12 December 2001 External T.I. 2001-0084375 - XXXXXXXXXX

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether XXXXXXXXXX are entitled to the 8(1)(c) deduction?

Position TAKEN:

The XXXXXXXXXX do not meet the status or function tests.

Reasons FOR POSITION TAKEN:

With respect to the "religious order" issue, XXXXXXXXXX are not members based on Bowman's six criteria nor do their employment involve an integral religious function.

						2001-008437
XXXXXXXXXX 					2001-007142
C. Tremblay, CMA

Dear XXXXXXXXXX,

Subject: XXXXXXXXXX

This is in reply to your letter of January 31, 2001, addressed to Mr. Roderick Quiney, Deputy Assistant Commissioner, Assessment and Collections Branch of the Canada Customs and Revenue Agency (the "CCRA"), which was referred to us for reply. The issue is whether the CCRA accepts that the XXXXXXXXXX, also known as direct care workers, are entitled to the clergy residence deduction. We apologize for the delay in our response.

We have reviewed the issue in light of the 1999 Tax Court of Canada decisions with emphasis on Alemu et al. v. the Queen (99 DTC 714). In order to avail themselves of the clergy residence deduction, the XXXXXXXXXX must meet both the status and function tests of paragraph 8(1)(c) of the Income Tax Act (the "Act") as discussed below.

The Status Test:

Subparagraph 8(1)(c)(i) of the Act requires that the taxpayer claiming the clergy residence deduction be a member of the clergy or a member of a religious order or a regular minister of a religious denomination. The XXXXXXXXXX are claiming to be members of a religious order.

In the 1999 Tax Court decisions, Judge Bowman established six criteria for determining whether a religious organization was a religious order and these were set out in McGorman and John Miller v The Queen 99 DTC 699 (TCC). Further, paragraph 8 of IT-141R refers to the term "religious order" to mean a group of people bound by the same religious, moral and social regulations and discipline. A religious order may comprise all of the members of an organization or only an identifiable group within that organization. A religious order will have an ascertainable faith with tenets and principles and a requirement for their adherence, and its members will be involved in carrying out the religious mission or ministry of the order. This may include evangelism, religious missions, religious education, social outreach, counselling or relief and development. Not every religious organization is a religious order.

In our view, in order for a person to establish that he or she meets the status test as a member of a religious order, that individual must show that he or she meets the six criteria established by Judge Bowman. The six criteria are as follows:

(1) The purpose of the organization should be primarily religious.

We accept that religion permeates XXXXXXXXXX and it is primarily religious.

(2) The members must agree to adhere 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 material well being

There is no evidence that the XXXXXXXXXX earn any less than the national or provincial average in their field of expertise or that the XXXXXXXXXX are there for any other reason than employment.

It should be noted that in the 1999 Tax Court decisions, Judge Bowman was not asked whether XXXXXXXXXX qualify for the deduction. Unlike the XXXXXXXXXX, those who were found to qualify for the clergy residence deduction were engaged exclusively in full-time administrative service and were receiving 30% less salary than what prevails in a similar employment in comparable non-religious organizations.

(3) The commitment of the members should be full-time and of long-term nature. It is important that it not be short term, temporary or part-time.

There is no evidence that the XXXXXXXXXX positions are of a long-term nature.

(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.

Other than the personal lifestyle and morality standards expected of staff, general to those relating to Christian beliefs, there is no indication that the XXXXXXXXXX are expected to live their lives any stricter than a lay church member.

(5) Admission to the order must be in accordance with strict standards of spiritual and personal suitability.

There is no indication that the XXXXXXXXXX are admitted to XXXXXXXXXX on the basis of strict standards of spiritual and personal suitability. It appears that a XXXXXXXXXX lapse of time is all that is required to be a member of XXXXXXXXXX. In our view, spiritual formation should be a major component for a member to be considered part of a religious order. There is nothing in the application for employment that indicates that the XXXXXXXXXX are applying for anything other than employment at XXXXXXXXXX in their particular field of expertise.

