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Battle against unfair tax changes to some group practices ends as budget bill passes into law

Just before rising for its six-week Christmas break, the Senate passed into law the bill implementing provisions outlined in the federal budget tabled last March. Bill C-29 becoming law effectively dashed physician hopes of an exemption to a measure that would adversely affect some physicians practicing in certain partnership models.

The measure was included in Bill C-29 to prevent some professionals who are business owners from using complex partnership and corporate structures to make multiple small business deductions. In describing these "professionals", the federal government cited lawyers, accountants and doctors who claim multiple small business deductions for a single partnership or corporate structure.

Since the introduction of the budget last March, the Canadian Medical Association (CMA) had mounted an intensive advocacy effort that resulted in the association being one of the few stakeholders to be consulted during the legislative phase of the bill. The CMA was pressing for physicians to be exempted from the tax measure.

The CMA met repeatedly with officials from Finance Canada and advisors from Finance Minister Bill Morneau's office to explain how physician group structures were different from those of lawyers and accountants. The CMA also underscored the fact that the changes would adversely affect between 10,000 and 15,000 physicians in Canada.

The group medical structures affected are prevalent within academic health science centres and among certain specialties, notably oncology, anaesthesiology, radiology, and cardiology. Unlike other professions, physician compensation is set by negotiations with the provinces and territories, and is based on the existing tax framework.

"These groups exist to deliver important elements of our health care system that are otherwise unfunded or underfunded," John Feeley, the CMA's Vice-president of Member Relevance, told a Senate committee studying the bill. "Finance officials are attempting to characterize the concerns of physicians as pocketbook issues. Nothing can be further from reality."

In presenting the case of physicians, the CMA cause was bolstered by a groundswell of support from members who sent over 2,000 letters and emails to Members of Parliament and Senators.

"In comparison, when we informed our members of the increase to the top personal taxation rate, we did not receive one message – not one message," Mr. Feeley told Senators.

In presenting its case for the exemption, the CMA did garner strong support from opposition members of the House of Commons finance committee, as well as strong support from a number of Senators. As a result of CMA efforts, some senators did propose an amendment to exempt physicians from the measures, but it lost by a narrow margin.

With the budget implementation act now law, it is important for physicians to clarify if they are indeed affected by technical changes targeting partnerships with multiple corporations each claiming a small business deduction. The federal government has recognized the important contribution of health care practitioners as small businesses and physicians' continued access to the incorporation framework has been maintained, so not all incorporated physicians will be negatively affected. To learn if your structure is affected, consult Incorporated Physicians: Are You Affected by the 2016 Federal Budget?

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