19 May 1995 External T.I. 9430755 - DEF'N OF RELIGIOUS ORDER

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

whether a specific religious organization qualifies as a "religious order" for purposes of subsection 110(2)

Position TAKEN:

Does not qualify as a "religious order" as the mission does not require vows of "chastity, poverty and obedience, including agreement to a communal life unless permitted to live otherwise" as required by definition of a "religious order" as recently clarified by the Federal Court - Trial Division

Reasons FOR POSITION TAKEN:

Estate of the late Bernard Zylstra, Jacob Small, William J. McRae, and Robert E Vandervennen v. Her Majesty the Queen, 94 DTC 6687. Court was required to consider, among other things, the meaning of a "religious order".

		943075
XXXXXXXXXX	Sandra Short

Attention: XXXXXXXXXX
May 19, 1995

Dear Sirs:

Re: Request for Religious Order status for XXXXXXXXXX

This is in reply to your letter of November 18, 1994 wherein you forwarded additional information concerning XXXXXXXXXX to assist the Department in determining whether the Mission qualifies as a "religious order" for purposes of subsection 110(2) of the Income Tax Act.

We understand that your request for incorporation as a federal, not for profit corporation has been approved. The Mission has not applied for recognition as a registered charitable organization because it is your view that such action is not necessary in that a Religious Order must by nature be charitable, and charitable at law. We would mention that in order to be exempt from income tax, a non-profit organization must, among other things, be "a club, society or association that, in the opinion of the Minister, was not a charity within the meaning assigned by subsection 149.1(l)...". This requirement was added effective for the 1977 and subsequent taxation years in order to require all charities to register with Revenue Canada whether or not they wish to issue receipts, in order to obtain tax-free status. This status is lost upon deregistration. In this regard, we refer you to Interpretation Bulletin IT-496 and Special Release thereto dated June 16, 1989 and, in particular, to paragraphs 2, 3 and 4, a copy of which is enclosed. We have also enclosed a copy of Information Circular 80-10R dated December 17, 1985 which may familiarize you with the provisions of the law that apply to all registered charities.

Based upon a careful and thorough review of all documentation forwarded by you on May 12, September 21 and November 18, 1994, it is our view that members of XXXXXXXXXX who choose to take the vow of perpetual poverty would not be considered members of a religious order under a vow of perpetual poverty as discussed in subsection 110(2) of the Income Tax Act. Our explanation follows:

In November of 1994, The Federal Court-Trial Division heard an appeal from the Tax Court of Canada (Estate of the Late Bernard Zylstra, Jacob Small, William J. McRae, and Robert E. Vandervennen v. Her Majesty the Queen, 94 Dominion Tax Cases, page 6687). The Court was required to consider, among other things, the meaning of a "religious order". The Court heard the expert testimony adduced by both the Plaintiffs and Defendant in the case and in rendering judgment accepted that the phenomenon of "religious orders" is:

...marked by common characteristics, when a group of persons, distinct from within a larger religious community, live under a set of rules, bound by vows to observe not only the general precepts of their church, but also vows of chastity, poverty and obedience, including agreement to a communal life unless permitted to live otherwise.

While members of the Mission appear to be very devoted members of a religious organization, the Mission does not require vows of "chastity, poverty and obedience, including agreement to a communal life unless permitted to live otherwise" as required by definition of a "religious order" as recently clarified by the Federal Court - Trial Division. For example, there appears to be no imposed vow of poverty (other than an optional vow of perpetual poverty) and we could find no references relating to "communal life" or exemption from communal life. Having read

XXXXXXXXXX
it is not clear that it may be said that a vow of chastity is required by members of XXXXXXXXXX We understand that upon applying for admission into the Mission, members must read, understand and agree to be bound at all times by the
XXXXXXXXXX

We believe that a "vow of obedience" would require not only obedience to a specific set of rules such as outlined above but would go beyond this compliance requirement to inform members of how the rules would be enforced and discuss the punishment to be imposed when those rules are broken.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch