Principal Issues: Is a regular minister away from his qualifying functions on parental leave eligible to claim the clergy residence deduction?
Position: No
Reasons: Employment maintenance income does not qualify for the deduction under paragraph 8(1)(c) of the Act
2007-021988 XXXXXXXXXX C. Tremblay, CMA (613) 957-2139 March 20, 2007
Dear XXXXXXXXXX:
Re: Clergy residence deduction
This is in reply to your electronic message of January 8, 2007, wherein you requested our views on whether a regular minister is entitled to the clergy residence deduction when he or she is away from his or her qualifying functions and is still being paid by the employer while on "parental leave". You state that during the parental leave period, no clergy duties will be performed.
Written confirmation of the consequences inherent in particular transactions are given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5. If, however, the particular transactions are partially completed or completed, the enquiry should be addressed to the relevant Tax Services Office. Notwithstanding the foregoing, we are providing the following comments.
Our Comments
In order to claim the clergy residence deduction a taxpayer must satisfy subparagraphs 8(1)(c)(i) and (ii) of the Income Tax Act (the "Act"). Subparagraphs 8(1)(c)(i) and (ii) of the Act read as follows:
"Clergy residence - where, in the year, the taxpayer
(i) is a member of the clergy or of a religious order or a regular minister of a religious denomination, and
(ii) is
(A) in charge of a diocese, parish or congregation,
(B) ministering to a diocese, parish or congregation, or
(C) engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination".
Further, the amount of the clergy residence deduction is restricted where the living accommodation the clergyperson occupies is rented or owned by the individual.
Where the living accommodation is rented or owned by the clergyperson, the amount of the deduction for a particular year is limited to the least of three amounts:
(a) the individual's remuneration for the year from the qualifying office or employment,
(b) the greater of
(i) 1/3 of the individual's total remuneration from the qualifying office or employment for the year, and
(ii) $1,000 per month (to a maximum of ten months) in the year during which an individual meets the conditions set out in subparagraphs 8(1)(c)(i) and (ii), and
(c) the rent paid or the fair rental value of the residence including utilities (less a reduction of all other amounts deducted in computing an individual's income from a business or from an office or employment in connection with the same accommodation).
Accordingly, as noted in (b)(ii) above, where a clergyperson rents or owns the accommodations, the status and function tests must be met during the leave period such that if the individual has no clergy functions to perform during the leave period, he or she will be restricted to the amount received from the qualifying office or employment during the year. It should also be noted that even if the function test was considered to be met during the leave period, in our view, the income received from an income maintenance insurance plan is not remuneration from a qualifying office or employment and would not be included in the above calculations.
The CRA is responsible for administering and enforcing the Act as enacted by Parliament. The Department of Finance Canada is responsible for tax policy and legislation. Should you wish them to consider a change to the legislation, you can write them at: Tax Policy Branch, Department of Finance, L'Esplanade Laurier, 140 O'Connor Street, Ottawa ON K1A 0G5.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency. Our practice is to make this disclaimer in all instances in which we provide an opinion.
We trust the above comments are of assistance.
Yours truly,
R. Albert, CA
For Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate