Clergy Residence Deduction Update

27 juin 2011 | Amanda J. Stacey

( Disponible en anglais seulement )

CRA has recently released two technical interpretations concerning eligibility for the clergy residence deduction under the Income Tax Act.  In the first one, dated February 1, 2011, CRA was asked to opine on whether the taxpayer qualified as a member of a religious order engaged exclusively in full-time administrative service by appointment of a religious order.

CRA reviewed the two-part test that must be met to be eligible for the deduction.  This test involves both a religious status test and a religious function test.  As an ordained orthodox rabbi, the taxpayer met the status test.  With respect to the function test, CRA reviewed the test that an organization must meet to qualify as a religious order for the purposes of the deduction.  This is a six-part test that was established by Justice Bowman in the McGorman decision in 1999.   The first part of this test involves a determination of whether an organization is “primarily religious”.  Unfortunately, as is the case with most CRA technical interpretations, this document is heavily redacted and we are not privy to the organization’s purposes.  In this case, CRA determined that the primary purpose of the organization was the provision of community services, not religion. CRA stated that the range of services provided appeared to be primarily geared towards the “uplifting of the Jewish community and to help them in time of need”.  CRA acknowledged that while the organization may be offering many religious services to the community, in its view religion was not a primary purpose of the organization.  CRA concluded that the organization is a “faith-based and non-profit social service community which operates a variety of programs”.  CRA also stated that it did not have any information that indicated that the organization was bound by a “statement of faith” or that “any particular vow was unique to the organization which set its members apart from the layman”.  As such, it did not, in CRA’s view, qualify as a religious order.

This technical interpretation is in line with CRA’s recent technical interpretations in that it appears to be a narrowing of the test for religious order status and in particular the meaning of the first part of the test – whether an organization is primarily religious.  CRA acknowledges in this technical interpretation that an organization that is primarily religious may have other objects within its overall religious purpose and that its objects may go beyond preaching the gospel and prayer and extend to works beneficial to humanity such as running hospitals or helping the poor and homeless.  However, this is not the first technical interpretation in recent months that concludes that a social service type organization with a religious focus is not primarily religious.  CRA’s statement that the organization does not appear to be bound by a statement of faith, or the like, may indicate a fundamental misunderstanding of this type of organization and religion.  Statements of faith are typically used in the Christian context but are not necessarily widely used in other faiths.

In the second technical interpretation, dated April 5, 2011, CRA was asked for its views on whether a campus minister at a university, and employed by the Navigators of Canada, qualified for the clergy residence deduction.  The taxpayer in question claimed that he was a member of a religious order.  The CRA agreed with this view as it considers the Navigators to be a religious order for the purposes of the deduction.

The taxpayer also took the position that the he satisfied the function test by virtue of ministering to a congregation. The CRA looked at whether the duties of the campus minister qualified as ministering to a congregation.  The CRA stated that it was its understanding that campus ministries are ministries that focus on the spiritual growth and development of students.  The following is a list of the specific duties of the taxpayer:

  • preach and teach on spiritual and theological subjects;
  • research and study religion, Scripture and theology;
  • plan and conduct public worship services;
  • preside over sacraments such as the “Lord’s Supper”; and
  • perform memorial services as required.

Based on this and based on the fact that the term “ministering” is a very broad concept, the CRA concluded that the taxpayer was considered to be ministering to the student group that was attending his campus ministry.  On the question of whether the student group qualified as a congregation, the CRA concluded that students attending the campus ministry do so to acquire religious rather than academic instruction.  Considering the nature of the duties performed by the taxpayer and the purpose of the students attending the campus ministry, the CRA agreed that the students constituted a congregation for the purposes of the deduction and, as such, the taxpayer was considered to be ministering to a congregation.  As such, the taxpayer qualified for the deduction in this case.

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

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