Vibe v. R., [1998] 3 CTC 2856, 98 DTC 1684

Garon T.C.J.:

These are appeals from income tax reassessments concerning the 1989, 1990 and 1991 taxation years.

By these reassessments the Minister of National Revenue disallowed the deductions in the respective amounts of $14,433.24, $15,083.28 and $16,345.33 claimed by the Appellant in the years 1989, 1990 and 1991 under paragraph 8(1 )(c) of the Income Tax Act with respect to the fair rental value of a residence that he owned and occupied during each of the three years.

The Appellant was ordained in May 1962 and has been on the clergy roster of the Evangelical Lutheran Church in Canada and its predecessor Church since that time. He has been a member in good standing of the Manitoba Northwestern Ontario Synod of the Evangelical Lutheran Church in Canada.

From his ordination until 1986, the Appellant has served various congregations as a full-time pastor of his Church in localities in the provinces of Manitoba, British Columbia, Alberta, Ontario and briefly in Minnesota, United States of America.

Effective September 1st, 1986, the Appellant became employed as Secretary of the Manitoba District of the Canadian Bible Society. Following such appointment, an installation service was arranged by his Church and was presided over by the Appellant’s Bishop, that is, the Bishop for the Manitoba Northwestern Ontario Synod. The General Secretary of the Canadian Bible Society assisted the latter Bishop in the Appellant’s installation service. The Appellant was employed in that capacity during the three years in issue and resigned his position in 1993 for health reasons.

The Canadian Bible Society was created under the authority of, “An Act to incorporate the Canadian Bible Society auxiliary to the British and Foreign Bible Society”, assented to on June 26th, 1906 as a non-profit corporation. The Canadian Bible Society is a registered charity under the Income Tax Act.

The object of the Canadian Bible Society is described in section 4 of the latter statute as follows:

The sole object of the Society shall be to promote and encourage the wider circulation throughout Canada of the Scriptures, without note or comment, and to co-operate with the British and Foreign Bible Society in its world-wide work.

From the 1990 version of the Constitution of the Canadian Bible Society, the following excerpts are of interest for present purposes:

1. The sole object of the District shall be to encourage the wider promotion of the Bible, without note or comment, throughout Manitoba, and to assist the Canadian Bible Society in its world wide ministry.

6. A District Secretary shall be appointed by the General Board of the Canadian Bible Society. Such appointment shall be preceded by consultation between the General Secretary and the Executive Board of the Manitoba District.

a. The District Secretary will be responsible to the General Board of the Canadian Bible Society, but will work in harmony with the District Board of the Canadian Bible Society.

b. The District Secretary will be the chief executive officer of the District and will be responsible for the administration and management of the District. He will also be responsible for the promotion and implementation of the national policies of the Society in the District.

C. The District Secretary will be an ex-officio member of the District Board.

Paragraphs numbered 1 and 2 of the By-laws of the Canadian Bible Society are worth noting:

The business of the Canadian Bible Society, La Société Canadienne, [sic] is managed by the Executive Board. Its membership is composed of one third clergy and two thirds lay persons representing the various denominations in the District. The Board is elected at the Annual Meeting of the Society each spring.

It is required that members of the Executive Board shall be members in good standing of their respective congregation, and as far as possible, shall be elected or appointed by their denomination to the Board.

There are no significant differences between the above provisions of the 1990 version of the Constitution of the Canadian Bible Society and the corresponding provisions in the pre-1990 Constitution that were applicable during a portion of the period in issue.

The position of District Secretary of the Canadian Bible Society was advertised in an issue of the periodical of the Lutheran Church of Canada some time in 1985 or early 1996. The advertisement reads thus:

Canadian Bible Society

will require two district secretaries for July 1, 1986. Successful candidates will be Biblically motivated, genuinely ecumenical, and personally outgoing ordained clergy ready to serve in either Manitoba or Nova Scotia. Applicants may write to:

The General Secretary

10 Carnforth Road

Toronto, Ontario M4A 2S4

The job description of Secretary of the Manitoba District of the Canadian Bible Society describes its primary purpose in these terms:

To alert, to listen, and to challenge the Christian community of Manitoba with the three-fold purpose of the Canadian Bible Society, both as it applies at home and beyond our borders, in a manner that is both relevant and respectful.

