11 September 2002 External T.I. 2002-0155045 - RELIGIOUS ORDER - STATUS

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

Does outside employment by a member of a religious order jeopardize the status of the religious order that have no restrictions on outside employment or services members can engage in?

Position TAKEN
Question of fact
REASON FOR POSITION TAKEN

Religious Order must have restrictions on what sources of income members can engage in.

2002-015504
XXXXXXXXXX C. Tremblay, CMA
957-2139
September 11, 2002

Dear XXXXXXXXXX,

Re: Paragraph 11of Interpretation Bulletin IT-141R (Consolidated) (the "Bulletin")

This is in reply to your letter of July 26, 2002 wherein you request a technical interpretation of paragraph 11 of the Bulletin. The specific portion of the paragraph, which you are concerned with states, "...A religious order will normally impose restrictions on the outside lifestyle and employment activities in which its members can engage. A religious order will regulate the amount of financial support its members may receive or enjoy from the order, the religious denomination or givings from the broader community...". You seek clarification with respect to a situation faced by missionaries and other religious workers in need of additional income to support their families. In your example, a missionary works in a country where visa restrictions only allow the missionary to enter the country as an English language teacher and the missionary receives a nominal amount for the employment services. You indicate that the employment activities allow the individual to operate within the Religious Order, which do not otherwise have the resources to support the worker. As a result you question whether all the earnings received from outside employment must be turned over to the Religious Order or can a member of a religious order earn nominal amounts from outside activities without jeopardizing the religious order status of the sending organization.

Our Comments:

The particular situation presented in your letter appears to be a factual one involving specific taxpayers. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. However, we are prepared to offer the following general comments, which may be of assistance.

Whether or not an organization is a religious order, whether or not an employee is a member of a religious order or whether or not the focus of an individual is with the religious order or with some other organization are all questions of fact. In our view, members of a religious order should be committed to the cause of that particular religious order and the particular religious order should require significant self-sacrifice and dedication from such members that transcends that of an ordinary churchgoer.

Whether or not a religious order will lose its status as a religious order because it fails to regulate the amount of financial support its members may receive or enjoy will depend on the particular facts. However, in our view, it is important that the organization have restrictions on what outside employment the members can engage in and what sources of income may be developed by them. In this respect, we refer you to the comments in paragraphs 13,14,15 and 16, in the decision of the tax court Koop et al v The Queen (99 DTC 707).

Generally, where a member of a religious order is allowed by the religious order to earn nominal amounts from outside activities, this will not, in and by itself, disqualify the status of the religious order. However, we are only prepared to make that confirmation on a case-by-case basis.

In your example, the employees may meet the status test by claiming to be members of a religious order, however, they would not meet the function test for their teaching activities because teaching is not considered to be ministering or full-time administrative service. Accordingly, a missionary would not be eligible for a deduction under paragraph 8(1)(c), where his or her source of income in a particular year was teaching.

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.

We trust the above comments are of assistance.

Yours truly,

for Director,
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation branch
- 2 -