In the February 2009 edition of this newsletter we reported on the Tax Court of Canada decision in Proulx v. Her Majesty The Queen. That case was an appeal from an assessment denying Ms. Proulx’s clergy residence deduction claim pursuant to the Income Tax Act.
Generally, this provision of the Act allows a member of the clergy, a member of a religious order, or a regular minister of a religious denomination to deduct his or her housing costs from employment income. Ms. Proulx worked as a pastoral associate for the Roman Catholic Church and claimed the deduction on the basis that she was a “regular minister” of the Church. The Tax Court of Canada held that Ms. Proulx qualified for the deduction as a “regular minister” within the Roman Catholic Church.
The Minister of National Revenue appealed this decision and the Federal Court of Appeal released its decision in this appeal on October 12, 2010 allowing the Minister’s appeal. In its brief decision, the Court of Appeal referred to its decision in Lefebvre v. Canada (released October 29, 2009) and stated that this decision has essentially decided the matter as to whether Roman Catholic pastoral agents qualify for the clergy residence deduction. In Lefebvre, the Federal Court of Appeal held that according to Canon Law, only ordained ministers are conferred a status that can be said to be permanent (i.e. ad vitam aut culpam) and that although lay faithful (such as pastoral agents) are authorized to perform specific functions that are normally entrusted to ordained ministers, they are called upon to do this on a temporary basis when there is a scarcity of ordained ministers. As such, they are not “regular ministers” for the purpose of the clergy residence deduction. The Court in Lefebvre referred to two previous Tax Court of Canada decisions on this same subject (Noseworthy v. The Queen (1999) and Pereira v. The Queen (2006)). The court reached differing conclusions in these two cases. The court in Lefebvre distinguished the Noseworthy decision on the basis of what the court called its “unusual facts”. In Noseworthy, the taxpayer was a female Roman Catholic prison chaplain. Although she was clearly not ordained, she nevertheless possessed the status of “regular minister” on the basis that the Catholic archbishop of Halifax had granted her the position of chaplain, she held that position permanently, she could administer sacraments, and the Catholic Church considered her to be a Catholic chaplain working regularly as a minister. In Pereira, the taxpayer, a lay-hospital Chaplain appointed by the Archbishop of the Diocese of Quebec, was held not to be a regular minister for the purposes of the clergy residence deduction because his appointment was not permanent. Based on its decision in Lefebvre, the Court in Proulx held that the taxpayer was not entitled to the clergy residence deduction.
It would appear that the Lefebvre decision has, once and for all, determined that Roman Catholic pastoral agents are not “regular ministers” with the meaning of the Income Tax Act, and on that basis, are not entitled to claim the clergy residence deduction. Going forward, the decision in Noseworthy should be read with caution as the court in Lefebvre appears to have confined it to its particular facts.