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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether employees of a religious order or religious denomination that work in administrative positions can qualify for the clergy residence deduction?
Position TAKEN: Insufficient facts to support whether employee meets status test.
Reasons FOR POSITION TAKEN: In order to qualify for function test the employee must meet status test in par.8(1)(c ).
XXXXXXXXXX 2002-011898
C. Tremblay, CMA
April 12, 2002
Dear Mr. XXXXXXXXXX,
Re: Clergy Residence Deduction
This is in reply to your letter of January 17, 2002, wherein you seek our views on whether an individual would qualify for the deduction under paragraph 8(1)(c) of the Income Tax Act (the "Act") with respect to full-time administrative service performed for a religious order or religious denomination.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4. Where the transactions are completed, the enquiry should be submitted to the relevant Tax Services Office. However, we are prepared to provide the following comments, which are of a general nature and are not binding on the Canada Customs and Revenue Agency ("CCRA").
Generally, to be eligible for the clergy residence deduction, an individual must be a member of the clergy, a member of a religious order, or a regular minister of a religious denomination (the "status test"). When one of these conditions is met, the individual must be 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 (the "function test").
In the scenarios you present, it does not appear that any individual is a member of the clergy; accordingly, in order to meet the status test, he or she must be a regular minister of a religious denomination or a member of a religious order.
For an employee directly employed by a religious denomination, to meet the status test, he or she must be a regular minister of a religious denomination authorized or empowered to perform spiritual duties, conduct religious services, administer sacraments and carry out similar functions. The individual should be authorized to perform all or at least most of the duties of a minister. Religious functions may include the 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. The individual should also be formally appointed and recognized by a body or person with the legitimate authority to appoint or ordain ministers on behalf or within the denomination. The position of regular minister should also be one of some permanence.
For an employee employed by a mission or relief agency related to a religious denomination, to meet the status test, he or she would have to either be a regular minister of the religious denomination (as described above) or a member of a religious order if the mission or relief agency is a religious order. Whether or not the mission or relief agency is a religious order is a question of fact. Judge Bowman has established, 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 CCRA has accepted these guidelines (see paragraph 9 of IT-141R (Consolidated)).
Regardless of the fact that an employee may have met the function test by being appointed to a full-time administrative service by a religious order or a religious denomination, the employee would not qualify for the deduction under paragraph 8(1)(c) of the Act, if he or she has not met the status test as described above.
Subsection 8(10) of the Act requires an employee claiming the deduction under paragraph 8(1)(c) of the Act to file with the return of income a prescribed form (T1223) signed by the employer to the effect that the employee met the requirements of the relevant provisions in the year in which the deduction was claimed.
We trust our comments are of assistance.
Yours truly,
Steve Tevlin
for Director
Business and Partnerships Division
Income Tax rulings Directorate
Policy and Legislation Branch
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