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: Whether an individual employed as a full-time Student Ministries Associate with XXXXXXXXXX , qualifies for a clergy residence deduction pursuant to paragraph 8(1)(c) of the Act.
Position: Inconclusive.
Reasons: We do not have enough information to determine if the individual satisfies both the status and function tests.
XXXXXXXXXX
2011-039406
June 13, 2011 V. Srikanth
Dear XXXXXXXXXX :
Re: Clergy Residence Deduction
We are writing in response to your letter dated January 21, 2011, wherein you requested an interpretation with respect to a clergy residence deduction pursuant to paragraph 8(1)(c) of the Income Tax Act (the "Act"). Specifically, you would like to know if, as a Student Ministries Associate with XXXXXXXXXX (the "Church"), you qualify for the clergy residence deduction as provided for in paragraph 8(1)(c) of the Act.
Our Comments
The particular circumstances in your request appear to represent a specific factual situation. As mentioned in paragraph 22 of Information Circular IC 70-6R5, Advance Income Tax Rulings, dated May 17, 2002, it is not this Directorate's practice to comment on specific proposed transactions other than in the form of an advance income tax ruling. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on our website at http://www.cra-arc.gc.ca. Your request was not submitted in the format required for an advance income tax ruling request, however, as stated in paragraph 22 of IC 70-6R5, we do provide written opinions on general enquiries which are not binding and we are prepared to provide you with the following comments.
Paragraph 8(1)(c) of the Act allows certain members of the clergy or of religious orders, as well as certain regular ministers of religious denominations, to deduct an amount in respect of their living accommodation.
In order to qualify for the clergy residence deduction, pursuant to paragraph 8(1)(c) of the Act, a person must satisfy both the status and function tests discussed below.
Status test
In order to qualify for the clergy residence deduction under paragraph 8(1)(c), a person must be one of the following:
- a member of the clergy;
- a member of a religious order; or
- a regular minister of a religious denomination.
You are of the opinion that you may satisfy the status test because of being a 'regular minister'. You would, however, like to know the conditions, if any, that you may have to satisfy with respect to the status of being a 'regular minister'.
Paragraphs 3 to 6 of the Interpretation Bulletin IT-141R (Consolidated), entitled 'Clergy Residence Deduction', provides explanation as to who may qualify as a 'member of a clergy' or a 'regular minister', and is reproduced below:
"Whether a person is a "member of the clergy" or a "regular minister" depends upon the structure and practices of the particular church or religious denomination.
A "member of the clergy" is a person set apart from the other members of the church or religious denomination as a spiritual leader. It is not necessary that the process of appointment be referred to as ordination or that the appointment be by someone higher up in the ecclesiastical hierarchy; it may be done by the congregation itself. It is sufficient that there be a formal or legitimate act of recognition, and it requires a serious and long-term commitment to the ministry. Priests, pastors, ministers, rabbis, imams, commended workers and other persons who have been commended, licensed, commissioned or otherwise formally or legitimately recognized for religious leadership within their religious organization may be members of the clergy.
A "regular minister" is a person who
- is authorized or empowered to perform spiritual duties, conduct religious services, administer sacraments and carry out similar religious functions. Religious functions may include participation in the conduct of religious services, the administration of some of the rituals, ordinances or sacraments, and pastoral responsibilities to specific segments of the religious organization;
- is appointed or recognized by a body or person with the legitimate authority to appoint or ordain ministers on behalf of or within the religious denomination; and
- is in a position or appointment of some permanence.
In the absence of a legitimate appointment or recognition, the mere performance of the duties of a minister will not suffice to constitute a "regular minister"."
In Côté v The Queen, [1999] 3 CTC 2152, the appellant was a youth pastor with the Assemblée Chrétienne du Nord. He was responsible for the youth congregation, which included some 20 young people ranging in age from 13 to 20. In the taxation year at issue, the appellant completed his Bible studies to obtain a ministry licence and become an ordained minister. At that time, he was at the level of a lay preacher. The issue was whether the appellant was a regular minister of a religious denomination and whether he was in charge of a congregation, within the meaning of paragraph 8(1)(c) of the Act. Lamarre Proulx, J.T.C.C made the following comments in his analysis and conclusion that the appellant did not qualify for a clergy residence deduction:
"[Paragraph] 8(1)(c) of the Act does not require a minister to perform his duties full-time, in contrast with what is required of someone engaged in administrative service for a religious denomination. The appellant did not spend all his time on his pastoral duties but did spend time on them on a regular basis; his appeal cannot fail on this ground.
Nor does [paragraph] 8(1)(c) state that only a person at the head of a ministry for a congregation can receive the deduction allowed in that section. In the church hierarchy there are duties and certain powers correspond to those duties. In my view, for a person to have full powers over performance of the liturgy is not necessarily an essential condition of [paragraph] 8(1)(c) of the Act. What matters is that the person be a regular minister of the religious denomination...
We know that the appellant is not an ordained minister in his religious denomination, but a lay preacher. We also know that he participates as such in the pastoral work of his church. However, as has just been said, it is not the title which determines the status of a regular minister: the person must be a member of a group which has a superior and distinct standing of its own in spiritual matters in his church. I will refer to this group as "clergy" to make these reasons easier to read.
It is well known that churches have lay members who assist members of the clergy or perform quasi-ecclesiastical duties. That does not make them members of the clergy of that church. To determine which members belong to the clergy and which belong to the lay assembly, it is necessary to know how the church or religious denomination in question is organized.
