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.
Principal Issues: Is a Collectivity within XXXXXXXXXX a religious order?
Position: yes
Reasons: 6 criteria offered by Judge Bowman. However not all members of the Collectivity qualify for the deduction.
2004-005513
XXXXXXXXXX C. Tremblay, CMA
(613) 957-2139
December 8, 2004
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
This is further to your letters of November 13, 2003 (XXXXXXXXXX), June 30, 2004 (XXXXXXXXXX), November 2, and December 2, 2004 (XXXXXXXXXX), which was is in reply to our letters of July 22, 2004 and of March 30, 2004 and numerous telephone conversations wherein we requested additional information. You request confirmation that persons employed at XXXXXXXXXX (the "Collectivity") qualify as a religious order and that the individuals who make up the Collectivity qualify for a deduction under paragraph 8(1)(c) of the Income Tax Act (the "Act").
The particular circumstance in your letter on which you have asked for our views is a factual situation. 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. Further, an income tax ruling can only be considered where the transactions are proposed and are submitted in the manner set out in Information Circular 70-6R5. However, we have considered your enquiry and provide the following comments, which are of a general nature only.
After a review of the information provided, in our opinion a member of the Collectivity qualifies as a member of a religious order within XXXXXXXXXX. A religious order is free to determine who its members are but only those members who have made a full-time and long-term commitment are considered to have met the status test for the purposes of paragraph 8(1)(c) of the Act. Further, in our opinion, not all members of the Collectivity meet the function test and qualify for the deduction under paragraph 8(1)(c) of the Act; only employees that are engaged exclusively in full-time administrative service or ministering to a congregation would qualify.
Full-time Administrative Service
From our review, it appears that only the position of XXXXXXXXXX can be considered engaged exclusively in full-time administrative service by appointment of a religious order. Functions such as a XXXXXXXXXX would not qualify as full-time administrative service. An administrator must be engaged full-time in the functions of determining organizational policies and coordinating various activities of the organization at the management level in order to be meet that function test.
Ministering to a Congregation
It does not appear that the employees holding the position of XXXXXXXXXX are ministering to a congregation. To "minister" for the purposes of paragraph 8(1)(c) of the Act does not require that the individual be formally ordained as a minister but he or she should be authorized or empowered to carry out certain functions of a minister such as the administration of some of the rituals, ordinances and sacraments, and pastoral responsibilities of the religious organization.
We refer you to paragraph [56] of decision in McGorman et al v the Queen (99 DTC 699), where Judge Bowman commented as follows when referring to Mr. Miller:
"...A clergyman, minister, priest or spiritual counsellor ministers to the spiritual needs of a congregation, collectively or individually. Ministers are, however, called on to do much more than offer spiritual guidance. They provide psychological and marital counselling. They advise on family and career related matters. It is to the church that people turn when faced with the infinite variety of problems that arise in life. Ministering is a very broad concept, particularly in the context of the work of a person of the cloth...."
Further, in Alemu et al v. the Queen (99 DTC 7 4), Reverend Shantz was found to be ministering to a congregation. In his role, he ministered to families of the residents, staff members, residents of the homes and families of prospective residents. The court found that his duties included daily devotionals, spiritual counselling and prayer, organizing and leading worship services at staff meetings and so on. His ministering covered a broad range of pastoral activities, preaching, counselling and participating in Sunday worship services. A XXXXXXXXXX would not, in our opinion, equate those duties. Job descriptions do not indicate that these individuals are employed to perform pastoral activities comparable in nature or degree to those of Reverend Shantz.
We are unable to determine to what extent, if any, the position of XXXXXXXXXX can be considered ministering to a congregation and, in our view, the job description of XXXXXXXXXX indicates that the duties are mainly teaching, a function that does not qualify.
Where we accept that members of the Collectivity, as it is presently comprised, are members of a religious order (although not everyone may qualify for the clergy residence deduction because of the function test), if any member is replaced or added, the new individual would not necessarily meet the status test. New members must meet the full and long-term commitment criteria; part-time, contract and term employees are not eligible. As to the function test; a number of job functions, such as grounds keepers, data analysts, clerical workers, property assistants, administrative assistants, research assistants and teachers do not qualify.
A member of a religious order who has met both the status and function test is entitled to claim a clergy residence deduction in respect of his or her residence but only to the extent of the income earned from that qualifying income from that employment or office. Further, the religious order would certify that the particular employee meets the conditions for claiming the deduction as set out in paragraph 8(1)(c) of the Act by issuing a T1223 (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 Act. Signing the Form confirms that the information provided to the Canada Revenue Agency (the "CRA"), in Part B of the Form, with respect to the employee status, function, job title and duties listed therein is true and complete and that the employee has met the conditions of qualifying employment.
We trust the above comments are of assistance. However, as stated in paragraph 22 of Information Circular 70-6R5, the opinion expressed in this letter is not a ruling and consequently is not binding on the CRA.
Yours truly,
Steve Tevlin
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch
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