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: Whether a pastor (the "Taxpayer") who is in charge of a children's ministry, satisfies the function test of being 'in charge of or ministering to a diocese, parish or congregation' for the purpose of the clergy residence deduction pursuant to paragraph 8(1)(c) of the Act.
Position: Yes.
Reasons: The group of children attending the children's ministry is considered to be a congregation. The Taxpayer being a pastor for this ministry, is considered to be 'in charge of or ministering to' the congregation. Further, the children's ministry is considered a specialized ministry based on the explanation in paragraph 16 of IT-141R.
Taxpayer Services and Debt Management Branch
750 Heron Road 2011-040477
Ottawa ON K1A 0L5 V. Srikanth
June 27, 2011
Attention: Nancy Della Vale
Re: Clergy Residence Deduction
This is in response to your correspondence dated April 28, 2011 wherein you requested our views on the clergy residence deduction provided for in paragraph 8(1)(c) of the Income Tax Act (the "Act"). Specifically, you would like our opinion on whether a pastor (the "Taxpayer") who is in charge of a children's ministry at the XXXXXXXXXX , satisfies the function test of being 'in charge of or ministering to a diocese, parish or congregation' for the purpose of the clergy residence deduction pursuant to paragraph 8(1)(c) of the Act.
Generally, to be eligible for the clergy residence deduction, pursuant to 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). 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 function test).
Status Test
Although you have not requested a determination of whether the Taxpayer satisfies the status test, we have the following comments to make in this regard.
In the form T1234, entitled 'Clergy Residence Deduction', the Taxpayer claims to have satisfied the status test by virtue of being a regular minister. According to paragraphs 5 through 7 of the Interpretation Bulletin IT-141R (Consolidated), entitled 'Clergy Residence Deduction', a regular minister of a religious denomination must be 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. The individual should also be formally appointed and recognized by a body or person with the legitimate authority to appoint or ordain ministers on behalf or within the religious denomination. The position of regular minister should also be one of some permanence.
In the given instance, the Taxpayer is a pastor for the Children's Ministry (referred to as the 'Children's Pastor') at the Church. Based on the job description provided ("XXXXXXXXXX", etc), an individual filling the Children's Pastor's position may not be able to perform most of the duties of a regular minister of the Church. Accordingly, in our view, the Taxpayer, solely by holding this position, has not demonstrated that he satisfies the status of being a 'regular minister' for the purpose of paragraph 8(1)(c) deduction.
However, in our view, the Taxpayer, by virtue of being a pastor at the Church, may be considered to be a member of the clergy, as explained in paragraph 4 of IT-141R, which states that:
"A "member of the clergy" is a person set apart from the other members of the church or religious denomination as a spiritual leader. It is not necessary that the process of appointment be referred to as ordination or that the appointment be by someone higher up in the ecclesiastical hierarchy; it may be done by the congregation itself. It is sufficient that there be a formal or legitimate act of recognition, and it requires a serious and long-term commitment to the ministry. Priests, pastors, ministers, rabbis, imams, commended workers and other persons who have been commended, licensed, commissioned or otherwise formally or legitimately recognized for religious leadership within their religious organization may be members of the clergy."
Based on the information provided, in our view, the Taxpayer appears to satisfy the status test of being a 'member of the clergy' for the purpose of paragraph 8(1)(c) deduction.
Function Test
The Taxpayer claims to satisfy the function test by virtue of being 'in charge of or ministering to a diocese, parish or congregation'. As stated in paragraph 13 of IT-141R:
""Ministering" is a very broad concept of serving or attending to the needs of a congregation, diocese or parish, or its individual members. This should be looked at within the context of the religious organization's practices and expectations. If a person who meets the status test is employed within a congregation, he or she is considered to be ministering to a congregation if he or she is fulfilling a pastoral or ministerial role in the manner requested by that congregation."
The Children's Ministry at the Church has programs for children XXXXXXXXXX . As per the incoming, some of the responsibilities of a Children's Pastor are:
- Provide oversight to, and be responsible for all aspects of ministry to children and their families;
- Provide overall direction and leadership to all staff and volunteers involved in the children's ministries;
- Recruit, equip and train teams for the ministry; and,
- Coach and mentor team leaders.
Since the Taxpayer caters to the spiritual and personal needs of the children and their families, which activities are in line with the ideology and expectation of the Church, in our view, the Taxpayer is ministering to the group of children attending the Children's Ministry.
The next issue to be resolved is whether the group of children attending the ministry is considered a 'congregation' for the purpose of paragraph 8(1)(c). It is stated in the incoming that the Church allocates different functions to specific ministries and the individuals attending a specific ministry constitute a 'congregation'. Accordingly, it is the Taxpayer's view that the children attending the Children's Ministry, constitutes a 'congregation' for the purpose of the clergy residence deduction.
As stated in paragraph 15 of IT-141R, a congregation 'is an assemblage or gathering of persons to whom a minister provides spiritual counselling advice, illumination and inspiration.' It is our understanding that the Children's Ministry is in charge of the Sunday school at the Church wherein the children participate in group worship, Bible storytelling, crafts, etc. The Children's Ministry also organizes outdoor activities during other times of the year for these children. Based on the description of the activities (XXXXXXXXXX), in our view, they revolve around the Church's ideology and expectations. Hence, we agree with the Taxpayer's view that the children attending the Children's Ministry constitute a 'congregation' for the purpose of satisfying the function test of 'being in charge of or ministering to a diocese, parish or congregation'.
Based on the description of the way the Church organizes its various activities, we also agree with the Taxpayer's view that the Children's Ministry is a specialized ministry as described in paragraph 16 of IT-141R, i.e., "Recognized forms of specialized ministry may include chaplaincies, religious education within a congregation, congregational pastoral responsibilities for music or youth, ethnic focus ministries, ministries with overseas or domestic missions, and ministries to the disadvantaged or disabled."
Based on the above analysis, in our view, the Taxpayer appears to satisfy both the status and function tests. Therefore, the Taxpayer is eligible to claim the clergy residence deduction pursuant to paragraph 8(1)(c) of the Act.
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CRA's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Mrs. Celine Charbonneau at (613) 957-2137. In such cases, a copy will be sent to you for delivery to the taxpayer.
R.A. Albert, CA
For Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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