The evidence did not show how the religious denomination to which the appellant belongs is organized...I thus cannot be certain that the appellant belongs to the class of clergy of his church as opposed to its lay members."
In our view, the above comments apply to your situation. Accordingly, if you are able to demonstrate that your position in the Church is such that it sets you 'apart from the other members of the church or the religious denomination', or that based on the organizational set up of the Church, you are able to show that you are member of a group that has 'a superior and distinct standing of its own in spiritual matters in [your] church', you may satisfy the status test of being a 'member of the clergy' or a 'regular minister of a religious denomination'. However, we were not provided with enough information to make this determination.
In order to satisfy the status test of being a member of a religious order, i.e., the Church, in your case, it depends on whether the Church is a religious order for the purposes of paragraph 8(1)(c).
Judge Bowman has established in McGorman et al v The Queen (99 DTC 699 TCC), with respect to the meaning of a "religious order", six criteria to serve as guidelines in determining whether an organization (or a collectivity of persons therein) is a religious order, and the CRA has accepted these guidelines as indicated in paragraph 9 of IT-141R. These guidelines can be used to determine whether the Church is a religious order. The six criteria are:
1. The purpose of the organization should be primarily religious.
2. The members must agree to adhere to and in fact adhere to a strict moral and spiritual regime of self-sacrifice and dedication to the goals of the organization to the detriment of their own material well being.
3. The commitment of the members should be full-time and of a long-term nature. In some cases it may be for life, but this is not essential. It is important that it not be short term, temporary or part-time.
4. The spiritual and moral discipline and regime under which the members live must be markedly stricter than that to which the lay church members are expected to adhere.
5. Admission to the order must be in accordance with strict standards of spiritual and personal suitability.
6. There should generally be a sense of communality.
Further, it is CRA's view that, to be a religious order for the purpose of paragraph 8(1)(c) of the Act, not most, but all the relevant criteria set out by the court should be met. Again, based on the incoming, we do not have enough information to determine whether the Church satisfies all the criteria, described above, to be considered a religious order for the purpose of the clergy residence deduction. Hence, we cannot comment on whether you are a member of a religious order.
Function test
In order to qualify for the clergy residence deduction, a person who has the required status must also be employed in a qualifying function. The person's function must be one that he or she is:
- in charge of, or ministering to, a diocese, parish or congregation; or
- engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination.
You have indicated in your letter that you are currently employed as a full-time Student Ministries Associate with the Church. In your job description, you mention that you assist the Youth Pastor in the running of the XXXXXXXXXX and your main responsibilities include assisting 'in recruiting, training and leading a team of youth workers in a multi-faceted program XXXXXXXXXX .' It is, however, unclear if you are 'in charge of or ministering to' this youth group. Further, paragraph 16 of IT-141R states:
"Persons who meet the status test performing specialized ministering may satisfy the function test depending on the significance of the ministry in the particular religious denomination. Recognized forms of specialized ministry may include chaplaincies, religious education within a congregation, congregational pastoral responsibilities for music or youth, ethnic focus ministries, ministries with overseas or domestic missions, and ministries to the disadvantaged or disabled."
Hence, it is possible that you may be able to satisfy the function test of being 'in charge of, or ministering to, a diocese, parish or congregation'. However, we do not have enough information to make this determination.
With respect to the function of full-time administrative service described above, the CRA has interpreted the phrase "administrative service" in paragraph 18 of IT-141R as follow:
"Administrative service" generally describes the functions of determining organizational policies and coordinating various activities of the organization at the management level. It is not limited to the senior level of management of an organization. Performance of specific staff (i.e., support) functions such as accounting, grounds keeping, information technology and clerical work does not qualify as administrative service. A person who meets the status test who is employed in a full-time administrative position is considered to be working exclusively and full-time in a qualifying function even if, in addition to administrative responsibilities, the person also engages in incidental ministering activities that would satisfy the function test. Both the words exclusively and full-time imply that the person does not have some other form of appointment, business or occupation that is in addition to, and impinges upon, the administrative work performed."
From the job description included in your submission (help recruit and train all student ministries' staff, help with administration such as planning of youth events and trips, help with publications, attend ministerial meetings, etc), it appears that a Student Ministries Associate will not determine organizational policies and coordinate various activities of the organization at the management level. Accordingly, in our view, the position does not appear to be that of a full-time administrative service for the purposes of paragraph 8(1)(c) of the Act and, therefore, in our view, you do not satisfy the function test of being 'engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination'.
Further, with respect to the function test, the appointment by the religious order or denomination need not be to employment with the religious order or denomination, but rather it can be to a position with an entity that is controlled by, and that is an integral part of the order or denomination. We, however, do not have any information about who appoints a Student Ministries Associate and if the appointing organization is a religious order or a religious denomination, for the purpose of deduction provided for in paragraph 8(1)(c) of the Act.
As mentioned earlier, in order to qualify for the clergy residence deduction, pursuant to paragraph 8(1)(c) of the Act, a person must satisfy both the status and function tests. However, as explained above, based on the information available to us, we are unable to determine whether you satisfy both the status and function tests. Therefore, we cannot comment definitely on whether you qualify for the clergy residence deduction provided for in paragraph 8(1)(c) of the Act.
We trust our comments will be of assistance to you.
Yours truly,
For Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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