Citation: 2013 TCC 311
Date: 20131002
Docket: 2007-1898(IT)I
BETWEEN:
JULIE OZAWAGOSH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
and
Docket: 2007-2395(IT)I
BETWEEN:
NORMA PETAHTEGOOSE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers J.
[1]
These appeals were
heard on common evidence. The Minister of National Revenue (the “Minister”)
reassessed the appellant Julie Ozawagosh’s tax liability to include in her
income the following amounts earned through her employment with Native Leasing
Services (NLS) in the following taxation years.
|
Taxation year
|
Income not included
|
|
1999
|
$22,310
|
|
2000
|
$38,521
|
|
2001
|
$38,244
|
|
2002
|
$20,593
|
|
2004
|
$27,948
|
|
2005
|
$16,621
|
[2]
In addition to the above
years, the appellant Julie Ozawagosh appealed her 2006 taxation year even
though the Minister assessed her tax liability on the basis of her tax returns as
filed. At trial, this appellant was not aware that she had appealed her 2006
taxation year. She admitted that she had not worked for NLS in 2006 and she could
not recall where the income reported was earned. It is therefore impossible for
me to decide whether the income earned in 2006 is exempt from taxation. The
appeal of Julie Ozawagosh for her 2006 taxation year is therefore dismissed.
[3]
The appellant Norma
Petahtegoose is appealing her 1999, 2000 and 2001 taxation years. The Minister
reassessed her tax liability to include in her income the amounts of $14,863,
$27,929 and $15,402 for those years respectively, which amounts were also
earned through employment with NLS.
[4]
Both appellants are
status Indians. They reside on and are members of the Atikameksheng Anishnawbek
First Nation and both were employed by NLS during the relevant taxation years.
NLS is an employment services leasing business. The appellants’ services were
leased to the Shkagamik‑Kwe Health Centre (SHC), where they each held
different positions. On the basis of their Indian status, neither appellant paid
income tax on her employment income received from NLS.
[5]
The issue in these
appeals is whether the income earned by both appellants from their employment
with NLS during the relevant taxation years was personal property of an Indian situated
on a reserve, thus falling within the purview of paragraph 87(1)(b)
of the Indian Act such that it would be tax exempt.
[6]
In the relevant years, SHC
was part of a network of ten Aboriginal Health Access Centres located
throughout the province of Ontario. It is one of the only two not located on a
reserve. It is situated approximately 20 kilometres away from the
Atikamekshen Anishnawbek reserve. Each such centre is modelled after community
health centres and is affiliated with a particular reserve. The network has now
grown to over 30 centres. The SHC’s letters patent and by‑laws set out
its objectives, which are to provide medical, health and traditional support
services to First Nation communities. The objects stated in the letters patent
dated May 25, 1998 read as follows:
(a)
To establish and to operate, one or more
culturally based holistic health centres dedicated to balance and healthy
lifestyles in the Northeast Region of the Province of Ontario.
(b)
To provide medical, health and supportive
services to the community with specific emphasis on the needs of the aboriginal
people in the community.
(c)
To promote the healing and wellness of the
aboriginal people in the community by providing culturally appropriate
services, traditional healing programs, community health and education
programs, and community outreach and development programs.
In by‑law No. 1, article 5, which deals
with aims and objectives, indicates that the first object of SHC is “[t]o
establish and operate one or more culturally appropriate Native holistic health
centres, dedicated to balanced and healthy lifestyles . . . ”
Article 7 which concerns the board of directors,
requires that at least 75% of directors be of Native ancestry. Article 5(b)(i)
specifies that another of SHC's aims and objectives is “to provide medical,
health and supportive services to the community with specific emphasis on the
needs of the Native people in the community”.
[7]
These same objectives
are found on the SHC website, where it is stated that SHC is dedicated to
providing equal access to quality health care for all First Nations Metis and
Inuit people in the city of Greater Sudbury, as well as individuals and
families from partner First Nations, namely; Wahnapitae, Henvey Inlet and
Magnetawan. Aboriginal people make up approximately 50% of SHC's staff. As part
of the traditional health program, visiting elders speak to clients in need of
guidance and counsel them, and part of its daily activities, the SHC also
engages in traditional practices such as the burning of sage called smudging, which
cleanses negative energy. Although clients of SHC have to fill out a
questionnaire when receiving services, they do not have to show identification
to prove that they belong to a First Nation. They simply self‑declare. Residency
is not a precondition to clients' obtaining SHC’s services. It is fair to say
that the services are available both to clients who reside on a reserve and to
clients who do not.
