14 May 1999 Ministerial Letter 9907028 - CLERGYMAN'S 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.

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.

XXXXXXXXXX

Dear Colleague:

Thank you for your letter of February 26, 1999, regarding your constituent’s concerns that Revenue Canada proposes to tax clergy housing allowances and change the clergyman’s residence deduction.

Revenue Canada does not have the authority to change income tax laws.

Revenue Canada’s role is to administer and enforce the Income Tax Act as passed by Parliament, and in accordance with relevant jurisprudence. The Department of Finance is responsible for tax policy and any proposed changes to the Act.

Where an employer provides an employee with free accommodation, the value of the benefit is generally included in the employee’s income. Similarly, if the employer provides an employee with an allowance in respect of accommodation, the housing allowance is also generally included in income. However, if the employee qualifies for the clergyman’s residence deduction provided under paragraph 8(1)(c) of the Act, he or she may claim a deduction in respect of the accommodation.

Generally, to be eligible for the clergyman’s 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. 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 deduction provided for under paragraph 8(1)(c) of the Act corresponds to the value of the employment benefit included in the individual’s income, where the employer provides the individual’s residence. However, subject to certain limits, where the individual rents the residence, the clergyman’s residence deduction corresponds to the rent paid and, where the individual owns the residence, to the fair rental value of the residence.

While there has not been any recent amendment to paragraph 8(1)(c) of the Act, there are significant differences between the Department’s views and those of members of various organizations regarding the interpretation and application of this deduction. However, these differences have been ongoing for a number of years. The Department’s views regarding the clergyman’s residence deduction are based on jurisprudence, the ordinary meaning of the terms used in paragraph 8(1)(c) and the intent of this provision. Many of the issues and interpretations which have been the subject of disagreement were recently heard before the Tax Court of Canada in a number of cases on the clergyman’s residence deduction. The Department is presently reviewing the Court’s decisions in these cases.

Should your constituent require further clarification as to the impact of any of these cases on his or her claim for the clergyman’s residence deduction, I invite your constituent to contact XXXXXXXXXX is aware of our correspondence and will be pleased to be of assistance.

I appreciate the opportunity to address your constituent’s concerns.

		Yours sincerely,

		Herb Dhaliwal, P.C., M.P.

Milled Azzi
957-8972
April 12, 1999
4-990702