Pastor Reimbursement of meals-Should his portion be a taxable benefit? (Canadian)?

Overtime Meals and Allowances Provided to

Employees

The CRA’s current administrative policy allows for a

non-taxable status of certain overtime meals or

reasonable allowances for overtime meals. This is the

case if the employee worked three or more hours of

overtime right after his or her scheduled hours of work;

and the overtime was infrequent and occasional in nature

(less than three times a week).

Concerns have been raised to indicate the economic

benefit received by the employee are often minor, the

meaning of a “reasonable allowance” is not always clear,

employer policies often allow for meal allowances after

two hours of overtime and the strict application of the

limitation of “less than three times in a week” sometimes

leads to certain inequitable results.

In order to address these issues, effective for the 2009

year, the CRA will consider no taxable benefit to arise

if:

• the value of the meal or meal allowance is

reasonable; a value of up to $17 will generally be

considered reasonable,

• the employee works two or more hours of overtime

right before or right after his or her scheduled hours

of work, and

• the overtime is infrequent and occasional in nature.

Less than three times a week will generally be

considered infrequent or occasional. This condition

may also be met where the meal or allowance is

provided three or more times per week on an

occasional basis to meet workload demands such as

major repairs or periodic financial reporting.

If overtime occurs on a frequent basis or becomes the

norm, the CRA considers the overtime meal allowances

to be a taxable benefit since they start taking on the

characteristics of additional remuneration.  (CRA website).   (CRA website( 

If a pastor meets a member or members of the congregation over coffee or a meal, there is no personal portion that should be declared as a taxable benefit by the church.

You may be confusing the eligibility of the business employer to deduct the full cost of the meal with a requirement to treat a portion of the meal as personal income on the part of the employee. An employer may claom only 50% of the meal as a cost of business deduction, but that 50% is not added to the business employee's T4.

Since the restriction applies only to for-profit entities, charities and churches are not affected.

I can appriciate that you have not been able to find a CRA comment regarding your question. CRA does not comment on questions that appear to have no basis in the Income Tax Act. If you want to obtain an authoritative answer to your question, you should consult a tax lawyer. Even if CRA would respond to your question, the courts have said that CRA cannot be held to commentary provided by CRA employees.

As an intermediary step, You could consult with the legal department of the Canadian Council of Christian Charities if your church is a member. They provide answers to their members churches and organizations free of charge.

This has never been an issue for anyone in private businesses where employees take clients or employees out for a meal or entertainment. if it did have taxable benefit connotations, I am sure CRA would have been all over this.

Don't wake a slepping dragon!

Do you have a portion of your budget allocated for his expenses?  Depending on how you structured things, I would think that that should be considered part of his salary and should not be considered a "free meal" at all.

Jeff, I respectfully disagree with you. How you categorise expendutures in the church budget has no bearing on the tax treatment of the expense. It is purely a matter of fact whether an expense is a taxable benefit or not. This is overned exclusively by the provisions of the Income Tax Act and CRA's administrative practices. As Reg said above, this has never been a problem for employees in the for-profit sector. Only the employer is prevented from claiming a deduction of more than 50% of the meal. If that same 50% would then also be taxed in the hands of the employee, that would constitute double taxation.

The reasonable free meals for pastors is not an issue and we should not make it one.

Dirk,

Thanks, that does clear it up for me.

Here in the US, the IRS allows all meals related to pastoral ministry an expense.  We can also claim any time we have people over for refreshments or a meal, parishioners or otherwise, as a ministry expense.  We just have to keep a calendar record of who and why.  Having a couple of beers and nachos while leading Theology Pub at the local brewery is deemed a pastoral ministry expense.