Norma Petahtegoose
[8]
From May 1999 until
2001, the appellant Norma Petahtegoose worked on a full-time basis at the SHC
as administrative support to the medical staff. She describes herself as being
the first person that clients would see when they walked into the health centre.
Her duties included booking appointments, managing files and preparing patients'
medical charts. She has no training as a physician or nurse and is not a traditional
healer. Most of her work duties were performed on SHC's premises. In fact, she
was rarely required to do work anywhere other than on SHC’s premises.
[9]
Ms. Petahtegoose
testified as to her difficult childhood. Born in 1967, she was adopted when she
was three months old. Her adoptive parents separated when she was three years
old. At six, she moved in with her older adoptive sister and finally went back
to live with her adoptive mother when she was thirteen. She pursued her high
school studies and completed a retail florist program at Cambrian College.
[10]
She married in 1989.
Her husband’s family is very mindful of their culture and practise it on a day‑to‑day
basis. She has learned a great deal about their traditions and culture. She
testified that, because of her background and life experience, she was able to
better understand SHC's clients’ issues and steer them in a direction that may have
been appropriate for them. She also learned a lot about her culture while
working at SHC.
Julie Ozawagosh
[11]
From 1998 until 2000,
the appellant Julie Ozawagosh worked with the aboriginal HIV/AIDS program as an
advocate-counsellor and did this work at SHC's offices. This program was part
of the Ontario Aboriginal HIV/AIDS Strategy. Her role was to promote “cross‑cultural
awareness” with respect to HIV, which she defined as an understanding of how
Anishnawbek people relate to and view the land and the issues of their people,
such as drug and alcohol abuse and physical abuse. She also taught harm
reduction programs and assisted HIV positive individuals and their families.
Her clients were exclusively Aboriginal people living on a reserve, but her
duties were performed on-reserve only around three times a year.
[12]
In 2000 or thereabouts,
she became the traditional coordinator for SHC and remained in that position
until her retirement in May 2005. She was employed by NLS and her services were
leased to SHC during the taxation years under appeal.
[13]
SHC provided the
appellant with an office from which she would coordinate activities and where
she would meet with clients. She also arranged traditional healer and alternative
health therapy services and coordinated a variety of cultural events,
ceremonies and workshops, such as medicine picking, craft and language classes,
and access to various support groups.
[14]
The appellant Julie
Ozawagosh accompanied a traditional healer and volunteered to harvest
traditional medicines, which are available on- and off-reserve, for around five
hours per week from April to October. She said that this took about 25% of her
time. In 2005, she only spent around 5% of her time on-reserve as she retired
in May of that year.
[15]
The appellant acquired
the knowledge to do the above through the elders and by attending conferences
and spiritual gatherings. She also took an on-reserve course in band planning
and economic development work offered by one Bernard Petahtegoose, an elder.
Her background and life experience were also a valuable tool.
Legislation
[16]
Pursuant to sections 3
and 5 of the Income Tax Act, a taxpayer must, in computing
his or her income, account for income from all sources, including amounts
received as salary, wages and other remuneration in the year. Amounts may be
excluded from income if they meet the criteria set out in section 81 of
the Income Tax Act, which reads in part as follows:
81. (1) Amounts not included in
income -- There shall not be included in computing the income of a taxpayer for
a taxation year,
(a) Statutory exemptions
[including Indians] -- an amount that is declared to be exempt from income tax
by any other enactment of Parliament, other than an amount received or
receivable by an individual that is exempt by virtue of a provision contained
in a tax convention or agreement with another country that has the force of law
in Canada.
The relevant statutory exemption which is at issue in
these appeals is found in paragraph 87(1)(b) of the Indian Ac, which reads
as follows:
87.
(1) Notwithstanding any other Act of Parliament or any Act of the legislature
of a province, but subject to section 83 and section 5 of the First Nations
Fiscal and Statistical Management Act, the following property is exempt
from taxation:
. .
.
(b)
the personal property of an Indian or a band situated on a reserve.
[17]
It therefore follows
from the above paragraph that I must decide whether the appellants’ employment
income was “personal property . . . situated on a reserve”.
Analysis
[18]
The Supreme Court of
Canada held in Nowegijick v. The Queen, [1983] 1 S.C.R. 29, and in
Bastien Estate v. Canada, 2011 SCC 38 [2011] 2 S.C.R. 710, that employment
income is personal property for the purpose of section 87. More
particularly, it said it was non-physical property. The only issue remaining here
is whether it is “situated on a reserve”.
[19]
Several cases have
acknowledged the difficulty of ascribing intangible property to a specific
location for the purposes of determining whether it is situated on a reserve. Connecting
factors were established by the Supreme Court of Canada in Williams v.
