4 February 2003 External T.I. 2002-0178045 - WITHHOLDING CLERGY

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:

Are reductions in withholding in respect of the clergy deduction required to be approved by the CCRA?

POSITION TAKEN:

YES, except if the benefit is accommodations provided by the employer.

REASON FOR POSITION TAKEN:

Form T1213 requirements and subsection 153(1.1) of the Act.

XXXXXXXXXX 								2002-017804
C. Tremblay, CMA
(613) 957-22139
February 4, 2003

Dear XXXXXXXXXX:

Re: Form T1213- REQUEST TO REDUCE TAX DEDUCTIONS AT SOURCE ("T1213")
Form T1223-CLERGY RESIDENCE DEDUCTION ("T1223")

This is in reply to your letter requesting our opinion as to whether members of the clergy who qualify for the deduction under paragraph 8(1)(c) of the Income Tax Act (the "Act") and who request a withholding reduction at source are required to file a T1213 with the Canada Customs and Revenue Agency (the "CCRA").

In your letter, as we understand it, it is your view that a completed T1213 is not required to be submitted to the CCRA and that reduced withholding at source need not be authorized by the CCRA. It is your view, that since pastors are entitled to a deduction from income for their accommodations, that a reduction of the withholding of income taxes at source can be handled by the church treasurer in-house.

Our Comments:

Any employee who qualifies for the clergy residence deduction under paragraph 8(1)(c) of the Act because he or she satisfies both the status and function test therein may ask the CCRA to reduce the amount of income tax at source that the employer is deducting from his or her salary. A completed T1213 should be sent to the local tax services office. They will review the claim and if the employee qualifies, the Client Services Division will issue a letter of authority that can be taken to the employer to adjust the income tax deducted from the employee's salary. A church treasurer should not reduce the withholding income tax at source without written authority from the CCRA. However, in a situation where the employee is provided free accommodation from his employer and also qualifies for a deduction under 8(1)(c) of the Act, and advises his employer in writing that he or she will claim a deduction from income for the residence or other accommodation, there is no need to have the CCRA authorize the reduction in the income tax withholding in respect of the benefit.

Subsection 153(1.1) of the Act allows the CCRA, after it is satisfied that the individual qualifies for a lesser amount of income taxes to be withheld at source from his or her salary, to determine that a lesser amount be withheld from the salary.

The T1223 on the other hand is the form required to claim the Clergy Residence Deduction and is required to be completed by both the individual claiming the deduction and the employer representative certifying that the status and function tests are met in that year. The T1223 does not have to be filed with the individual income tax return but must be made available should the CCRA request to see it. For example, a completed T1223 may be required by the Client Services Division of the local tax services office to approve the T1213 request for reduction of withholding at source. Accordingly, we cannot agree that the T1223 alone authorizes the employer to reduce the withholding at source.

We trust our comments are of assistance.

Yours truly,

Steve Tevlin
For director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch