Government, religious leaders draft tax guidelines

Now that Revenue Canada has decided not to appeal a court decision on the clergy housing deduction, government officials are working with religious leaders to develop new guidelines. They should be complete this fall.

The guidelines are expected to incorporate principles laid out in a court decision in February by Judge D.G.H. Bowman, who ruled in favour of 38 taxpayers and against eight who were denied the clergy housing deduction by Revenue Canada. (The decision was reported in the May issue of the Journal.)

The Canadian Council of Christian Charities went to bat for the taxpayers, appealing the decisions to tax court.

The council decided not to appeal the eight denials and in May, Revenue Canada announced it also would not appeal the rulings.

Members of the council are now “intimately involved” in developing the new guidelines, said executive director Frank Luellau, who has seen several drafts.

“We have been very encouraged by the process. The reason I’m pleased is I see that our hard-fought and expensive court battle was not for nothing.”

Actual wording from the court decision is going in there, he said. “It cost us too much, but at least we are getting something of what we went out to buy.” Financial records indicate the council spent $1.5 million this fiscal year, ending April 30, 1999, and $520,000 last year on legal fees related to clergy housing.

But Revenue Canada will have to pay some of that. In a separate ruling in April, Judge Bowman awarded costs to the council.

“We expect the settlement will be somewhere between $300,000 to $400,000,” said Mr. Luellau. “The award was very strongly in our favour. It is probably the largest settlement on costs that has been awarded against the government in the tax court. To get that kind of award of costs is very significant, in that the judge is making the point that this was an unfair procedure forced on these taxpayers.” Only some legal expenses are eligible, however, so the organization will do well to recoup even 10 per cent of its legal bill. The council has submitted its claim for costs but Revenue Canada is fighting some of the items. Revenue Canada did not respond to request for an interview.

Meanwhile, the council has raised $827,000 toward expenses. Marianne Meed Ward is a freelance writer, editor and broadcaster in Toronto.

Eligibility rules

To qualify for the deduction, a person must be

– a member of a religious order,

– a member of the clergy, or

– a regular minister of a religious denomination.

In addition, that person

– must minister to a diocese, parish or congregation, or

– must work in full-time administrative service by appointment of a religious order or denomination.

Taxpayers who qualify can claim the fair rental value of their home as a deduction from income. On average, it’s worth about $5,000 a year in after-tax dollars.