January 13, 1994
Source Deductions Division Head Office A. Bissonnette Rulings Directorate Director 957-8943
Attention: Jim Ivey, Chief DO/TC Support Services
932416
Clergyman's Residence
We are writing in reply to your memorandum of August 23, 1993 regarding the Clergyman's Residence deduction available to individuals meeting the criteria outlined in subsection 8(1)(c) of the Income Tax Act (the "Act"). You have requested our views on the impact of the recent court decision in Kolot v. The Queen (92 DTC 2391). More specifically, you have asked whether the cash housing allowance paid to
XXXXXXXXXX
will be taxable in light of this decision.
XXXXXXXXXX
XXXXXXXXXX
the decision can be distinguished on its facts and we are not prepared to accept the case as a precedent in any situation except where the facts are substantially the same as that found in Kolot.
Generally, to be eligible for the paragraph 8(1)(c) deduction, the individual must first be a member of the clergy, a member of a religious order, or a regular minister of a religious denomination (the "status test"). Where one of these conditions is met, then 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"). For your information we have attached a copy of the Federal Court of Appeal Case Small et al. v. MNR (89 DTC 663) in which there is a detailed discussion of these tests and a discussion of the pertinent terms.
In the past it has been the Department's position that as individuals in the position of Staff Associate were not empowered to perform all the rites of a regular minister, they were not acting in the capacity of a regular minister and therefore not eligible for the paragraph 8(1)(c) deduction. In the Kolot case the Court found that the appellant was a regular minister of a religious denomination ministering to a congregation. The Judge found that she was a "regular minister" since she had been appointed to the position by the Presbytery.
We are not able to comment more specifically regarding XXXXXXXXXX case given the information available to us at this time. If the Kolot decision is applicable in the case of XXXXXXXXXX with respect to the provisions of paragraph 8(1)(c) of the Act, she should as a minimum, meet the following criteria:
1) she should have specifically covenanted with an organized church or religious body and provides or assists in the providing of "spiritual leadership" to that church;
2) the nature of her duties must involve those otherwise carried out by ordained ministry;
3) she should have been "licensed" or in some manner authorized to carry out the duties of ministry including the highest level of duties i.e., the sacraments;
4) she, as a licensed individual, and all other individuals that have been licensed, are subject to or responsible to some governing body of the organized church or religious organization; and
5) she carries out duties that cannot be carried out by other members of the church or religious organization without the permission of the governing body.
In summary, whether or not an individual is eligible for the deduction under paragraph 8(1)(c) of the Act will be a question of fact to be determined on a review of the facts present in each situation.
We trust that our comments have been of assistance and will enable you to reply to XXXXXXXXXXB.W. DathDirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. Client Assistance Directorate
c.c. Assessment of Returns Directorate