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 teachers that work in administrative positions or do other ministering activities can qualify for the clergy residence deduction?
Position TAKEN:
Generally no, however administrators who work full-time according to Canadian labour laws (+35 hours) as administrators and who also teach qualify.
Reasons FOR POSITION TAKEN:
Teachers do no meet the function test.
Administrators must be engaged exclusively in full-time administrative service.
XXXXXXXXXX 2002-012074
C. Tremblay, CMA
June 20, 2002
Dear XXXXXXXXXX:
Re: Paragraph 8(1)(c) of the Income Tax Act (the "Act"):
Persons of Status having Ministerial or Administrative Responsibilities
together with Teaching Responsibilities
This is in reply to your letter of June 17, 2002, and further to our meetings of March 22 and June 3, 2002, requesting the appropriate method for determining the entitlement to the clergy residence deduction of a person who meets the status test in paragraph 8(1)(c) of the Income Tax Act (the "Act") and who along with his or her ministerial or administrative responsibilities also teaches. The issue arises primarily within religious schools. You have provided us with six different situations and ask for our interpretation. You indicate in all instances that the individuals meet the status test; accordingly, we will focus our comments on the function test.
Situation 1:
Reverend A meets the status test. She is employed at a religious school operated within her denomination. In addition to her teaching responsibilities, Reverend A holds the position of an administrative officer (say the Director of Development) for the school. Reverend A spends at least 90% of her work time fulfilling her teaching responsibilities including preparation, marking, tutoring, professional development and direct classroom time. Her administrative responsibilities occupy no more than 10% of her work time.
In our view, Reverend A is not entitled to a deduction under paragraph 8(1)(c) of the Act. She is primarily a teacher. Paragraph 19 of Interpretation Bulletin IT-141R (Consolidated) (the "Bulletin") states that teaching is not considered administrative service, whether or not it is at a denominational school, college or seminary. Occasional or incidental teaching will not, however, disqualify a person whose full-time responsibility is qualifying administrative service.
Situation 2
Pastor B is a minister employed at a denominational school. He is the Principal of the school. He also teaches several of the religious studies courses at the school. The time spent by Pastor B on his administrative responsibilities as Principal is approximately 50% of his work time. The rest of his time is spent fulfilling his religious studies teaching responsibilities to the students at the school. Because course offerings change from year to year and the size of the faculty may fluctuate largely in a small school as a result of a single hiring or a sabbatical for example, the allocation of Pastor B's time ranges from year-to-year. This fluctuation ranges from say 40% to 60% of his work time being spent fulfilling his administrative responsibilities.
We assume the individual in this situation has been appointed by his religious denomination. An administrator who meets the status test is required to be engaged exclusively in full-time administrative service by appointment of a religious order or a religious denomination. Under normal circumstances, we would expect that an administrator generally spends the equivalent of a traditional workweek of 35 hours in fulfilling the administrative function in order to qualify for the deduction. Where the individual spends 35 hours or more a week under general circumstances at the administrative functions, the teaching responsibilities would not disqualify his or her claim.
Although the term "exclusively" and "full-time" do not preclude a person of status from qualifying for the deduction even though they have other responsibilities, in our view, such responsibilities should not be such as to render their administrative duties as part-time and have their other non qualifying duties occupy more of their employment time.
Situation 3
Reverend C is a minister recognized by his denomination. He is properly appointed to have charge of a local church congregation as its pastor. Because his church congregation is modest in size and in resources, in addition to his pastoral work he fulfills and is responsible for many of the administrative tasks necessary to operate his church. In addition to presiding at services, performing the sacraments, counselling and visitation, he keeps the church's records, maintains its accounts, prepares the church's tax information returns and has handyman level maintenance responsibilities. In addition, at one of his church's three Sunday services, the Associate Pastor will frequently preside permitting Reverend C to regularly teach one of the children's Sunday school classes. All of his time is spent serving his congregation as pastor in these mixed pastoral, administrative and teaching functions.
