Housing allowance decision expected soon

Published February 1, 1999

After a marathon 38 days of hearings in what may be the longest tax trial the country has seen, a judge is expected to rule this spring whether fewer clergy will be entitled to claim a housing allowance.

The allowance represents a sizable chunk of a minister’s after-tax income, notes Toronto lawyer Patrick Boyle. Mr. Boyle defended 71 clergy in the tax trial that concluded in December.

Clergy or members of religious orders who perform a qualified function, such as ministering to a congregation, may deduct from their taxes the fair rental value of their homes. If that benefit is withdrawn, their after-tax incomes drop substantially and a parish might be expected to help make up the difference, Mr. Boyle said.

For the last couple of decades, Revenue Canada and the Department of Finance have been reviewing the allowance with the hope of narrowing the number of clergy eligible for it, Mr. Boyle said. Some years ago, the Finance Department recommended amendments to Parliament.

“But Parliament couldn’t touch it without incurring the wrath of all organized religion,” he said.

Thus Revenue Canada has adopted a piecemeal approach, challenging individual clergy and trying to get the deduction tightened up through the tax courts. These are some of the issues it raised during the trial:

  • Revenue Canada says when there are multiple pastors in a parish, only the head pastor should qualify for a deduction.
  • When a church (such as the United Church of Canada) has both ordained and non-ordained ministers, only the ordained ministers should qualify for a deduction, the tax department says.
  • Basing its argument on old British and Canadian cases, it also says that aside from ordained clergy, people should be recognized as ministers only if they are seen to be “spiritually superior” to the laity.
  • Some clergy who are performing roles outside of traditional church ministry, such as working as chaplains, have had their taxes reassessed.

No Anglicans were among the 71 who were part of the trial, but some individual Anglican clergy have been challenged by Revenue Canada on this point, Mr. Boyle said.

The judge is expected to rule in March or April.


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