Canada, [1992] 1 S.C.R. 877, to guide courts in their analysis. In Bastien,
supra, the Supreme Court of Canada said that, in conducting a
“connecting factors” analysis, judges must have regard to the purpose of the
exemption, the type of property and the nature of the taxation of the property
(see paragraphs 18, 20, 42 and 43) while keeping in mind that the question
to be determined is whether the property is situated on a reserve.
[20]
In Bastien, supra,
the Supreme Court of Canada indicated that the purpose of section 87 is
not to “remedy the economically disadvantaged position of Indians” by allowing
them to acquire, hold and deal with property in the commercial mainstream on
different terms than their fellow citizens nor to “confer a general economic
benefit upon the Indians” (see pararagraphs 21 and 23). It is, rather, as
stated by La Forest J. in Mitchell v. Peguis Indian Band, [1990]
2 S.C.R. 85, and restated in Bastien, supra “to insulate the
property interests of Indians in their reserve lands from the intrusions and
interference of the larger society so as to ensure that Indians are not
dispossessed of their entitlements”.
[21]
In Bastien, supra,
Cromwell J. for the majority made two additional comments with regard to the
purposive approach. He said at paragraph 25 that while a “purposive
analysis must inform the court’s approach to weighing the connecting factors .
. . it must be acknowledged that there may not always be a complete
correspondence between the meaning of the text and its broad, underlying
purpose”.
[22]
The second comment
concerns the expression “Indian qua Indian”. At paragraphs 26, 27 and 28,
Cromwell J. stated that the focus should be on whether there is a connection
between the property and the reserve such that it may be said that the property
is situated there for the purposes of the Indian Act, and not on whether
the “property is integral to the life of the reserve or to the preservation of
the traditional way of life”. He noted:
. .
. While the relationship between the property and life on the reserve may in
some cases be a factor tending to strengthen or weaken the connection between
the property and the reserve, the availability of the exemption does not depend
on whether the property is integral to the life of the reserve or to the
preservation of the traditional Indian way of life.
[23]
In Googoo v. The
Queen, 2008 TCC 589, Associate Chief Justice Rossiter, relying on The
Queen v. Monias, 2001 FCA 239, stated the following, at paragraph 91, concerning
a specific case of employment income:
Paragraph
87(1)(b)’s purpose is to protect from erosion by taxation the property,
such as employment income, of individual Indians which they acquire, hold and
use on the reserve. Its purpose is to achieve the
preservation of property held by [Indians] qua Indians on reserves so
that their traditional way of life would not be jeopardized. It is the situs of
its acquisition that is particularly important.
[24]
In the present, the
property said to be exempt under section 87 of the Indian Act is
the appellants’ employment income; the nature of the tax is a tax on income.
The Federal Court of Appeal has said in Canada v. Folster, [1997]),
3 F.C. 269, Shilling v. M.N.R., 2001 FCA 178, and Bell v. Canada,
[2000] 3 C.N.L.R. 32, (2000), 256 N.R. 147, that the following factors are
potentially relevant in determining whether an Indian’s employment income is
situated on a reserve:
–
the location or
residence of the employer;
–
the nature, location
and surrounding circumstances of the work performed by the employee;
–
the nature of any
benefit that accrued to the reserve from that work; and
–
the residence of the
employee.
[25]
The weight to be
assigned to any of these factors will vary according to the facts of each
case.
Traditional way of life
[26]
The appellants rely on
the decision rendered by the Federal Court of Appeal in Canada v. Robertson, 2012 FCA 94, in support of an argument to the
effect that the traditional way of life should be given significant weight in
these appeals. In Robertson, the Federal Court of Appeal interpreted Cromwell
J.’s comment that the protection of section 87 is not limited to income
earned in the course of activities that could be characterized as “integral to
the life of the reserve or to the preservation of the traditional Indian way of
life” as meaning that section 87 should not be interpreted in a manner
that limits the activities from which Indians may earn tax‑exempt income
to the past (see paragraphs 60‑62). The Court further said that an
activity that gives rise to income and that is important to the economic,
social and cultural fabric of the reserve “is relevant to determining whether a
sufficiently close connection exists between the Reserve and the source of the Appellants’
income”.
[27]
In Robertson, the
Court found a sufficiently close connection to exist between the reserve and fishing,
the source of the taxpayers’ business income, by attaching significant weight
to the long history of commercial fishing in lakes near the reserve by the
First Nation and their ancestors and to the continuing importance of that
fishing to the economic, social, and cultural fabric of the reserve.
[28]
I believe that the
facts in Robertson can be distinguished from the facts in these appeals.