In other words, to discover the best ways to alert and challenge Christians within the various denominations that make up the Christian mosaic of Manitoba to the three-fold purpose of the Society, namely:

The ‘Translation’ of the Bible, in part or in whole, into as many languages of the world as there are people who desire.

The ‘Publication’ of the Bible in a format that is easily readable, and at a price that people can afford.

The 'Distribution' of the Bible, whether directly or through the missionary endeavours of the supporting Churches to all who desire a copy of the Bible.

The Canadian Bible Society was requiring at the relevant time that the District Secretary had a minimum of five years parish experience and preferably ten years. It was also considered desirable that the incumbent of that position had a broad ecumenical experience since he had to deal with a great number of Christian denominations.

Before accepting the appointment, the Appellant consulted with the Synod Bishop of Manitoba and Northwestern Ontario who was quite supportive of his application. The latter Synod Bishop had previously endorsed the Appellant’s application for this position.

The Appellant also had discussions at that time about the duties of the position of Manitoba District Secretary of the Canadian Bible Society with Reverend William R. Russell, the General Secretary of the Canadian Bible Society.

The Appellant was offered the position of Manitoba District Secretary in a letter dated June 3, 1986 from the General Secretary, Reverend Russell.

Following his acceptance of the above position, the Appellant received a Letter of Call from the Manitoba and Northwestern Ontario Synod. A Letter of Call dated November 3, 1986 was also issued to the Appellant by the Church Council of the Evangelical Lutheran Church in Canada. This Letter of Call was forwarded to the Appellant by the Secretary of the latter Church with his letter of November 19, 1986. The last paragraph of the letter of November 19, 1986, is of some significance:

May God bless you in this new ministry you are undertaking.

(Emphasis added)

The Appellant gave a detailed account of his work as Manitoba District Secretary of the Canadian Bible Society. The Appellant testified that he spent about 60% of his time on the road for the purpose of visiting the parishes and congregations of the various denominations in Manitoba. In his work, he contacted the pastors of such denominations. As a minimum, with the consent of the pastor of the local Church, the Appellant participated in the worship service by making a five minute presentation in the course of which he promoted the reading and study of the Bible. On an average, he made 150 to 200 five-minute presentations a year during the relevant period. In addition, he preached sixty to seventy times a year during the years in issue. He visited 150 to 200 local churches in a particular year.

With respect to the worship services, the Appellant read lessons and shared in the sermons, if the local pastors agreed. On many occasions, the local pastors consented to the Appellant playing an important role in the conduct of worship services; at times, he conducted the whole service. He also assisted with the communion service, that is, in the distribution of bread and wine in churches of his denomination and, to a lesser extent, in churches of other denominations. The Appellant also presented what he called a children’s or youth feature that is, a religious message that was made palatable for young people of a congregation.

Occasionally he also filled in as a minister for the worship service. He was also available for ministry work on Sunday eight to ten times a year, at the request of the Synod Bishop. He occasionally visited prisons and more often, senior citizens retirement homes. He also called at the offices of the Citizenship Court where he presented Bibles to individuals who became Canadian citizens.

On many occasions, in his attendance at and participation in the worship service, he wore the clerical collar and was dressed as a clergyman. On other occasions, taking into account the wishes of the local pastor, he would wear the clerical gown or simply dress in civilian clothes.

In addition to his participation in the worship services, the Appellant was required by the duties of his office to attend to correspondence and handle special requests, for example, from institutions which would like free bibles or free new testaments. He took part in board meetings of the Canadian Bible Society and in a number of meetings of various committees of the Manitoba District of the latter Society.

On his visits to the churches of the various denominations, the Appellant arranged for the placing of envelopes in the Church for donations to the Canadian Bible Society, provided that the local pastor consented to this type of arrangement. In many cases, the local pastor did not agree to this collection method. The Appellant stated that the collection work for the Canadian Bible Society was not a significant part of his work. The raising of funds for the Canadian Bible Society was mainly done through its national direct mail programme, which was operated through the national office in Toronto, by a number of employees of the Canadian Bible Society. The Appellant himself also acknowledged receipt of larger gifts to the Canadian Bible Society.

