5 January 1995 Ministerial Letter 9433288 - INDIAN EMPLOYMENT INCOME EXEMPTION WILLIAMS

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.

January 5, 1995

XXXXXXXXXX

Dear XXXXXXXXXX:

I am writing in response to your letter of December 15, 1994, concerning your employees and the Indian Act Exemption for Employment Income Guidelines which were issued in June 1994. In particular, you have asked whether employees of the
XXXXXXXXXX

would be exempt from taxation under Guideline 4.

You state that XXXXXXXXXX is a national non-profit organization dedicated to

XXXXXXXXXX

XXXXXXXXXX

Guideline 4 will apply to exempt all the employment income of an Indian, as defined for the purposes of the Indian Act, regardless of where their employment duties are performed, where a) the employer is resident on the reserve; b) the employer is an Indian band, tribal council or an Indian organization controlled by one or more such bands or tribal councils, if the organization is dedicated exclusively to the social, cultural, educational or economic development of Indians who for the most part live on reserves; and c) the duties of the employment are in connection with the employer's non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves. These elements must be satisfied in order for Guideline 4 to apply to exempt the employment income of a particular Indian.

The meaning of the term "employer is resident on the reserve" used in the Guidelines is that 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 exercised in a place other than the principal administrative office of the organization. It is a question of fact where the central management and control is exercised. You have not provided me with any facts upon which to comment on whether your organization satisfies this element of Guideline 4. However, I wish to point out that satisfaction of this element is always of some concern where the head office on an organization is located on a reserve but its main place of business is located off reserve.

As you have noted, where the employer is an organization, it must be an Indian organization controlled by "one or more such bands or tribal councils". "Such bands or tribal councils" refers to the bands or tribal councils which could satisfy the employer element of Guideline 4 on their own right. Accordingly, this means that the Indian organization must be controlled by one or more Indian bands which have a reserve, or tribal councils representing one or more Indians bands which have reserves. XXXXXXXXXX conducts its business through its board of directors which is elected on a regional basis from its membership which includes bands and tribal council. However, the facts presented do not indicate that the election of the board of directors is undertaken in such a manner that the members who are bands and tribal councils would control XXXXXXXXXX Accordingly, in our view, this element of Guideline 4 has not been satisfied.

XXXXXXXXXX mandate is too broad and does not satisfy the element of Guideline 4 that XXXXXXXXXX be dedicated exclusively to the social, cultural, educational or economic development of Indians who for the most part live on reserves.

I would also like to point out that the employment duties of each particular Indian employee must be considered to determine if they were in connection with the employer's non-commerical activities carried on exclusively for the benefit of Indians who for the most part live on reserves.

I trust that I have explained the Department's position, however, should you have additional information which you feel may indicate that the employment income of XXXXXXXXXX employees satisfies all the elements of Guideline 4, I would be pleased to consider them.

Denis Lefebvre
Interim Assistant Deputy Minister
Policy and Legislation Branch