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: XXXXXXXXXX - Religious Order?
Position: No
Reasons: Does not meet all 6 criteria established by judge Bowman
2004-009779
XXXXXXXXXX C. Tremblay, CMA
(613) 957-2139
December 15, 2004
Dear XXXXXXXXXX:
This is in reply to your letter of September 18, 2004, and is further to additional information you sent on November 30, 2004 asking for our views as to whether you, as the Canadian Director of XXXXXXXXXX qualify for the clergy residence 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. However, we have considered your enquiry and provide the following comments, which are of a general nature only.
Generally, to be eligible for the clergy residence deduction under paragraph 8(1)(c) of the Act, 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"). Since you are not a member of the clergy or a regular minister of a religious denomination, the only manner in which you could meet the status test is to be a member of a religious order and this would only be possible if XXXXXXXXXX were considered a religious order.
Judge Bowman has established in McGorman et al v The Queen (99 DTC 699 TCC), with respect to the meaning of a "religious order", six criteria to serve as guidelines in determining whether an organization (or a Collectivity of persons therein) is a religious order, and the Canada Revenue Agency (the "CRA") has accepted these guidelines as indicated in paragraph 9 of Interpretation Bulletin IT-141R (Consolidated). We have attempted to use these guidelines in our review of the information you supplied.
Religious Order
XXXXXXXXXX.
The 1st criteria - Purpose
A religious order can have other purposes but religion must be its main purpose and, in our view, the activities of XXXXXXXXXX demonstrate that the organization is primarily religious.
Judge Bowman did not detail the application of the six criteria of a religious order to a collectivity as opposed to the organization itself. It is a question of fact whether a collectivity does exist and that it is a religious order. We assume that in your situation it is the organization that is seeking religious order status rather than a collectivity within the organization.
The 2nd Criteria - Strict Moral and Spiritual Regime
Members must agree to and in fact adhere to a strict moral and spiritual regime of self-sacrifice and dedication to the goals of the organization to the detriment of their own material wellbeing. We were not given any evidence indicating that the employees of XXXXXXXXXX earn less than others who perform similar work in an organization of similar size in the public or private sector. Further, the fact that that the organization does not appear to place any limitations on the earning of outside income is not conducive to the finding that there is a religious order. Although the members are not identified, we assume that the members are the Pastor and the Canadian Director.
The 3rd Criteria - Full-time and Long-term Service
It is not clear whether members dedicate their working time exclusively to the pursuit of the objectives of XXXXXXXXXX. The submission states that the members have worked for the organization since XXXXXXXXXX and that they are expected to continue "long into the future". XXXXXXXXXX it appears that his devotions and commitments predate any possible order and in fact may reflect a personal lifelong commitment to his work regardless of the existence of a collectivity of members.
The 4th Criteria - Spiritual and Moral Discipline
The spiritual and moral discipline and regime under which members live must be markedly stricter than that to which lay members of the church are expected to adhere. Although this test appears to be met, there is no formalized code of conduct document submitted or any evidence that these requirements are codified in an employment contract. Further, there does not appear to be a redress mechanism.
The 5th Criteria - Strict Standards of Spiritual and Personal Suitability
The admission of members must be in accordance with strict standards of spiritual and personal suitability. There does not appear to be a probationary period, a documented assessment methodology or training required. Nothing in the XXXXXXXXXX submission indicates that any form of public worship or prayer is required. It appears that the employer does not require regular attendance at a church or other place of worship.
It seems that there is no formal religious training. In our review of the submission, we did not notice anything that would confirm that the members could be recognized from the broader community as members of a religious order either by their conduct, dress or public statements.
The 6th Criteria - Sense of Communality
There should generally be a sense of communality. Other than refer to the employees as members of a spiritual family, there is nothing to support a finding of a sense of communality.
In conclusion, we are of the opinion that XXXXXXXXXX is not a religious order. Accordingly, you would not meet the status test and thus not be entitled to a deduction under paragraph 8(1)(c) of the Act. Accordingly, we have not considered whether any of your duties would meet the function test.
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 CRA. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.
We trust these comments will be of assistance.
Yours truly,
Steve Tevlin
For Director
Financial Industries Division
Income Tax Rulings Directorate
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