25 March 1998 External T.I. 9800195 - HIGH SCHOOL ADMINISTRATOR VS. 8(1)(C)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether an administrator of an independent XXXXXXXXXX high school qualifies for the clergyman’s residence deduction provided in paragraph 8(1)(c).

Position TAKEN:

No.

Reasons FOR POSITION TAKEN:

We were not provided with any information in order to establish whether the status test of paragraph 8(1)(c) has been met. However, based on the information provided, the function test has not been met. That is, the school which appointed the taxpayer to his position, through its board of directors, is not a religious order or denomination.

XXXXXXXXXX 		5-980019
M. Azzi

March 25, 1998

Dear Sir:

Re: Clergyman’s Residence Deduction

This is in reply to your letter of December 22, 1997, wherein you requested our views on whether you qualify for the clergyman’s residence deduction provided in paragraph 8(1)(c) of the Income Tax Act (the “Act”).

You indicate that you were employed as an administrator of an independent high school owned by a society of XXXXXXXXXX Churches, and that you had no teaching responsibilities. You were appointed to your position by the board of directors of the school. We understand that the school teaches the regular XXXXXXXXXX prescribed high school curriculum, plus religious and music courses, and that all of the teaching staff is approved by XXXXXXXXXX

Our Comments

Generally, to be eligible for the paragraph 8(1)(c) deduction, 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 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”).

We have not been provided with any information in order to establish whether you meet the status test. As regards the function test, you are not in charge of or ministering to a diocese, parish or congregation; therefore, the issue, under the function test, is whether you are engaged exclusively in full-time administrative service by appointment of a religious order (as the school itself is not a religious denomination).

Whether an organization is a “religious order” is a question of fact which must be determined on a case-by-case basis. This term is not defined in the Act; however, we agree with the expert testimony, which was accepted by the Federal Court-Trial Division in the case of Zylstra Estate et al. v. The Queen (94 DTC 6687), that the phenomenon of “religious orders” is:

“...marked by common characteristics, when a group of persons, distinct from within a larger religious community, live under a set of rules, bound by vows to observe not only the general precepts of their church, but also vows of chastity, poverty and obedience, including agreement to a communal life unless permitted to live otherwise.”

The Court further found that educational purposes are not “religious purposes in the sense pursued by a religious order, though some religious orders may also pursue educational purposes as subordinate to their primarily religious purpose of service to their God through worship, prayer and devotion.” In McRae v. The Queen (97 DTC 5124), the Federal Court of Appeal agreed with the conclusion in Zylstra.

Based on the limited information provided, in our view, the school which appointed you to your position, through its board of directors, is not a religious order as described above. Consequently, in our view, you do not meet the function test and do not qualify for the clergyman’s residence deduction provided in paragraph 8(1)(c).

In closing, we would also note that we were not provided with any information regarding your employment duties and level of authority in order to establish whether you were “engaged exclusively in full-time administrative service”. The Concise Oxford Dictionary defines “administrative” as “concerning or relating to the management of affairs” and “administrator” as “a person capable of organizing...a person who performs official duties in some sphere, e.g. in religion or justice”. In our view, an administrator is therefore a senior person in an organization who is responsible for carrying out the objectives of that organization and who has the capability and authority to organize so as to achieve those objectives. Such an individual performs official duties and often has signing authority for that organization.

We trust that these comments will be of assistance.

Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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