5 March 1996 External T.I. 9607815 - INDIAN ORGANIZATION - EMPLOYEES

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.

Principal Issues:

Whether a XXXXXXXXXX would be an organization described in Guideline 4 of the Indian Act Exemption for Employment Income Guidelines.

Position:

No.

Reasons:

It would not be an "Indian organization" but, rather, an organization of government that would provide service to Indians.

		960781
XXXXXXXXXX		J.D. Brooks

Attention: XXXXXXXXXX

March 5, 1996

Dear Sirs:

Re: XXXXXXXXXX

This is in reply to your letter of February 19, 1996 addressed to Gord Murray concerning the XXXXXXXXXX

XXXXXXXXXX

Restated briefly are the questions you raised concerning our Indian Act Exemption for Employment Income Guidelines ("Guidelines"):

1.Will Guideline 1 apply if the XXXXXXXXXX is located on "designated lands"?

2.If Guideline 1 applies, will the exemption apply to Indian employees whether they live on or off reserve?

3.If Guideline 1 does not apply, will Guideline 4 apply?

4.If Guideline 4 applies, will the exemption apply to Indian employees whether they live on or off reserve?

Our Views

The situation outlined in your letter relates to actual proposed transactions involving specific taxpayers. Confirmation as to the income tax consequences of proposed transactions can only be given in the context of an advance income tax ruling. However, we offer the following general comments.

1.Since in the Indian Act "reserve" includes "designated lands" for most purposes, Guideline 1 applies with respect to designated lands. Thus, Guideline 1 would apply to status Indians who perform at least 90% of their employment duties at the XXXXXXXXXX provided that the XXXXXXXXXX is located on designated lands.

2.Where Guideline 1 applies, the employee may live either on or off reserve.

3.One of the requirements of Guideline 4 is that the employer must be resident on a reserve. You stated that the XXXXXXXXXX will be operated by a non-profit corporation which will have its head office located on XXXXXXXXXX Reserve XXXXXXXXXX The meaning of an employer being resident on a reserve is defined on page 10 of the Guidelines. If the central management and control of the corporation is on reserve, the corporation would be considered to be resident on reserve. Before discussing Guideline 4, we would point out that Guideline 2 would normally apply to status Indians who live on reserve and work for an employer that is resident on reserve.

Another requirement of Guideline 4 is that, where the employer is an organization other than an Indian band (which has a reserve) or a tribal council (representing Indian bands which have reserves), the organization must be an "Indian organization" that is controlled by one or more Indian bands or tribal councils. Although 85% of the population which the XXXXXXXXXX will serve consists of status Indians living on reserve, and Indians will hold more than 50% of the seats on the board of directors, the Authority would not seem to be an Indian organization, but rather an organization of government which will serve Indians. Thus, it is our current view that the requirements of Guideline 4 would not be met.

4.Residence of the employees is not a factor to be considered in Guideline 4 and, in other situations where Guideline 4 does apply, it is typical that the employees would not live on reserve.

We trust that these comments will be helpful to you.

Yours truly,

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