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 a Retreat Director qualify for the 8(1)(c) deduction?
Position TAKEN
No, if the employee does not meet the status test
Possibly, if the employee meets the status test and has qualifying functions.
It is a question of fact whether a Retreat Director is engaged exclusively in a full-time administrative service.
REASON FOR POSITION TAKEN
Not a regular minister of a religious denomination, nor does the function appear to be "full-time administrative function"
2002-017178
XXXXXXXXXX C. Tremblay, CMA
(613) 957-2139
November 14, 2002
Dear XXXXXXXXXX:
Re: Clergy Residence Deduction
This is in reply to your letter of October 29, 2002, wherein you asked specific questions with regard to the clergy residence deduction and specifically Form T1223, Clergy Residence Deduction (the "Form"). You also discussed the position of Retreat Director and asked our opinion as to whether it would qualify for the Clergy Residence Deduction (the "Deduction").
Generally, to be eligible for the 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 order to claim the Deduction, an employee is required to have his or her employer or an authorized person complete Part B of the Form. The Form requires that the employer or an authorized person sign Part B of the Form certifying that to the best of their knowledge that the employee has met the status and function tests required under paragraph 8(1)(c) of the Income Tax Act (the "Act"). Accordingly, if the employer or authorized representative is aware that the employee has not met the conditions of qualifying employment, the authorized employer representative should not complete and sign the Form. Signing the Form confirms that the information provided to the Canada Customs and Revenue Agency (the "CCRA"), in Part B of the Form, with respect to the employee status, function, job title and duties listed therein is true and complete.
As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on transactions involving specific taxpayers other than in the form of an advance income tax ruling. However, we have considered your specific questions and since you asked us for guidance, we provide the following comments to your questions, which are of a general nature only.
1. Does a staff member who provides an administrative function to the church qualify for the Clergy Residence Deduction?
If an employee does not meet the status test, that employee does not qualify for the Deduction thus there is no need to look at whether that employee meets the function test. However, if the employee meets the status test by being a member of the clergy or a religious order or a regular minister of a religious denomination, and the employee is engaged exclusively in full-time administrative service by appointment of a religious order or a religious denomination, he or she would meet the function test. The CCRA has interpreted the phrase "administrative service" in paragraph 18 of Interpretation Bulletin, IT-141R (Consolidated), a copy of which is enclosed. Although it is not limited to the senior level of management of an organization, performance of specific staff functions such as accounting, grounds keeping, information technology and clerical work does not qualify as administrative service. It is a question of fact whether a regular minister (see comments to question 5) employed as a Retreat Director meets the function test such that he or she determines organizational policies and coordinates various activities of the organization at the management level.
2. Does living on site qualify the individual any differently than an administrative person in the office living off site?
In order to qualify for the Deduction it is important that both the status and the functions tests be met. Living on-site or off-site is not relevant when determining if an employee qualifies for the deduction; however, the amount of the deduction may be different if a qualified individual lives on-site or off-site.
3. Are we correct that a Retreat Director's position, as a non-member of the clergy, does not qualify for the Clergy Residence Deduction?
An employee that does not meet the status test cannot qualify for the Deduction.
4. There may be enough growth in the future to hire a second minister who would assume some of the responsibilities of the Retreat Director. In this case then, are we correct to assume that the position would then have an eligible element to it for the portion paid to provide housing?
Provided the individual is a regular minister (see comments to question 5), he or she would meet the status test. However, it is a question of fact whether that employee's duties and responsibilities would qualify for the function test. In our view, if the only full-time functions of the regular minister were to oversee the premises, book retreats and promote the use of the facilities, the employee would not qualify for the Deduction.
5. We currently have a part-time ministerial student assisting the minister two days a week; does she qualify for the Clergy Residence Deduction?
Only a member of the clergy, a member of a religious order or a regular minister qualifies for the Deduction. In our view, and further to paragraph 5 and 6 of IT-141R (Consolidated), a regular minister of a religious denomination must be 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.
We trust the above comments are of assistance.
Yours truly,
Steve Tevlin
For Director,
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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