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.
Principal Issues: Can individuals employed as aboriginal spiritual caregivers by a XXXXXXXXXX claim the clergy residence deduction?
Position: Possibly.
Reasons: Whether an individual satisfies both the status and function tests required by paragraph 8(1)(c) of the Act is a question of fact that must be addressed on a case-by-case basis.
XXXXXXXXXX 2015-062037
Robert Dubis, CPA, CA
June 13, 2016
Dear XXXXXXXXXX:
We are replying to your letter of November 12, 2015, in which you asked whether individuals employed as Aboriginal Spiritual Caregivers (“ASCs”) in XXXXXXXXXX qualify for the clergy residence deduction under paragraph 8(1)(c) of the Income Tax Act (“Act”).
More specifically you ask if an ASC would be considered “a regular minister of a religious denomination” who ministers to “a diocese, parish or congregation”, as those terms are used in the Act.
Our Comments
This technical interpretation provides general comments about the provisions of the Act and related legislation. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.
Generally, to qualify for the clergy residence deduction provided under paragraph 8(1)(c) of the Act, an individual must be a member of the clergy, a member of a religious order, or a regular minister of a religious denomination (the status test). The individual must also 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 function test). An individual must satisfy both tests.
Status Test
For the purposes of satisfying the status test, an individual must be a member of the clergy, a member of a religious order, or a regular minister of a religious denomination. You have asked whether ASCs qualify as regular ministers of a religious denomination.
The information you provided indicates that the individuals holding the position of ASC are neither members of the clergy, nor members of a religious order. Thus, an individual would only satisfy the status test if he or she is a regular minister of a religious denomination.
The Canada Revenue Agency’s interpretation of the expression “religious denomination” is explained in paragraph 12 of Interpretation Bulletin IT-141R, Clergy Residence Deduction:
“‘religious denomination’ is a group of individuals that is called or identified by the same name and that has a particular system of religious faith or belief. The set of religious beliefs or ideology or practices of the members of a religious denomination will be sufficiently distinct to distinguish the members from society as a whole.”
Each First Nations, Métis or Inuit band or community has its own language, cultural practices, and spiritual beliefs. Given the diversity of Canada’s aboriginal peoples, each ASC’s connection to and status in a religious denomination must be considered on a case-by-case basis with consideration to the structure and practices of the particular system of faith of his or her band or community.
According to paragraph 5 of IT-141R:
“a ‘regular minister’ is a person who:
- is authorized or empowered to perform spiritual duties, conduct religious services, administer sacraments and carry out similar religious functions. Religious functions may include participation in the conduct of religious services, the administration of some of the rituals, ordinances or sacraments, and pastoral responsibilities to specific segments of the religious organization;
- is appointed or recognized by a body or person with the legitimate authority to appoint or ordain ministers on behalf of or within the religious denomination; and
- is in a position or appointment of some permanence.”
Generally the Tax Court of Canada and the Federal Court of Appeal have viewed a regular minister as an individual who is acknowledged by his or her religious denomination as having a distinct standing in spiritual matters and status which sets him or her apart from the laity of the denomination in spiritual matters.
Although an ASC may conduct ceremonies, rituals, and prayer in a XXXXXXXXXX, that in itself is not sufficient to qualify as a regular minister. It is the ASC’s appointment, permanency, and authorization and empowerment to perform spiritual duties within the particular system of faith of his or her band or community that must be considered on a case-by-case basis to determine whether the ASC is a regular minister.
Function Test
An individual who has satisfied the status test can satisfy the function test 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 denomination.
In this respect, you have asked whether ASCs are considered to be ministering to a congregation. Paragraph 13 of IT-141R indicates that “ministering” is a very broad concept of serving or attending to the needs of a congregation, diocese or parish, or its individual members, and should be viewed within the context of the religious organization’s practices and expectations.
Whether the population within a XXXXXXXXXX constitutes a diocese, parish, or congregation is a question of fact. Paragraph 15 of IT-141R states:
“A ‘congregation’ is not defined by any particular church structure, by territorial boundaries nor by the number of people gathered in one place. It is an assemblage or gathering of persons to whom a minister provides spiritual counseling, advice, illumination and inspiration. A group of students assembled for academic instruction is not a congregation. Persons who meet the status test do not need to be in charge of a single, fixed congregation. They can serve multiple congregations. Congregations can be of a diverse and fluid makeup and require neither voluntary attendance nor homogeneity of religious belief. Chaplains in hospitals, jails, the armed forces and other such organizations are generally considered to minister to congregations.”
In Kraft et al v MNR, 99 DTC 693, a minister giving spiritual counselling and leading weekly chapel services in three custodial facilities was considered to be ministering to a congregation. In our view, with consideration to IT-141R and Kraft, the XXXXXXXXXX population would likely constitute a congregation. However, it would still have to be established that the ASC was ministering to that congregation.
Where it is established that an ASC is ministering to a congregation, such ministering duties must be an integral part of his or her employment responsibilities. Ministering activities that are incidental to an individual’s primary job responsibilities, or that are performed in addition to such duties, will generally not meet this requirement. The following factors may assist you in making a determination in this respect:
- how often ministering is performed;
- the amount of time spent ministering; and
- the individual’s ministering responsibilities relative to his or her overall job duties.
Summary
In order to qualify for the clergy residence deduction, each ASC must satisfy both the status and function tests. Whether an ASC satisfies both tests depends on all of the specific facts involved.
ASCs that satisfy both tests must complete Form T1223, Clergy Residence Deduction. The employer must complete Part B of Form T1223 and certify that the information provided is to the best of its knowledge, correct and complete. ASCs earning qualifying income from more than one office or employment will require certification from each employer.
The clergy residence deduction may only be deducted from the individual’s qualifying income from an office or employment. Where an individual does not earn income from an office or employment, no clergy residence deduction is permitted.
We trust our comments will be of assistance.
Yours truly,
Nerill Thomas-Wilkinson, CPA, CA
Manager
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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