2015-0576461E5 Clergy Residence Deduction

Principal Issues: Whether a school chaplain is eligible to claim the clergy residence deduction?

Position: See response.

Reasons: See response.

Author: Baltkois, Thomas
Section: 8(1)(c)

XXXXXXXXXX  `                                   2015-057646
                                                               T. Baltkois

July 22, 2015

Dear XXXXXXXXXX

Re: Clergy residence deduction

We are writing in response to your correspondence concerning whether a school chaplain employed by XXXXXXXXXX (College) may claim the clergy residence deduction provided by paragraph 8(1)(c) of the Income Tax Act (Act). It is our understanding that a school chaplain employed by the College must be an ordained priest of the XXXXXXXXXX Church.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). 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 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Generally, to be eligible for the clergy residence deduction provided by 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 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).

In order to qualify for the clergy residence deduction, a person must satisfy both the status and the function tests.

Status test

According to the job description you provided, a school chaplain employed by the College must be an ordained priest of the XXXXXXXXXX Church. An ordained priest is a member of the clergy. Thus, it appears that the College’s school chaplain would satisfy the status test.

Function test

An individual who has satisfied the status test as a member of the clergy 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.

You have not indicated on which basis you believe the function test could be satisfied in the particular situation. However, based on the information you provided, it appears unlikely that a school chaplain would be engaged exclusively in full-time administrative service, even though some employment duties are administrative in nature. Therefore, the function test would only be satisfied if the chaplain is considered to be in charge of, or ministering to, a diocese, parish or congregation.

The school chaplain is required (among other things) to plan and lead weekday worship services in the school chapel, administer sacraments, preside or assist in other religious celebrations, and officiate at weddings, services and funerals. However, the employment duties also include certain teaching responsibilities.

Generally, the function test may be satisfied by an individual who performs specialized ministering (for example, as a chaplain) and who is also required to perform teaching duties as part of his or her overall employment responsibilities. However, ministering to a congregation must be an integral part of the individual’s overall employment responsibilities.

Ministering to a congregation

Paragraph 13 of Interpretation Bulletin IT-141R (Consolidated), Clergy Residence Deduction, 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.

Paragraph 15 of IT-141R generally defines a “congregation” as, “an assemblage or gathering of persons to whom a minister provides spiritual counseling, advice, illumination and inspiration”. The courts have similarly held that for purposes of paragraph 8(1)(c) of the Act, a congregation is generally a group of people assembled for religious worship, or to hear a preacher. A congregation can be large or small, but must be comprised of two or more people.

Paragraph 15 of IT-141R also clarifies that a group of students assembled for academic instruction is not a congregation for purposes of paragraph 8(1)(c) of the Act. Consistent with these views, the courts (footnote 1) have generally concluded that students enrolled at an educational institution are likely assembled for academic instruction or religious education rather than religious worship, and are therefore not a congregation for purposes of paragraph 8(1)(c) of the Act. Thus, an individual, who is employed by an educational institution to teach students as part of an academic curriculum, would not generally be considered to minister to a congregation.

However, in the situation described, the employment duties of the school chaplain do not appear to be limited to teaching. The school chaplain is also required, for example, to plan and lead weekday and special worship services in the school chapel for faculty and employees of the school, its students, and visiting parents. Factors which may indicate that a chaplain is ministering to a congregation include:

*     Attendance at chapel services is voluntary;
*     Attendance at chapel services is not limited to individuals who are affiliated with the school.

The documentation you provided does not indicate whether students, faculty, etc., may choose to attend (or not attend) chapel services. For example, it is unclear whether students may be required to attend chapel services as a condition of enrollment at the school, or to satisfy an academic requirement. The documentation you provided also does not address whether attendance at chapel services is open to others in the community or to the general public.

Where it is established that the chaplain ministers to a congregation, such ministering duties must also be an integral part of the chaplain’s overall employment responsibilities in order to satisfy the function test.

The word “integral” is not defined in the Act, nor has its meaning been interpreted in Canadian case law. In such situations, we generally rely on the ordinary meaning of the word (e.g., dictionary definition). The Dictionary of Canadian Law defines “integral” to mean “essential to completeness; constituent”. The Concise Canadian Oxford Dictionary defines “integral” to mean “of a whole or necessary to the completeness of a whole”, and the word “constituent”, as “composing or helping to make up a whole”.

Based on these definitions, ministering to a congregation must be a fundamental or intrinsic component of an individual’s overall job responsibilities in order to satisfy the function test. Ministering activities that are merely incidental to an individual’s main or primary job responsibilities, or that are performed in addition to such duties, will generally not meet this condition.

While there is no test or general rule which may be applied to establish whether ministering constitutes an integral part of a particular individual’s employment responsibilities, the following factors may assist you in making this determination:

*     how often ministering is performed;
*     the amount of time spent ministering;
*     the individual’s ministering responsibilities relative to his or her overall job duties.

A school chaplain who is an ordained priest likely satisfies the status test. However, it is a question of fact whether an individual holding this position would satisfy the function test. Consequently, we are unable to determine whether a school chaplain employed by the College is eligible for the clergy residence deduction provided for in paragraph 8(1)(c) of the Act.

We trust these comments will be of assistance to you.

Yours truly,

Nerill Thomas-Wilkinson, CPA, CA
Manager
for Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader:  Because of our system requirements, the footnotes contained in the original document are shown below instead:

1  Bissell v The Queen, 99 DTC 721 (TCC); Shepherd v The Queen, 2002 DTC 3855 (TCC)

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