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 members of XXXXXXXXXX can take a vow of poverty that would qualify for the purposes of subsection 110(2) of the Income Tax Act, paragraph 6(2)(e) of the Canada Pension Plan and paragraph 7(b) of the Employment Insurance Regulations.
Position:
No.
Reasons:
July 10, 2002
Winnipeg Tax Centre HEADQUARTERS
Mathilda Freakes Randy Hewlett, B.Comm.
CPP/EI Coverage Officer 613-957-8973
2002-014544
XXXXXXXXXX - Vow of Poverty
We are writing in response to your request of June 6, 2002, wherein you inquire whether or not members of XXXXXXXXXX can have a "vow of poverty" for purposes of the Income Tax Act (the Act).
In your letter, you indicate that paragraph 6(2)(e) of the Canada Pension Plan (the CPP) and paragraph 7(b) of the Employment Insurance Regulations (the EIR) exclude from their application employment situations where an individual has taken a vow of poverty. Our interpretation of this phrase in the context of the Act would be helpful in your analysis of whether the CPP and EIR apply in specific cases you are reviewing, which involve members of XXXXXXXXXX.
Subsection 110(2) of the Act permits an individual to deduct in computing the individual's taxable income for the year an amount that is paid to a religious order, not exceeding the total of the individual's superannuation or pension benefits and earned income for the year, if during the taxation year he or she is "a member of a religious order and has, as such, taken a vow of perpetual poverty". Therefore, not only must the individual have taken a vow of poverty, but he or she must also be a member of the religious order to which the income has been paid. Paragraph 6(2)(e) of the CPP and paragraph 7(b) of the EIR have a similar requirement.
Paragraph 6(2)(e) of the CPP exempts an individual's employment from being pensionable where the individual is "a member of a religious order who has taken a vow of perpetual poverty and whose remuneration is paid either directly or by the member to the order". Paragraph 7(a) of the EIR exempts an individual's employment from being insurable where the individual is "a member of a religious order, if the person has taken a vow of poverty and the person's remuneration is paid directly, or by that person, to the order".
Interpretation Bulletin IT-86R Vow of Perpetual Poverty, discusses the CCRA's interpretation of subsection 110(2) of the Act, but does not discuss the meaning of a religious order. Interpretation Bulletin IT-141R (Consolidated) Clergy Residence Deduction, however, does discuss the term and the relevant factors applicable in determining if a religious order exists. As noted in paragraph 8 of IT-141R, religious order means a group of people bound by the same religious, moral and social regulations and discipline. Further, whether or not an organization or a group of individuals within an organization is a religious order is a question of fact to be determined on a case-by-case basis. No factor predominates and each must be assigned its proper weight in the context of all the facts.
Paragraph 9 of IT-141R discusses some of the common characteristics of a religious order. It indicates that the purpose of the organization should be primarily religious. The order may have other objects, such as education, the relief of poverty, or the alleviation of social ills and suffering, but these must fall within the overall context of the religious purpose. XXXXXXXXXX.
We trust our comments are of assistance, and will be helpful in your analysis of whether the CPP and EIR apply in the cases you are reviewing.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CCRA's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
John Oulton, CA
Manager
Business and Individual Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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