The Federal Court of Appeal, in addition to giving significant weight to the
long history of commercial fishing by the First Nation and their ancestors,
also considered, among other things, the fact that many of the activities related
to the catching of fish were located on-reserve and that the activities carried
on off‑reserve were nonetheless engaged in near the reserve. In addition,
all the business dealings of the taxpayers were with an on‑reserve
cooperative, which was a critical institution in the life of the reserve. It was
this latter factor that anchored the taxpayers’ business income to the reserve
(see paragraph 86).
[29]
In our fact situation, the
SHC, unlike the cooperative in Robertson, is not situated on a reserve
nor was most of the work performed by the appellants done on a reserve. I do
not believe that the evidence of an elder setting forth his views that no
boundaries exist to delimit his “home” is sufficient to support a finding that
the work was performed on a reserve. I have no doubt, though, having regard to
the nature of the appellants' employment, that their difficult past and their
life experience may, in certain circumstances, have allowed them to better
understand their clients and help them deal with those clients' problems. I do
not, however, believe this to be a sufficient basis for concluding that the
appellants’
employment income was situated on a reserve.
Nature of appellants’ employment
[30]
The appellant Norma
Petahtegoose worked at the SHC as administrative support to the medical staff.
She was basically a receptionist. She explained that because of her background
and life experience she was able to better understand SHC’s clients’ problems
and steer them in a direction that might have been appropriate for them.
However, the evidence also discloses that she has no training as a physician or
nurse and is not a traditional healer. In addition, most of her work was performed
on SHC’s premises and she was rarely required to work at any other place.
[31]
The appellant Julie
Ozawagosh, on the other hand, became the traditional coordinator for SHC in 2000
and remained in that position until her retirement. In that capacity, she
arranged traditional healer and alternative health therapy services and
coordinated a variety of cultural events, ceremonies and workshops. She also
accompanied a traditional healer and volunteered to harvest traditional
medicines on different reserves and off-reserve for about five hours a week
from April to October, which she said represented 25% of her time, except in
2005. She acquired the knowledge to do this work through the elders and through
conferences and spiritual gatherings.
[32]
In Shilling, supra,
the Federal Court of Appeal held that the fact that the employment at issue
involved providing social services that consisted in the delivery of programs
to assist Native people off‑reserve in large part through reconnecting
them with their culture and traditions was no reason per se, for conferring
preferred tax treatment under section 87 (see paragraphs 49-52). This
was, according to the Federal Court of Appeal, in stark contrast to the
situation in Folster, supra, where the hospital patients to whom
the appellant provided services mostly lived on‑reserve. The Federal
Court of Appeal wrote at paragraph 52 of Shilling:
[52]
In finding that the nature of the respondent's duties are [sic] not a
connecting factor to a reserve, we do not overlook the fact that the services
provided are social services to Native people as opposed to employment in a
for-profit enterprise. However, many not-for-profit social service
organizations exist in Canadian cities. Employees of such organizations are not
exempt from income tax. Given the limited purpose of paragraph 87(1)(b) of
the Indian Act, the fact that the employment at issue involves providing
social services to off-reserve Native people, is no reason for conferring
preferred tax treatment under that provision.
[33]
I agree with the respondent’s
counsel when she argues that, as laudable as the work of the appellants may have
been, the provision of non‑profit social services to Indians will not connect
their employment income to a reserve as a physical place. That argument is
particularly well-founded in the case of the appellant Norma Petahtegoose.
[34]
As to the appellant
Julie Ozawagosh, the nature of the work she performed could be linked to Indian
traditions and culture. The services she rendered to on-and off-reserve clients
at SHC were aimed at addressing issues by drawing on those traditions and that
culture. In its recent decision in Kelly v. Canada, 2013 FCA 171,
the Federal Court of Appeal considered that Mr. Kelly had “'unique
qualifications, skills and experience' in the area of 'traditional strategic
planning and traditional governance'”. He provided services aimed at addressing
“in a holistic manner the social, cultural, economic and political spheres and
issues of traditional life on the reserves”. Although the Court did not specify
what weight was to be assigned to these facts, I should think that they would merit
considerable weight. In the case of the appellant Julie Ozawagosh, the evidence
is not clear as to whether SHC’s clients were Indians living on a reserve. Her
work was performed off-reserve, with the exception of harvesting medicines,
which was done both on- and off‑reserve. This makes it more difficult for
me to locate her employment income on a reserve.
