2 April 2012 External T.I. 2012-0436101E5 - Clergy Residence Deduction

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: Does an Executive Pastor qualify for a clergy residence
deduction pursuant to paragraph 8(1)(c) of the Act?

Position: No.

Reasons: The individual satisfies the status test but not the function test. To qualify for the
clergy residence deduction under 8(1)(c), an individual must satisfy both the status and function
tests.

XXXXXXXXXX

April 2, 2012								2012-043610
										V. Srikanth

Dear XXXXXXXXXX :

Re: Clergy Residence Deduction

This is in response to your letter dated January 10, 2012, wherein you requested an
advance income tax ruling on the above-mentioned subject. Specifically, you requested
us to rule that, as the Executive Pastor of the XXXXXXXXXX (the “Entity”), you
qualify for the clergy residence deduction provided for in paragraph 8(1)(c) of the
Income Tax Act (the “Act”).

Our Comments

As indicated in our letter dated February 14, 2012, we are unable to provide an advance
income tax ruling with respect to the subject of your request as the issues involved relate
primarily to questions of fact. However, we had indicated that we would attempt to
resolve the issues in conjunction with the Taxpayer Services and Debt Management
Division.

We understand that a letter dated March 20, 2012, has been sent to you from Client
Services at the XXXXXXXXXX Tax Services Office (“TSO”), wherein your request for
a reduction to your income tax deductions withheld at source by your employer, for
XXXXXXXXXX , has been denied. This denial relates to your claim for a clergy
residence deduction provided for in paragraph 8(1)(c) of the Act. In this regard, please
note that we are in agreement with the TSO’s views that you do not qualify for the clergy
residence deduction pursuant to paragraph 8(1)(c) of the Act. However, we would like to
provide you with the following comments on this issue.

Generally, to be eligible for the clergy residence 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).

Further, in order to qualify for the clergy residence deduction, pursuant to paragraph
8(1)(c) of the Act, the person must satisfy both the status and the function tests discussed
below.

Status test

In your opinion, you satisfy the status test by virtue of being a member of the clergy.
Based on the information you provided, we agree with your view that you satisfy the
status test of being a member of the clergy.

Function test

In your opinion, you satisfy the function test by virtue of ministering to a congregation.

With respect to ‘Ministering’, paragraph 14 of the Interpretation Bulletin IT-141R
(Consolidated), entitled ‘Clergy Residence Deduction’, states that:

“Persons who meet the status test who minister on a part-time or assistant basis and those
performing specialized ministering satisfy the function test. As long as ministering to
congregations is an integral part of their employment responsibilities and expectations,
that activity will qualify.”

As an Executive Pastor of the Entity, your duties include several functions such as
administrator, Catalyst, Mentor, Overseer and Minister. You have further indicated that
Ministering constitutes XXXXXXXXXX percent of all your functions. While we are
given to understand that you have authority to perform ceremonial duties such as
weddings, funerals, baptism etc, there is no indication that you perform these functions
on a regular basis. In our view, your ‘Ministering’ duties are incidental and not integral
part of your job as an Executive Pastor. This is further confirmed by statement describing
your duties on the Entity’s web page which states that:

XXXXXXXXXX

Accordingly, based on the information you have provided and that available to us, we are
of the view that you do not satisfy the function test of ‘ministering to a congregation’, for
the purpose of claiming a clergy residence deduction.

As indicated earlier, in order to claim a clergy residence deduction pursuant to paragraph
8(1)(c) of the Act, it is necessary for an individual to satisfy both the status and function
tests. As noted above, in our view, you satisfy the status test but not the function test;
therefore, you are not eligible to claim the clergy residence deduction provided for in
paragraph 8(1)(c) of the Act.

We trust that our comments will be of assistance.

Yours truly,

R.A. Albert, CA
For Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate

Cc: XXXXXXXXXX
Client Services
XXXXXXXXXX Tax Services Office