12 November 1996 External T.I. 9622915 - TAXATION STATUS OF CLERGY AND RELIGIOUS WORKERS

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:

Followup to previous file. Writer wants further clarification of interpretation of certain legislative provisions regarding the tax treatment of certain members of the clergy and religious orders.

Position:

No change in position, more detailed explanation of applicable provisions which include 5(1), 6(1), 110(2).

Reasons:N/A

									962291
XXXXXXXXXX							D. Zion

Attention: XXXXXXXXXX

November 12, 1996

Dear XXXXXXXXXX:

Re: Taxation Status of Clergy and Religious Workers

This is in response to your letter of June 21, 1996, in which you requested confirmation of your interpretation regarding the taxability of clergy, members of religious orders and individuals employed in parachurch activities. Your letter is further to this Directorate's correspondence with XXXXXXXXXX on the same and related issues. We apologize for the delay in replying.

You have presented certain examples to illustrate your understanding of the taxability of amounts received by the above-noted individuals who receive financial support through the payment of such amounts as salary and wages, other remuneration, cash allowances for living expenses and/or the provision of non-cash benefits. Since the underlying principle with respect to the taxation of these amounts relates to the same issue upon which you have requested our views, we have not addressed each situation individually. However, we have the following general comments which we trust will further clarify the Department's position.

Our Comments

As stated in our letters of November 21, 1995, and February 1, 1996, our comments regarding the taxability of amounts received by members of a religious order apply to members of a religious order or any religious denomination, provided that they meet the applicable provisions of the Income Tax Act (the "Act"). Paragraph 6(1)(a) of the Act requires that in the computation of an individual's income the inclusion, as income from an office or employment, of an amount relating to a benefit in respect of board or lodging and any other benefits of any kind whatever except benefits described in subparagraphs 6(1)(a)(i) through (v) of the Act. Paragraph 6(1)(b) of the Act requires all allowances to be brought into income in the year received for personal or living expenses or for any other purpose, to the extent that they are not described within the exceptions set out in subparagraphs 6(1)(b)(i) to (xi). Thus, generally speaking, the value of board and lodging and non-accountable cash allowances constitute a taxable benefit under paragraphs 6(1)(a) and (b) of the Act respectively, and, as such, are required to be brought into income, subject to the exceptions provided in these provisions, unless the benefits or allowances are exempted by virtue of paragraph 6(6)(a) of the Act. Accordingly, it is our view that whether the individual is a member of a religious order, member of a religious denomination or a parachurch worker, if that individual is in receipt of these types of amounts or benefits, then pursuant to section 200 of the Regulations, every person who makes a payment as or on account of, or who confers such a benefit is required to prepare an information return in prescribed form in respect of such a payment or benefit. Such an individual would then be required to file an income tax return pursuant to subsection 150(1) in a taxation year when tax is payable by the individual for the year or when a demand for such a return is made under subsection 150(2) of the Act, even if the individual is not liable to pay tax for the year.

Subsection 110(2) of the Act permits an individual who is a member of a religious order and has taken a vow of perpetual poverty to deduct certain amounts paid by him or her to the order in computing taxable income for a taxation year. These amounts include, the aggregate of superannuation or pension benefits and earned income for the year as defined by section 63 of the Act provided the requirements of subsection 110(2) of the Act are met. It is a longstanding position of the Department that a member of a religious order who would otherwise meet all the requirements of subsection 110(2) of the Act, would not be precluded from making a deduction under subsection 110(2) of the Act when the employer has retained certain amounts for statutory deductions, board and lodging and other taxable benefits when the member has no legal right or recourse to receive such amounts, provided the member remits the entire amount of his or her net remuneration to the order as well as any subsequent refund of the amounts so withheld.

As you are aware, questions concerning tax policy fall within the purview of the Department of Finance. Such concerns related to subsection 110(2) and paragraph 8(1)(c) of the Act, may be directed to the Department of Finance, L'Esplanade Laurier, 140 O'Connor Street, Ottawa, Ontario K1A 0G5.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch