Ottawa tightens clergy tax rules

After losing 46 of 49 cases this year in the Tax Court of Canada regarding clergy housing tax deductions, the federal government is proposing new legislation and clarification as to who qualifies for the deduction and at what rate.

According to Rob Saffrey, director of finance for the Diocese of Toronto, the changes would only apply to active clergy who provide their own housing, either rental or owned, and does not affect those who live in rectories.

“About 36 per cent of 350 active clergy in this diocese are affected by these changes because they provide their own housing,” Mr. Saffrey said. “As long as they fit the status and function test for the qualification, there won’t be any mechanical changes to our current bookkeeping practices because we provide separate stipend and housing amounts.”

The status test for qualification states that an individual must be a member of the clergy, a member of a religious order or a regular minister of a religious denomination. The function test states that the person must also 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.

However, in the case of dioceses that have a salary system, Mr. Saffrey said it will be more difficult.

In such dioceses, individual clergy dealt with the housing deduction themselves. Now Revenue Canada wants the employer ? the church ? to assess the fair market value of the housing. That means the diocese will have to reorganize their bookkeeping practices to account for the housing allowance. “It certainly will create more work for us in Toronto as well,” he said. “We have to go after every individual for this figure and keep track of it.”

Though the new legislation may create more paper work, Mr. Saffrey welcomes the changes. About three years ago, he noted that Revenue Canada was demanding individual letters from the diocese regarding housing deductions and noted that priests in some dioceses, like Nova Scotia and Huron, were being exceptionally harassed, which led to the Tax Court cases that also involved other faith groups. “It was obvious that some sort of clarification and regularization was needed, and now we have it,” he said. Margaret Dinsdale is a freelance writer living in Toronto.