It is to be noted that in the years in question, the Appellant ought not to present himself to congregations and gatherings as a Lutheran pastor but as a representative of the Bible Society.

The Appellant was also required to make an annual written report to the Synod Bishop about his ministry and in particular about his work for the Bible Society. The Appellant also had informal communications with the Synod Bishop at least twice a year.

The Appellant did not perform funerals during the years in issue; he conducted two marriages during that period. Family and marriage counselling was not part of the duties of his office.

It should also be noted that the Evangelical Lutheran Church of Canada paid no part of his salary. The Appellant’s Church did not provide him with an office or other facilities. However, the Appellant elected to continue to participate in the pension plan of his Church rather than in the pension plan of the Canadian Bible Society.

The testimony of the Synod Bishop for Manitoba and Northwestern Ontario during the years in issue corroborated the Appellant’s testimony, namely with regard to the installation service that took place shortly after the Appellant’s appointment to the office of Manitoba District Secretary of the Canadian Bible Society. As well, the Synod Bishop asserted that there was a requirement for the Appellant to possess the Call of his Church for serving as Secretary of the Manitoba District of the Canadian Bible Society. He also confirmed that the Appellant was required to make an annual report to him, in his capacity as the Synod Bishop, like any other pastor of his denomination albeit the form of the report was of a different nature.

It was also mentioned that, in particular, the Appellant remained subject to the discipline provisions of his Church which are found in Part III of the By-laws of the Evangelical Lutheran Church in Canada.

Reverend Russell Tudor Hall, who was Resource Director for the Canadian Bible Society during the relevant years, testified briefly at the hearing of these appeals. He provided information as to how the Canadian Bible Society raised its funds to finance its operations. He gave explanations in particular about the direct mail fund raising programme directed by the national office of the Canadian Bible Society in Toronto. This programme was the primary source of funds for the Canadian Bible Society.

The Appellant’s submissions

On behalf of the Appellant it was submitted that paragraph 8(1 )(c) of the Income Tax Act requires a taxpayer to meet status and function requirements to be entitled to that deduction.

Regarding the status test, the taxpayer must be a member of the clergy, a member of a religious order or a regular minister of a religious denomination. According to the function requirement test, the taxpayer must be in charge of or ministering to a diocese, parish or congregation or must be engaged in full-time administrative service by appointment of a religious order or a religious denomination.

Applying these two tests, it was submitted on behalf of the Appellant that the first test is met by reason of the fact that the Appellant was an ordained minister of the Evangelical Lutheran Church in Canada.

As for the second test, it was advanced that the Appellant was ministering to the congregation on whom he attended in his capacity as the Manitoba District Secretary of the Canadian Bible Society. In support of this proposition, Counsel for the Appellant referred to paragraphs 4 and 5 of the Interpretation Bulletin, IT-141 dated December 31, 1973 and to Revenue Canada Directives TIP 92-02 and 1974.14 dated March 20, 1997.

For the Appellant, it was also urged that the word “congregation” in the phrase “ministering to a congregation” in paragraph 8(1 )(c) of the Act should be read as including the plural “congregations”. It was suggested that a contrary intention is not indicated in paragraph 8(1 )(c).

The proposition was also put forward that the function requirement of ministering to a congregation does not restrict the deduction set out in paragraph 8(1)(c) of the Act to just the local Church minister of a particular congregation.

The Appellant also submitted, as an alternative argument, that if the Appellant’s work as Manitoba District Secretary of the Canadian Bible Society is not found ministering, such work was full-time administrative service to which the Appellant had been appointed by a religious denomination, namely the Evangelical Lutheran Church of Canada.

The Respondent’s submissions

The respondent relied on the decision of Deputy Judge Rowe in the case of McNeil v. R., [1] who described the general purpose of paragraph 8(1 )(c) at page 705.

