2004 Ruling 2004-0098641R3 - Paragraph 149(1)(c)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Does a particular First Nation qualify as a public body performing a function of government for purposes of paragraph 149(1)(c)?

Position: Yes

Reasons: The First Nation can be considered a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c).

XXXXXXXXXX  							2004-009864

XXXXXXXXXX, 2004

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling - XXXXXXXXXX

This is in reply to your letters of XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the taxpayer, XXXXXXXXXX ("First Nation"). We also acknowledge the information provided in our telephone conversation (XXXXXXXXXX).

We understand that to the best of your knowledge and that of the First Nation, none of the issues involved in the ruling request is:

i. in an earlier return of the First Nation or a related person;

ii. being considered by a tax services office or a tax centre in connection with a tax return already filed by the First Nation or a related person;

iii. under objection by the First Nation or a related person;

iv. before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; and

v. the subject of a ruling previously issued by the Directorate to the First Nation or a related person.

Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definitions unless otherwise indicated.

Our understanding of the facts, the proposed transaction and the purpose of the proposed transaction is as follows:

Facts

1. The First Nation is an "Indian band" within the meaning of the Indian Act.

2. The First Nation's mailing address is XXXXXXXXXX.

3. The First Nation has XXXXXXXXXX, within the meaning of the Indian Act, known as XXXXXXXXXX (Hereinafter referred to as the "Reserve"). The size of the reserve is XXXXXXXXXX.

4. The First Nation is served by the XXXXXXXXXX Tax Services Office and files its returns with the XXXXXXXXXX Tax Centre.

5. XXXXXXXXXX.

6. XXXXXXXXXX.

7. All of the First Nation's offices along with any facilities under its control are located on the reserve belonging to the First Nation.

8. The First Nation is comprised of approximately XXXXXXXXXX members (the "Members"), approximately XXXXXXXXXX of which live on the Reserve.

9. The First Nation's Chief and Council are democratically elected by the First Nation's Members.

10. The First Nation is a party to the XXXXXXXXXX.

11. The First Nation has received an Order-in-Council authorizing it to manage its revenue moneys pursuant to section 69 of the Indian Act.

12. The First Nation has passed XXXXXXXXXX by-laws under section XXXXXXXXXX of the Indian Act, which provide for, among other things:

XXXXXXXXXX.

13. The First Nation administers a number of programs through funding provided by Indian and Northern Affairs Canada ("INAC"), including programs relating to:

(a) elementary school education;

(b) post secondary education;

(c) land trust services;

(d) community infrastructure;

(e) economic development;

(f) police services;

(g) fire prevention;

(h) recreation and sports;

(i) social assistance and social support services;

(j) child and family services; and

(k) youth outreach.

14. Under a Health Services Transfer Agreement, signed with Health Canada on an annual basis, the First Nation manages health services in respect of the following:

(a) community health benefits;

(b) child and family services; and

(c) non-insured health benefits.

15. The First Nation operates a housing support program to assist Members with constructing homes on reserves.

16. The First Nation maintains employment and training programs that include a full range of services including: mobility assistance, disability support, targeted wage subsidy, skill enhancement, summer career placement, and employee assistance services.

17. The First Nation has developed and maintained a business grant program for Members of the First Nation. The grants may be up to XXXXXXXXXX% of project capital requirements in respect of the start-up, expansion or acquisition of a business by members of the First Nation.

Proposed Transaction

18. In XXXXXXXXXX, the First Nation will invest approximately $XXXXXXXXXX in an interest-bearing one-year Guaranteed Investment Certificate ("GIC") with a financial institution.

Purpose of the Proposed Transaction

19. The purpose of the proposed transaction is to generate income to support the governance, public works, infrastructure and development of the First Nation.

Ruling Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transaction and purpose of the proposed transaction, we rule as follows:

A. The First Nation is a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c) of the Act and, accordingly, no tax will be payable under Part I of the Act by the First Nation on the interest income earned on the GIC described in 18 above.

The above advance income tax ruling, which is based on the Act and Regulations in their present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular IC 70-6R5, dated May 17, 2002, and is binding on the Canada Revenue Agency provided the proposed transaction is completed by XXXXXXXXXX.

Yours truly,

XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate