28 July 1995 Internal T.I. 9513997 - FOR ADMIN OF XXXXXXXXXX

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 the taxpayer was entitled to a deduction under para 8(1)(c), & more particularly whether the religious organization which appointed him was a religious denomination

Position TAKEN:no

Reasons FOR POSITION TAKEN:

question of fact: the religious organization in question is more XXXXXXXXXX than a religious denomination

		July 28, 1995

	XXXXXXXXXX Tax Services 	Income Tax Rulings and
	Office Audit	Interpretations
		 Directorate
A. Humenuk
	Attention: XXXXXXXXXX		957-8953

951399

Clergyman's Residence Deduction
XXXXXXXXXX

We are replying to your memorandum of May 17, 1995 in which you ask for our views on whether the above noted individual is entitled to a deduction under paragraph 8(1)(c) of the Act for the 1988 and 1989 taxation years.

XXXXXXXXXX

is engaged in the full time administration of the Association. You have asked for our comments as to whether he qualifies for a deduction under paragraph 8(1)(c) of the Act for 1988 and 1989, particularly in light of the fact that the Church and the Association profess to be interdenominational.

In order to claim a deduction under paragraph 8(1)(c) of the Act, an employee must qualify under both a status and a function test. Except for the disclaimer notice on his certification of ordination, it seems clear that XXXXXXXXXX is a member of the clergy and qualifies under the "status test".

An employee who meets the "status test" will qualify for the deduction if he or she:

- is in charge of or ministering to a diocese, parish or congregation or

-is engaged exclusively in full-time administrative service by appointment of a religious order or a religious denomination.

In Zylstra Estate et al v The Queen (94 DTC 6687), the Court held that the phrase "diocese, parish or congregation" is intended to describe different organizational or institutional structures determined by religious denominations for the ongoing organized activities of their members on a regular basis. Thus while a gathering of persons may be a congregation for some purposes, it will not qualify as a congregation for the purposes of paragraph 8(1)(c) of the Act unless it is a gathering for shared religious purposes recognized by a religious denomination for its regular organizational religious activities. While XXXXXXXXXX responsibilities include spiritual leadership, the Association does not appear to have regular organizational religious activities for its members and thus, XXXXXXXXXX cannot be considered to be in charge of, or ministering to a diocese, parish or congregation. If our understanding of his duties is correct, the spiritual services led by XXXXXXXXXX are presumably in the context of the XXXXXXXXXX In Zylstra, the Court held that the faculty and students of the Ontario Bible College was not a congregation in that no religious denomination recognized it as such for the purpose of carrying out its regular organized religious activities.

Based on his job description, we agree that XXXXXXXXXX is engaged exclusively in full time administrative service. The remaining issue is whether the Association (which appointed him to his post) is a religious order or religious denomination.

In Zylstra, the Court offered extensive commentary on the meaning of religious orders and the common understanding of the term in light of the canon law of the Roman Catholic Church. While the term no longer has significance under Roman Catholic canon law, the Court found the term "religious order" to mean a religious organization which has an expression of faith or religious purpose which separates it and its members from the religious denomination which it serves. The Court further found that education, while sometimes pursued by a religious order in order to fulfil the primary goal of service to God through worship, prayer and devotion, is not a religious purpose of the type found in religious orders. These findings are consistent with our view that a religious order is a group of people who are members of a religious community who have abandoned a secular lifestyle.

The Association is not a distinguishable part of a larger religious group nor are its members required to abandon a secular lifestyle. Accordingly, it is our view that the Association is not a religious order.

The next question is whether the Association can be considered a religious denomination. The fact that the Association considers itself to be interdenominational is not determinative in that the statement can be seen as an explanatory attempt to attract persons of all backgrounds to the Association while encouraging individuals to maintain ties with local churches. In Small et al v MNR (89 DTC 663) (which was later affirmed by Zylstra), the Tax Court found that the Ontario Bible College was not a religious denomination because the shared religious beliefs or ideology were not sufficiently distinct to distinguish the denomination or its members apart from society as a whole. In the case of the Association, its members do seem to have a shared system of belief which can be distinguished from other religious groups.

Nevertheless, it is our view that the Association is not a religious denomination but is instead a
XXXXXXXXXX

In the English case of Walsh v Lord Advocate ((1956) 3 AH E.R. 129) the issue was whether Mr. Walsh was exempt from military service as a regular minister of a religious denomination by virtue of his membership in the body called Jehovah's Witnesses. Lord MacDermott found the term "religious denomination" to require two co-existing elements: a lay element which is being ministered to and a ministering or clerical element which has special status. In our view, these two elements are also needed to meet the definition of religious denomination for the purpose of paragraph 8(1)(c) of the Act since the deduction is restricted to that portion of the religious denomination which is clerical and holds a special status within the group.

XXXXXXXXXX

From this it would appear that the lay element is effectively excluded from the Association. Even if membership were granted to individuals who do not intend to be members of clergy, the Association does not recognize a place in its organization for a lay element. The lack of a lay element in the Association supports a finding that the Association is not a religious denomination since an important facet of a religious denomination is that it encompasses all who believe in the tenets of faith as expressed by that denomination.

In summary, it is our view that the Association is neither a religious order nor a religious denomination and thus XXXXXXXXXX does not qualify for the deduction under paragraph 8(1)(c) of the Act. We are returning the Minister's Handbook, Job Description and 1986 Certificate of Ordination.

We trust our comments will assist you in replying to XXXXXXXXXX

P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c. Individual Returns and Payments Processing Directorate
Processing Division