Counsel for the Respondent also found support for his position in the House of Commons Debates on July 31, 1956 reported in Hansard at pages 6775 and 6777 and the observations made by the then Minister of Finance. In this connection, counsel for the Respondent commented as follows in his memorandum submitted during oral argument entitled “Respondent’s Points of Argument”:

At the time of amendment of the provision into its present form 1956, the Minister responsible indicated that the deduction was not intended to be applicable in the case of all clergymen or ministers, and that it was to apply to a clergyman, ‘whether he be in fact a pastor in charge of a congregation or a member of the church body in the higher level [...] who engages in church work exclusively including acting as a pastor from time to time’.

Counsel for the Respondent also propounded the proposition that the general scheme of the Act is to preclude deductions for personal and living expenses and contended, on the basis of the decision of this Court in the case Oligny c. R., [2] and in a decision of the Federal Court of Canada, Trial Division in the case of Zylstra Estate v. Minister of National Revenue, [3] that paragraph 8(1 )(c) is to be construed narrowly rather than liberally.

On behalf of the Respondent, the attention of the Court was drawn to a difference in substance between the English and the French versions of the enactment of paragraph 8(1)(c), the French version being narrower. In support of this submission, Counsel contrasted the portion of the enactment in the English version of paragraph 8(1)(c) “is in charge of, or ministering to a diocese, parish or congregation” with the enactment in the French version “et qu’il dessert un diocèse, une paroisse ou a la charge d’une congrégation”.

It was also submitted in the Respondent’s Points of Argument that, ‘“ministering to a congregation’ consists of having the charge of the spiritual needs and welfare of the congregation as the principal focus of one’s activities, and not simply having such duties as an incidental or secondary concern. It is further submitted that the phrase ‘ministering to a congregation’ does not include the performance of only a portion of the duties that are ordinarily performed by a clergyman who is ministering to a congregation. A clergyman who is ‘ministering to a congregation’ or to ‘congregations’ is one who is performing the bundle of duties that are ordinarily associated with and performed by the minister of a congregation”.

Finally, it was urged on the Court that the appointment of the Appellant to the position of Manitoba District Secretary of the Canadian Bible Society was not an appointment by a religious denomination as required by paragraph 8(1)(c) of the Act, but rather an appointment made by the Canadian Bible Society which is an entity other than a religious denomination or a religious order.

Analysis

It is common ground that the entitlement by a member of clergy to a deduction against the income from his office or employment in respect of his residence is governed by paragraph 8(1 )(c) of the Income Tax Act which provides as follows:

8(1) In computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:

(c) where the taxpayer is a member of the clergy or of a religious order or a regular minister of a religious denomination, and 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, an amount equal to

(i) the value of the residence or other living accommodation occupied by him in the course of or by virtue of his office or employment as such member or minister so in charge of or ministering to a diocese, parish or congregation, or so engaged in such administrative service, to the extent that such value is included in computing his income for the year by virtue of section 6, or

(ii) rent paid by him for a residence or other living accommodation rented and occupied by him, or the fair rental value of a residence or other living accommodation owned and occupied by him, during the year but not, in either case, exceeding his remuneration from his office or employment as described in subparagraph (1);

First, there is no dispute about the quantum of the deduction claimed by the Appellant in each of the years in issue.

As mentioned by Judge Beaubier of this Court, in the case of Kolot v. Z?., [4] the case law has established that there is a twofold test to determine whether or not a taxpayer can fall within the ambit of paragraph 8(1 )(c) of the Income Tax Act. These tests have been described as the status test and the function test.

It is common ground here that the Appellant was an ordained minister of the Evangelical Lutheran Church in Canada. The Appellant was therefore a member of the clergy within the purview of the opening words of paragraph 8(1 )(c) of the Income Tax Act. Thus, the Appellant met the status test.

The second test is whether the Appellant, in the years in issue, satisfied the function test. In other words, having regard to the facts of the present case, was the Appellant ministering to a congregation in his capacity as Manitoba District Secretary of the Canadian Bible Society.

