist upon Mr.

Mullins a disproportionate amount of disability driven costs by exclusion of the CDB from Ms. Mullins’ income. The Guidelines expect the CDB to be taken into account at a different stage. The Guidelines require the CDB to be taken into account “in determining the amount of” such expenses to be shared, pursuant to sub-section 7(3).

One way to do that, and unlikely the only way, might be to have a disability driven expense paid for or contributed to first from out of the CDB. [ 21 ] This does not mean that all disability driven expenses must be paid for first from the CDB and, only after the entire CDB is exhausted, then paid for by the parents in proportion to their incomes.

The CDB “must” be taken into account for such determinations, but many factors will affect that determination, such as the role one parent may play or have played in the child’s disability (for example, abusive treatment necessitating counselling or physical supports expenses would militate against the abusing parent benefiting in any way from the CDB received by the other parent) or marked disparity in the spouses’ respective incomes (for example, if the non-primary caregiving spouse would have been ineligible for the CDB by reason of high income, despite the disability of the child, had that parent been the primary care-giving parent, it would militate against that spouse gaining much if any benefit of the CDB when not the primary care-giving parent and taking a disability driven expense into account). [ 22 ] The parties are directed to submit an order reflecting this ruling, now that the remaining issue has been decided.

However, if the parties are unable to agree on the effect of taking into account the CDB in their circumstances, they may contact my office to arrange a time to speak to it, before submitting the form of order. Heard on the 15 th day of December, 2015. Dated at the City of Calgary, Alberta this 19 th day of, April 2016. P.R. Jeffrey J.C.Q.B.A. Appearances: Sonja Lusignan for the Plaintiff Chad R. Johnson for the Defendant