Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: What are the housing taxable benefits, if any, for a member of the clergy who is required to have housing accommodations in two Canadian cities.
Position: General comments given.
Reasons: Question of fact; specific comments would only be provided in the context of an advance income tax ruling submitted in the manner outlined in Information Circular IC 70-6R5.
XXXXXXXXXX 2007-026285
L. Carruthers, CA
February 27, 2008
Dear XXXXXXXXXX :
Re: Housing Benefits
We are writing in response to your letter of December 7, 2007, in which you requested our technical interpretation as to the calculation of the taxable housing benefits, if any, for a member of the clergy who is required to have housing accommodations in two Canadian cities.
The particular circumstances in your letter involve a pastor who was recently transferred by his Church from XXXXXXXXXX to XXXXXXXXXX . He sold his XXXXXXXXXX home and purchased a new home in XXXXXXXXXX, moving there with his wife and XXXXXXXXXX children. In order to maintain stability in the XXXXXXXXXX ministry, the Board of Directors of the Church requires the pastor be in XXXXXXXXXX approximately two to three days per week for the next six to twenty-four months. The Church has purchased a residence for the pastor's use while he is in XXXXXXXXXX for two to three days per week.
We were requested to advise whether subsection 6(6) of the Income Tax Act (the "Act"), regarding special work sites, would apply in the following hypothetical situations, and to include the method of calculating the taxable benefit, if any:
(a) The XXXXXXXXXX residence, which is owned by the Church, would be available for the pastor's exclusive use while he is in XXXXXXXXXX two to three days per week. The residence would be vacant if not used by the pastor.
(b) The XXXXXXXXXX residence, which is owned by the Church, would be available for the pastor's use while he is in XXXXXXXXXX two to three days per week. The pastor's XXXXXXXXXX teenaged children would be staying in the XXXXXXXXXX residence and attending school in XXXXXXXXXX for the next six months.
(c) The XXXXXXXXXX residence, which is owned by the Church, would be available for the pastor's use, but not exclusive use, while he is in XXXXXXXXXX two to three days per week.
(d) The Board extended the requirement for the pastor to travel to XXXXXXXXXX by six month intervals after the initial twenty-four month term.
Your request appears to be a factual situation relating to a proposed if not a completed transaction. This Directorate does not provide written interpretations involving completed transactions since, as mentioned in paragraph 22 of Information Circular IC 70-6R5, Advance Income Tax Rulings, dated May 17, 2002, such requests should be made in writing to the appropriate Canada Revenue Agency ("CRA") tax services office ("TSO"). Notwithstanding the foregoing, we are prepared to provide the following general comments.
Paragraph 6(1)(a) of the Act includes in a taxpayer's income "the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment". Pursuant to paragraph four of IT-470, Employee's Fringe Benefits, the value placed on the benefit of board and lodging derived from employment should approximate its fair market value. In our view, this would include the benefit of lodging supplied to the pastor while he is in XXXXXXXXXX two to three days per week. The impact, if any, the pastor's exclusive or non-exclusive access to the XXXXXXXXXX residence has on the fair market value of this benefit is ultimately a question of fact to be decided with due regard for all of the circumstances.
Furthermore, in our view, paragraph 6(1)(a) of the Act is a provision of broad import and will include in a taxpayer's employment income the value of a benefit that was directly received or enjoyed by another person because of the taxpayer's office or employment. Accordingly, this would include the benefit for the six months of lodging supplied to the pastor's teenaged children attending university in XXXXXXXXXX. The fair market value of this benefit is ultimately a question of fact to be decided with due regard for all of the circumstances.
Paragraph 6(6)(a) of the Act generally exempts from inclusion in an individual's employment income the value of benefits for the individual's board and lodging at a location that is considered a "special work site". Therefore, to the extent the XXXXXXXXXX work site meets the requirements of paragraph 6(6)(a), the pastor would have no taxable income due to the benefit of lodging supplied to him while he is in XXXXXXXXXX two to three days per week. In our view, the pastor's taxable benefit due to his teenaged children residing in the XXXXXXXXXX residence is not related to his board and lodging and therefore the exemption pursuant to paragraph 6(6)(a) of the Act would not apply to the benefit amount relating to his teenaged children. As discussed in our Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations, for the special work site exclusion to apply all of the following requirements must be met:
a) the duties of the office or employment performed by the individual at the work location are of a "temporary nature";
b) throughout the period the duties of the office or employment are performed at the work location, the individual maintains at another location a self-contained domestic establishment as the individual's principal place of residence, which is available for the individual's occupancy and not rented by the individual to any other person;
c) the distance between the individual's principal place of residence and the work location is such that the individual cannot reasonably be expected to commute daily; and
d) the period the individual is required to be away from the principal place of residence at the work location because of the duties of the office or employment is at least 36 hours.
As noted in paragraph five of IT-91R4, the term "temporary" is not defined in the Act. However, as a general rule, duties will be considered to be of a temporary nature if it can reasonably be expected that they will not provide continuous employment beyond a period of two years. The determination of the expected duration of employment must be made on the basis of the facts known at its commencement. Based on the information provided, in our view, to the extent the requirement for the pastor to travel to XXXXXXXXXX does not exceed two years, the pastor's duties in XXXXXXXXXX would be considered to be "temporary".
It should be noted that if the Board extended the requirement for the pastor to travel to XXXXXXXXXX by six month intervals after the initial twenty-four month term, it may be necessary to redetermine whether the duties undertaken by the pastor are considered to be of a temporary nature for the purposes of the special work site exclusion. As noted in paragraph six of IT-91R4, in this regard, particular consideration should be given to the following factors:
- the nature of the duties to be performed by the employee (certain types of work are, by their nature, short term engagements, such as repair work or trades which are involved only during a certain phase of a project);
- the overall time estimated for a project, or a particular phase of a project, on which the employee is engaged to perform duties; and
- the agreed period of time for which the employee was engaged according to the employment contract or other terms of the engagement.
The determination of whether a particular allowance is excluded from income under subsection 6(6) of the Act can only be made after reviewing all of the facts, including the employment contract, the authority under which the allowance is paid or the lodging is provided, the nature of employment, and the frequency and duration of an employee's trips.
Whether, due to his exclusive use of the XXXXXXXXXX residence, the pastor maintains two self-contained domestic establishments, will not in, and of itself, affect his ability to claim an exemption under subsection 6(6) of the Act. It will, however, be a question of fact as to which of the self-contained domestic establishments is "his principal place of residence" at a relevant time.
To facilitate the process of claiming an exemption under subsection 6(6) of the Act, an employee should complete Form TD4 and have it certified by his or her employer. If the employer has any particular questions concerning the correctness of statements on the form the employer should contact the local TSO for assistance. You may also want to refer to Chapter 3 of CRA Guide T4130, "Employers' Guide - Taxable Benefits," which can be obtained from our website www.cra-arc.gc.ca.
We trust that our comments will be of assistance.
Yours truly,
R.A. Albert, CA
For Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
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