In that position, his main duties, apart from the office work related to any clerical office, or for that matter generally to any type of office, could be summarized as follows:

On many occasions, the Appellant assisted the pastor of the local Church in the conduct of the congregation’s regular worship services. The Appellant spoke from the pulpit. In fact, the Appellant participated in the sermon to the congregation in his presentation concerning the promotion of the use and reading of the bible. In some instances, he preached the entire sermons to the congregations. He also participated in the regular worship of these congregations in other ways, such as reading lessons, leading prayers, etc. The Appellant also assisted in administering the sacrament of communion. He led the bible study lessons.

Also, the work performed by the Appellant, as Manitoba District Secretary of the Canadian Bible Society, was regarded as ministry by his Church. Among other things, the Evangelical Lutheran Church in Canada issued a specific Letter of Call to the Appellant, following his appointment to that position. The Synod Bishop also put out a Letter of Call to the Appellant for the same purpose.

Also the installation service was conducted under the direction of the Synod Bishop after the Appellant’s appointment to the above position. This factual element is a clear recognition by the Church that the Appellant’s work constituted ministry. I agree with counsel for the Appellant that considerable weight should be given to what constitutes ministry in the eyes of a particular Church, although I recognize that the matter may not be entirely conclusive. The Appellant’s work for the Canadian Bible Society was also considered by that Society as ministry. The evidence of the Resource Director of the Canadian Bible Society was that the work of the District Secretaries of the Canadian Bible Society was described “as a cognate ministry”.

In performing the above duties the Appellant was, in my view, ministering to the congregations on whom he attended. These congregations were regular congregations of established religious denominations. Regarding the use of the singular in the phrase “ministering to a diocese, parish or congregation” in paragraph 8(1)(c) of the Income Tax Act, I am in full agreement with the point made by Counsel for the Appellant that it was a long stand- ing principle of statutory interpretation that words in the singular do include the plural, as set out in subsection 33(2) of the Interpretation Act.

It is of interest to note the import of the words, “diocese, parish and congregation” in the context of paragraph 8(1 )(c) of the Income Tax Act. The observations of Justice MacKay of the Federal Court, Trial Division in the case of Zylstra Estate v. Minister of National Revenue (1994), 94 D.T.C. 6687 (Fed. T.D.)at page 6696 are worth noting:

It is my opinion that in this broader context of the words used to describe the qualifications for a deduction, the words ‘diocese, parish or congregation’ are intended to describe different organizational or institutional structures determined by religious denominations for the ongoing organized activities of their members on a regular basis. Thus, a gathering of persons may well be a congregation for some purposes, but unless it is a gathering for shared religious purposes recognized by a religious denomination for its regular organizational religious activities, it does not qualify as a ‘congregation’ within the meaning of that word in paragraph 8(1 )(c) of the Act.

Even if paragraph 8(1 )(c) of the Income Tax Act is to be construed narrowly, I cannot accept that paragraph 8(1 )(c) should be restricted to the usual case of the local Church pastor. If that had been the intention of Parliament, it would have been easy to say so. In this regard, it is interesting to observe that in the Interpretation Bulletin IT-141 dated December 31, 1973, a reasonably broad interpretation is given to the concepts of, “Ministering to a congregation”, and, “congregation”. Paragraphs 4 and 5 of this Bulletin read as follows:

4. “Ministering to a congregation” means performing a function in relation to the members of the congregation similar to that performed by ministers of the better known religious denominations. For example, a cantor whose main function is to sing in religious services is not ministering to a congregation as is a cantor who has been trained to fulfil and is carrying out religious duties similar to those of a rabbi.

5. A congregation is not defined by territorial boundaries nor by the number of people gathered together in one place. Accordingly, chaplains in the armed forces or with an institution are generally considered to minister to congregations.

Thus, I find as a fact that the Appellant, during the years in issue, was ministering to congregations within the purview of paragraph 8(1 )(c) of the Income Tax Act. The Appellant met during the years in issue the function test.

Therefore, I corne to the conclusion that the Appellant is entitled, in each of the years in issue, to the deduction provided by paragraph 8(1)(c) of the Income Tax Act in respect of his residence.

For these reasons, the appeals are allowed with costs and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant is entitled, in respect of the years 1989, 1990 and 1991, to the deduction spelled out in paragraph 8(1 )(c) of the Income Tax Act.

Appeal allowed.