Taxman Eyes Clergy Couples

Article excerpt

Back when "man" truly represented gender in the word "clergyman" and when the church represented the nucleus of a community, the Income Tax Act was drafted to include a tax break for clergy housing.

Among the act's assumptions was that the church rectory was not just a home, it was a community meeting place, said Robert Saffrey, director of finance at the Diocese of Toronto.

Income Tax Act

Clergymen's Residences

1. A member of the clergy or of a religious order or a regular minister of a religious denomination may claim a deduction in respect of his residence if he is

(a) in charge of or ministering to a diocese, parish or congregation, or

(b) engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination.

7. Where any individual is provided with free accommodation, the value of the benefit is included in his income for tax purposes. If he meets the requirements outlined in paragraph 1 above, he may claim a deduction in respect of that accommodation. The deduction is limited to the amount included in income as a benefit.

For that reason, the Income Tax Act allowed for ministers to deduct an amount for housing expenses from their income.

But with the ordination of women in several denominations, including the Anglican Church, has come the unique situation of clergy couples and the tax implications of each spouse claiming the same deduction available to a cleric married to a layperson.

Local Revenue Canada taxation offices have contacted one Presbyterian and five United Church clergy couples in southern Ontario about the housing deductions they have claimed in recent years. Three of the couples have been reassessed, resulting in each minister owing a substantial amount of back-income tax, up to $20,000, plus interest.

Two of those couples have appealed, according to a background document prepared for the Canadian Council of Churches by the United Church's legal counsel. The CCC document warns, however, "there would be a low chance of success for clergy couples to challenge Revenue Canada's position in the civil courts."

The implications of the Revenue Canada decision could be significant, said Mr. Saffrey, who is advising the CCC in the tax matter. He said it could make a liability out of a priest married to a priest.

"If we say you're going to have to pay them more because they're married to a cleric, well, if I were a parish and I were looking at two candidates who were relatively equal, why would you want the one who's going to cost you $6,000 more?" asked Mr. Saffrey.

One western Canada priest married to another priest commented on the implications of the decision: "What I think will happen soon is that the clergy housing allowance deduction will go. I mean, there's no other occupation that I know of that gets one like that."

The couple, who are employed by the same parish -- one full-time, the other part-time -- live in a rectory. …