New federal tax rules released on clergy housing

Published April 1, 2000

New rules governing the clergy housing deduction don?t change much for Anglicans, but they also don?t override troubling proposals to change the amount of the deduction and how it is calculated.

The new rules, released as interpretation bulletin IT 141R by Canada Customs and Revenue Agency (formerly Revenue Canada) in February, apply only to current legislation and do not take into account proposals released by the Department of Finance Oct. 19. Those changes would make employers, not employees, have to determine the amount of the deduction, and to set caps on the amount claimed.

The proposed changes only affect clergy living in their own homes. Currently, the deduction is based on the fair rental value of accommodation, in recognition that a minister?s house is often used for pastoral work. Clergy who live in church-provided housing receive a stipend, but must record as income the value of the house. The church determines that value, and the deduction is limited to that amount. Clergy then pay income tax only on the stipend.

Clergy who live in their own homes can be remunerated either by a stipend plus a cash amount for a housing allowance, or a straight salary. The individual determines the rental value of the home, and the deduction can be up to 100 per cent of the entire remuneration package, although it rarely is. In that case, the clergy would pay no income tax.

The finance minister wants to limit the deduction to the amount of the housing allowance, where that?s part of the remuneration package, and force employers to come up with an amount earmarked for housing where remuneration is a straight salary. That in effect makes the employer a real estate agent responsible for setting values on properties ?we don?t have anything to do with,? said Rob Saffrey, director of finance for the Diocese of Toronto.

Only 30 per cent of clergy in the diocese live in their own homes, but the trend is in that direction. It would be an administrative nightmare to look at the houses of 100 clergy, Mr. Saffrey said. When the proposals were first released, he said dioceses on a salary system would face a greater paperwork headache.

But Stephen Koning, director of finance for the Diocese of Calgary, which has shifted to salary-based remuneration for all 65 clergy, says ?it?s not at all clear? the shift would present more difficulty under his system. Still, he too is worried about the proposed changes.

?I can?t think of any other place in Canadian tax law where employer determines a deduction amount. That?s between the taxpayer and Revenue Canada.? He expressed his concerns in a letter to the Department of Finance Jan. 3, where he suggested instead that the government initiate a blanket cap of 50 per cent of the entire remuneration package if the aim is to prevent clergy from off-setting all their income with the deduction. Regarding the new interpretation bulletin, Mr. Koning said, ?It?s fair.? It retains the status and function tests for eligibility, but expands the definitions used based on rulings in the Tax Court of Canada last year. Marianne Meed Ward is a weekly columnist for the Toronto Sun and a panelist on Vision TV?s Skylight program.


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