A standard agreement some Canadian doctors use to set up medical partnerships may have been drafted in part to avoid paying higher business taxes, says an internal Finance Department document.

The template agreement, backed by the Ontario Medical Association, has been used for years by some physicians who thereby benefit from the federal small business tax rate of 10.5 per cent.

Small businesses are taxed at the 10.5 per cent rate on the first $500,000 in income, after which the general corporate rate of 15 per cent applies.

But the OMA-supported template agreement has allowed individual doctors to take advantage of the $500,000 small-business ceiling, rather than having to split up the partnership's $500,000 limit among the members.

Dr. Laurent Marcoux, a family physician in Quebec, is the president-elect of the Canadian Medical Association. His group is fighting a federal tax measure that would impact medical partnerships. (twitter.com/marcoux_laurent) The Canadian Medical Association is in a battle royal with the Finance Department over a 2016 budget measure now before Parliament that targets such tax-planning arrangements. The amendments would require doctors and other professionals in partnerships to split a pool of $500,000 in income that's eligible for the small-business rate.

"It is possible that the CMA (or the Ontario Medical Association) drafted the agreement, at least in part, in order to avoid the application of the pre-Budget 2016 tax rules which restrict multiplication of the small business deduction in circumstances where professional corporations are parties to the agreement," says the May 9 briefing note prepared for Finance Minister Bill Morneau.

"It is this type of tax planning that the Budget 2016 measure targets."

CBC News obtained a copy of the document under the Access to Information Act.

Doctors have complained they were sideswiped by the proposed tighter tax rules. But the briefing note suggests that such medical partnerships were among the business arrangements that were in the sights of the Liberal government.

The Morneau briefing note also acknowledges that the partnership template for doctors might also have been drafted in part to limit legal liability.

A spokesman for the Canadian Medical Association said the note "is a good example of how officials at Finance Canada have consistently and repeatedly misunderstood and mischaracterized" the issue.

Canadians could find it more difficult to gain access to cardiologists. - Canadian Medical Association spokesman

"This briefing note fails to mention the fact that numerous physician partnership models were validated by the Canada Revenue Agency to be in compliance with the provisions of the Income Tax Act as they existed prior to the Budget 2016 amendments," said John Feeley, vice-president of member relevance.

The association wants Morneau to exempt group medical structures from the new measure. "If the proposed tax change is implemented … Canadians could find it more difficult to gain access to cardiologists, radiologists, anesthetists and other specialists," Feeley said in a statement to CBC News.

Time is running out for the medical group. Bill C-29 passed third reading in the House of Commons, and is under scrutiny tonight at a Senate committee, where Feeley and the CMA's president-elect, Dr. Laurent Marcoux, will make a last-ditch appeal.

Feeley argues that medical partnerships were not created with tax reductions in mind, but to support physician training and research that the provinces fail to fund, or underfund.

Abandon group structures?

Contrary to predictions that aggrieved doctors will head to the United States, the association expects Canadian physicians will simply abandon the group structures, undermining medical training, research and specialized care, and ultimately hurting patients.

Morneau's spokesman, however, says the measure is about tax fairness and helping small businesses grow and create jobs.

The Canadian Medical Association says a new federal tax measure could hurt patient access to cardiologists and other specialists. (Marina von Stackelberg/CBC) "We remain committed to supporting [doctors] through the small business tax deduction, and fully support them setting up a group structure to better serve patients," said Daniel Lauzon, director of communications for the minister.

"All we are doing is clarifying that the rules for professionals are the same as for any other small business — one business gets one deduction."

The 2016 budget estimated that tightening the tax rule will mean an extra $70 million in business-tax revenue for the government in 2017-2018, though the figure includes other professionals such as lawyers who might also be benefiting from the current looser tax rules for partnerships.

Doctors have said they cannot be compared to other professionals, who can charge higher costs to clients, because physician revenues are subject to limits imposed by provincial health-care systems.

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