In our view, the XXXXXXXXXX are employees but are not members of a religious order. Likewise, not every individual who identifies with a religious order, either by being an employee or an associate is a member of the religious order. Some live life in the spirituality of the religious order to which they are related but are not members. Some religious orders have honorary, corporate and general memberships. Some employees, for example teachers in religious schools, are asked to sign statements regarding morality standards. In our view, such statements do not make those teachers members of a religious order. As a further example, not every person who works for a hospital operated by a religious order is a member of that religious order.

(6) There should be a sense of communality.

Judge Bowman did not expand on this criterion. In our view, this criterion could apply to either the residents or the XXXXXXXXXX.

A further requirement of paragraph 8(1)(c) of the Act is to meet the function test discussed below.

The Function Test:

Subparagraph 8(1)(c)(ii) of the Act also requires that an individual who has met the status test as discussed above be;

(A) in charge of a diocese, parish or congregation,
(B) ministering to a diocese, parish or congregation, or
(C) engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination.

XXXXXXXXXX claims in a letter dated November 29, 2000 that the XXXXXXXXXX meet the function test under (B) because they are ministering to a congregation.

In your January 31, 2001, letter to Mr. Quiney, you state in your first paragraph of page 3 that;

"XXXXXXXXXX".

You also appear to base your position that XXXXXXXXXX are ministering to a congregation on the 1999 Tax Court decisions of Koop et al (99 DTC 707) and McGorman et al.

In our view, clause 8(1)(c)(ii)(B) of the Act referring to "ministering" means more than preaching or a prayer service. For example, in paragraph [56] of the decision in Miller, Judge Bowman commented, "...Ministers are called on to do much more than offer spiritual guidance. They provide psychological and marital counselling. They advise on family and career related matters. It is to the church that people turn when faced with the infinite variety of problems that arise in life. Ministering is a very broad concept, particularly in the context of the work of a person of the cloth..."

With respect to the Koop and McGorman cases, it is our view that the duties of the XXXXXXXXXX are different for a number of reasons. Ms. Koop was a commissioned minister of the Mennonite Brethren Churches and ministered to young offenders at two different centres and ministered at the Street Light worship service. She was recognized as a spiritual leader and she led the sermons. Ms. McGorman did not have formalized religious training, however, she qualified because of her full-time administrative duties.

In our view, to "minister" for the purposes of paragraph 8(1)(c) of the Act does not require that the individual be formally ordained as a minister but be authorized or empowered to carry out certain functions of a minister such as the administration of some of the rituals, ordinances and sacraments, and pastoral responsibilities of the religious organization. The position of XXXXXXXXXX involves no formal religious training or ministerial preparation but does involve prayer, which is a common practice of all believers. Traditionally, feeding the hungry or visiting the sick have been considered "works of charity" rather than ministering.

It appears that XXXXXXXXXX are primarily involved in care albeit some incidental spiritual duties are required. In our view, ministering is not an integral part of the responsibilities of a XXXXXXXXXX given the fact that the activities of the job description refers to feeding, dressing, social counsel, meal planning, and housekeeping. Further, the recruitment advertisement of XXXXXXXXXX does not mention any religious requirements or religious qualifications. In addition, there is no reference to religious training or preparation and there is no indication that any spiritual duties will be required. The only requirements for one to hold the position of a XXXXXXXXXX appears to be XXXXXXXXXX.

Accordingly, in our view and based on the above analysis, XXXXXXXXXX do not meet either the status or function tests as required under paragraph 8(1)(c) of the Act.

In closing, we acknowledge receipt of your letter dated September 6, 2001, which we received on November 20, 2001 and we note in your last paragraph, a request for a meeting. We ask that you fully consider the above opinion that sets CCRA's position as it relates to XXXXXXXXXX. Should you still require a meeting, we invite you to contact Sandra Short at (613) 954-2860 of the Assessment and Collections Branch of the CCRA.

Yours truly,

Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

cc Sandra Short, Assessment and Collections Branch