Principal Issues: Whether annual membership fees paid by pastors and ministers to maintain their status can be deducted as annual professional membership dues.
Position: Question of fact but generally, yes.
Reasons: Provided the professional status is recognized in a provincial marriage act, the fees are eligible.
2006-016831 XXXXXXXXXX Charles Rafuse 613-957-8967 August 25, 2006
Dear XXXXXXXXXX:
Re: Professional Dues for Clergy
This is in reply to your email dated January 24, 2006 and our telephone conversation of May 9, 2006 (XXXXXXXXXX/Rafuse), concerning the deductibility of annual membership fees paid to your religious organization by your member pastors and ministers.
Specifically, you have indicated that the pastors and ministers are "licensed and commissioned" through your organization and require this status to be registered by provincial governments so they may legally perform marriage ceremonies. You indicated that the pastors and ministers are paid their salaries through the individual churches that employ them. Further, that their duties of employment include performing marriage ceremonies. You have asked whether these annual membership fees qualify for an income tax deduction as professional fees under subparagraph 8(1)(i)(i) of the Income Tax Act (the "Act")
Our Comments
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.
Under subparagraph 8(1)(i)(i) of the Act, a deduction in computing income from an office or employment is permitted for amounts paid by a taxpayer (employee) for annual professional membership dues, the payment of which are necessary to maintain a professional status recognized by statute. As further explained in paragraph 1 of IT-158R2, "Employees' professional membership dues", "an employee may deduct annual professional membership dues in computing the income or loss from an office or employment to the extent that they may reasonably be regarded as applicable to that source of income and provided that:
(a) they are annual dues (in contrast with entrance fees) necessary to maintain professional status,
(b) the amount claimed is paid in the taxation year and the employee is not reimbursed or entitled to be reimbursed, and
(c) the professional status is recognized by a Canadian, provincial, or foreign statute."
You have indicated that the membership fees paid by pastors and ministers to your organization are not reimbursed. The main issue to be resolved is whether the pastors and ministers must maintain professional status that is recognized by a Canadian, provincial, or foreign statue. In Alan Montgomery et al. v. Her Majesty the Queen, (1999 DTC 5186, Federal Court of Appeal), the issue was whether a real estate appraiser in Ontario had a professional status "recognized by statute" within the meaning of subparagraph 8(1)(i)(i) of the Act. The court found that "recognized by statute" does not mean that professional organizations have to be established and regulated by statute but instead that the statute "acknowledge the existence, validity, character or claims" of the professional. Since the professional status of appraisers was referred to by three statutes, the Court was satisfied that there was statutory acknowledgement of the status of appraisers whose status is associated with membership in the Appraisal Institute of Canada, and therefore the requirements of subparagraph 8(1)(i)(i) of the Act were met.
On this basis, provided the marriage act for a particular province contains wording that indicates that the status of pastors and ministers is recognized, it is our opinion that annual membership fees paid to maintain that status is eligible for a deduction under subparagraph 8(1)(i)(i) of the Act, where all other conditions outlined above are also met.
We trust this information is helpful.
Yours truly,
Randy Hewlett
Manager
Business and Personal Section
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch