29 December 1994 External T.I. 9431205 - INDIANS WILLIAMS GUIDELINES EXEMPT STATUS

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

		943120
XXXXXXXXXX		943181

December 29, 1994

Dear XXXXXXXXXX:

This is in reply to your letters of November 22, and December 1, 1994 in which you made representations on behalf of
XXXXXXXXXX.

as to whether its employees would qualify for tax exemption on the basis of Guideline 2 of the Department's Indian Act Exemption for Employment Income Guidelines.

You stated that

XXXXXXXXXX

XXXXXXXXXX

Our comments

Guideline 2 will exempt all the income of an Indian from an employment regardless of the location of the employment duties when, the employer is resident on a reserve and the Indian lives on a reserve. "On a reserve", by definition includes
XXXXXXXXXX.

We note that in your view the employer is resident on the reserve. Nonetheless, we provide these comments for your consideration. It is a question of fact as to whether an organization is "resident on reserve". As stated in the Guidelines, an employer is resident on reserve if "the reserve is the place where the central management and control over the employer organization is actually located. The central management and control of an organization is usually considered to be exercised by the group that performs the function of a board of directors of the organization. However, it may be that the real management and control of an organization is exercised by some other person or group. Generally, management and control is exercised at the principal place of business but it is recognized that this function may be legitimately exercised in a place other than the principal administrative office of the organization." Where an organization which would otherwise not be considered to be resident on reserve is asserting that it satisfies the definition because it holds its board of directors meetings on reserve, it should generally be considered to satisfy the definition where management and control over the organization is legitimately exercised during those meetings. In addition, in our view, the fact that the board of directors meetings are held on different reserves would not, in and by itself, cause an organization to not be considered resident on reserve.

Although we have provided these general comments, a review of the minutes of boards of directors meetings and resolutions or by-laws passed thereat would be required to conclusively resolve this question of fact and this would best be resolved by a District Office. Nevertheless, in our view, in a situation where the board of directors meet on a reserve, albeit different reserves, at which decisions are made which direct an organization's operations, such an organization would generally be considered resident on reserve.

The term an "Indian lives on a reserve" as used in the Guidelines means the Indian lives on the reserve in a domestic establishment that is his or her principal place of residence and that is the centre of his or her daily routine. The fact that an Indian is absent from a reserve for short periods of time because of either the type of employment duties being performed, the distance between the reserve and the location of those duties, or both, does not necessarily mean that the Indian has taken up residence off reserve. It is a question of fact whether, in those circumstances, the Indian continues to live on a reserve. However, the longer the period of absence from the reserve, the more likely it is that the domestic establishment maintained on the reserve is not part of the daily routine of the employee. In particular, where employment duties are all located off reserve and returns are made to the domestic establishment on the reserve only for days off and vacations, the domestic establishment on the reserve would not be the centre of the employees daily routine. Accordingly, the employee will not be considered to be resident on the reserve for purposes of the Guidelines.

With respect to the Company's employees, in our view, employees working under the conditions described with respect to any of the XXXXXXXXXX projects noted above, would not be considered to be an Indian who lives on reserve for purposes of the Guidelines. Accordingly, they will not be exempt on their employment income under Guideline 2.

We trust that these comments will be of assistance.

Yours truly,

R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch