The CRA was recently asked to comment on whether an Executive Director of a charity was entitled to claim the clergy residence deduction made available in the Income Tax Act. In order to be eligible to claim the clergy residence deduction in any given year, an individual must meet a “status” test and a “function” test. The status test generally requires that a person be either a member of the clergy, a member of a religious order or a regular minister of a religious denomination. The function test requires that the individual either be in charge of or ministering to a diocese, parish or congregation or be engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination.

The executive director of the charity in question was not affiliated with any specific denomination as an ordained minister and the CRA did not have any further information to indicate that the individual was a member of the clergy. Because the taxpayer did not meet the status test as a member of the clergy, the CRA considered whether the taxpayer was a member of a religious order.

In determining whether a taxpayer is a member of a religious order, the CRA uses the 6-part test set out by Justice Bowman in McGorman v. The Queen. The CRA only considered the first part of this 6-part test here, namely, that the purpose of the organization should be primarily religious. The taxpayer had described his employer as a non-denominational organization focussed mainly on the spiritual development of youth, evangelism, and short-term missions. The CRA relied on two cases to conclude that the organization did not meet the first part of the 6-part test and was thus not a religious order. Surprisingly, although the CRA found that the organization’s primary purpose appeared to be the “uplifting of youth through their spiritual development”, it found that this was not a religious purpose. The CRA found that “while the aim of the Mission may be to further the principles set out in the doctrinal statements in one way or the other, there is no element of worship involved”. The CRA stated that the constitution and statement of faith did not constitute a religious ideology. Unfortunately, we are not privy to the organization’s constitution and statement of faith. Because the organization did not meet the first part of the 6-part religious order test, the taxpayer’s employer was not considered to be a religious order, and thus the taxpayer could not satisfy the status test as a member of a religious order.

Finally, because the taxpayer described his employer as non-denominational, the CRA found that he could not be a regular minister of a religious denomination. As such, the taxpayer did not meet the status test and thus could not claim the clergy residence deduction. Given its conclusions, the CRA did not consider the function test.

While we are not privy to the details of this organization’s documents, we are concerned by the CRA’s conclusions in this technical interpretation. We would have thought that an organization involved in the “spiritual development of youth, evangelism and short-term missions” would be primarily religious.

Organizations that have concerns regarding the eligibility of their employees for the clergy residence deduction should feel free to contact us.