16 June 1989 Ruling 57801 F - Application of Automobile Allowance to Clergymen

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.

June 16, 1989

Dear Sirs:

Re:  Automobile Allowance as Relate to Clergymen

This is in reply to your correspondence dated March 31, 1989 wherein you have queried whether subparagraph 6(1)(b)(xi) of the Income Tax Act (the "Act") will be applied to clergyman or whether relief will be granted towards this particular class of taxpayer.

Our understanding of the situation is as follows:

To assist individual clergymen with the business portion of their automobile costs, a monthly allowance is paid to cover the "capital" or fixed costs of the automobile and secondly, the employer pays or reimburses the individual clergyman for actual out-of-pocket operating costs incurred in the performance of employment duties.

Subparagraphs 6(1)(b)(x) and (xi) of the Act, applied to the above, will tax the monthly allowance in the hands of the individual clergyman as the provisions of these subparagraphs deem the allowance to be in excess of a reasonable amount.

The monthly allowance is deemed to be in excess of a reasonable amount for two reasons: first, the allowance is not based solely on the number of kilometres for which the motor vehicle is used in connection with or in the course of his office or employment (subparagraph 6(1)(b)(x) of the Act) and secondly, because the clergyman is receiving both an allowance in respect of the business use of the motor vehicle and is reimbursed for expenses in respect of the same business use (subparagraph 6(1)(b)(xi) of the Act).

The provisions of subparagraphs 6(1)(b)(x) and (xi) of the Act will be applied equally to clergymen as to other employees.  The preamble to subparagraphs 6(1)(b)(x) and (xi) or the Act states that "for the purposes of subparagraphs (v), (vi) and (vii.1), an allowance received in the year by the taxpayer for use of a motor vehicle in connection with or in the course of his office or employment shall be deemed to be in excess of a reasonable amount..." etc.  Subparagraph 6(1)(b)(vi) of the Act is specifically included in the preamble and is the subparagraph that deals with allowances received by a minister or clergyman in charge of or ministering to a diocese, parish or congregation.  As a result, any relief extended to this class of taxpayer would be in direct contravention to the Income Tax Act.

The clergymen affected by the above may wish to explore their eligibility for deducting travel expenses as permitted by paragraph 8(1)(h) of the Act.

We regret our opinion could not be more favourable but trust that the above comments will be of assistance to you.

Yours truly,

for DirectorSmall Business and General DivisionSpecialty Rulings Directorate Legislative and IntergovernmentalAffairs Branch