Reverend C is in charge and ministers to a congregation within his role as pastor and ministering to his congregations is an integral part of his responsibilities. In our view, his administrative and teaching functions would not disqualify his claim.
Situation 4
Mr. D is a regular minister within his denomination. He is also employed at one of his denominational schools as the school's Vice-Principal. Because of the school's size and Mr. D's abilities, Mr. D also teaches at the school. Because his administrative responsibilities as Vice-Principal require approximately one-third of his aggregate work time, he also carries a teaching load equal to approximately two-thirds of what the school's full time teachers' carry.
In this situation we also assume that Mr. D is appointed to the school by his religious denomination. As in situation 2, Mr. D needs to meet the words "...engaged exclusively in full-time administrative service by appointment of a religious order or denomination...". In our view, the responsibility of teaching a course load equivalent to approximately two-thirds of that of other teachers make it difficult for us to accept that the additional responsibilities are incidental. However, if the individual were required to generally spend 35 hours a week under normal circumstances at the administrative functions, his teaching responsibilities would not disqualify him.
Situation 5
Mrs. E's status is that of chaplain within her denomination and, as in Noseworthy (99 DTC 541), her appointment as chaplain constitutes her a regular minister within her denomination. She is also an accredited teacher. She is employed at a denominational school where she carries a normal teacher's course load. In addition to her teaching responsibilities, Mrs. E serves as a part-time chaplain at a chronic care facility in her community and in that capacity regularly leads Sunday services at the institution and brings communion to its residents. While the school does not operate the chronic care facility, they are within the same denomination and the same community.
In our view, the fact that Mrs. E carries a normal teacher's course load would lead us to conclude that she is employed as a teacher and as such would not qualify for the clergy residence deduction from her source of income as an employee of the school.
As to her other function as a part-time chaplain, where the chronic care facility is a separate employer than the school, she could qualify from that source of income and be allowed the clergy deduction for an amount up to the amount not exceeding the remuneration from that employment source. However if she is only a volunteer, then there is no income that qualifies for the deduction.
Situation 6
Reverend F is employed at one of her denomination's colleges, where she carries a full-time course load teaching at the college. As one of the ordained faculty members, she functions as Chaplain and is responsible for leading the chapel and worship program within the school. She presides at the school's chapel approximately one Sunday a month. The chapel is operated by the school and is open to all in the community. Its worshippers include students, other faculty and people who hive in the nearby community. In addition, Reverend F spends two Sundays a month preaching and presiding at services in other churches within her denomination when their regular pastor is away. She is expected to do this additional work by her denomination. If she receives honoraria from the local congregation where she is preaching, she includes it in income.
Where the Reverend ministers to a diocese, parish or congregation she qualifies for the deduction from that source. In our view, and further to paragraph 16 of the Bulletin, a Chaplain is a recognized form of specialized ministry.
Whether the employees who perform ministering duties over and above theirday-to-day teaching activities or full-time administrative service activities, as the case may be, still meet the function test is a question of fact, see for example Attwell v MNR (67 DTC 611). Paragraph 14 of the Bulletin states "Persons who meet the status test who minister on a part-time or assistant basis and those performing specialized ministering satisfy the function test". In our view, the words "part-time" and "assistant" were introduced in paragraph 14 of the Bulletin to describe those situations similar to McNeil (95DTC702) and Kolot (92DTC2391), respectively. For instance, an employee who works only part-time as a minister (i.e. the job itself is part-time), and ministering is an integral part of that part-time job, would meet the function test. However, the deduction would be limited to the remuneration from that part-time job. Similarly, in a larger congregation ministering as an assistant to the head pastor will also qualify as long as the "integral part" test is met.
In regards to the outside activity of Reverend F, that activity will not qualify for the purposes of paragraph 8(1)(c) of the Act unless she receives a stipend from that source as employment income (paragraph 8(1)(c) of the Act does not apply to self-employed earnings). Please note that the deduction available under paragraph 8(1)(c) of the Act would be limited to the amount received from the qualifying source.
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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