Location of the employer
[35]
Hardly any evidence was
presented regarding the identity, functions and operations of NLS other than a
copy of one of the employment contracts it signed with the appellant Julie
Ozawagosh, which reveals nothing of any particular value in this regard. In
light of Shilling, supra, and Horn v. Canada, 2008 FCA
352, the location of NLS should not be given a great deal of weight. In
addition, the appellant Norma Petahtegoose testified that, from the beginning
of her contract, she believed that she was applying through SHC, and she stated
that she did not seek the position through NLS. In my opinion, the location of
NLS is of no assistance as a connecting factor.
Location of the work performed by the
employee
[36]
SHC is located in Sudbury, Ontario, and is not on a reserve. The appellant Norma Petahtegoose testified that
most of her work duties were carried out on SHC’s premises. As for the
appellant Julie Ozawagosh, her testimony revealed that she spent around five
hours per week from April to October, which she describes as being about 25% of
her time, harvesting medicines on different reserves and off-reserve. There is
no evidence as to what portion of the harvesting was actually done on-reserve.
[37]
In November 2008, the
Atikameksheng Anishnawbek First Nation filed a territorial claim seeking a
declaration and damages with respect to an alleged failure to properly provide
reserve lands in the Greater Sudbury Region in accordance with a treaty. The
claim was eventually dismissed by the Ontario Superior Court of Justice.
[38]
It follows from Folster,
supra, Shilling, supra and Bell, supra, that
the off‑reserve location of the employment is not alone conclusive. In Shilling,
the Federal Court of Appeal said at paragraphs 49 and 50:
[49]
In this case, the respondent's place of employment was in Toronto. This is a
factor that would tend to locate her employment income off-reserve. However,
under the connecting factors analysis, location of employment alone will not be
conclusive. Normally, regard must be had to the nature of the employment as a
whole and the surrounding circumstances to determine what connection, if any,
the off-reserve employment has to a reserve.
[50]
This is what was done in Folster, supra, where, although the employment was
off-reserve, its location adjacent to the reserve, on land to be annexed by the
reserve, and for a hospital whose clientele was primarily reserve Indians, was
sufficient to situate the employment income on a reserve. Indeed, in Bell, supra, Létourneau J.A., at paragraph 36, subsequently stated
that the nature of the employment and the circumstances surrounding it are the
considerations that best indicate whether the personal property in question is
within the commercial mainstream.
[39]
I do not believe that
the surrounding circumstances in this case are sufficient for me to conclude
that the appellants' employment duties were performed on a reserve. Even if I
were to allocate a portion of the appellant Julie Ozawagosh's employment income
to the harvesting of medicines on reserves, the evidence is insufficient to enable
me to make an appropriate determination given that some harvesting was also
done off‑reserve.
Benefit to the reserve
[40]
SHC provided its
services to clients who lived on different reserves and to clients who lived off‑reserve.
The evidence does not disclose where, in relation to a reserve, NLS carried on its
activities, nor does it show what connection the appellants may have had with
NLS in terms of benefit to a reserve.
[41]
The Federal Court of
Appeal in Canada v. Akiwenzie, 2003 FCA 469, clearly indicated
at paragraphs 10 and 11 that, even if employment duties performed were
beneficial to reserves, this still had nothing to do with the preservation of
the personal property of an Indian qua Indian on such reserves.
[42]
My colleagues Hershfield
and Archambault in Dugan v. The Queen, 2011 TCC 269, and Desnomie
v. The Queen, 1998 CanLII 255, subsequently affirmed by the Federal Court
of Appeal, 2000 DTC 6250, have explained that even if an employee’s work may
help to maintain and enhance the quality of life on a reserve for the Indians
living there, that does not necessarily connect the employee’s entitlement to,
or use of, the employment income to that reserve as a physical location. The
erosion of the entitlement of an Indian qua Indian on a reserve has to be
determined by reference to the person whose income is involved and not by
reference to the different reserves that are benefiting directly or indirectly
from the services of that person. Hence, I believe this factor should not be
given much weight.
Residency
[43]
In the cases referred to
above, residency was included as a potentially relevant factor for determining
the location of employment income for the purposes of section 87, although
it is not one that would generally be given much weight (see Folster, supra and
Bell, supra). In Kelly v. Canada, supra, the Federal
Court of Appeal, at paragraph 52, said that the wording of section 87
commands us to ask not whether the owner of the property is situated on a
reserve, but whether the property is situated on a reserve.
[44]
In our fact situation, both
appellants lived on a reserve, but the evidence adduced does not indicate that
the activities related to the appellants’ employment took place on-reserve,
except for the harvesting of medicines by the appellant Julie Ozawagosh,
and this activity was not limited to her own reserve. The appellants'
employment income was not generated by their on-reserve activities and that
makes it difficult to locate their employment income on a reserve.
Conclusion
[45]
Although there are
factors that favour the appellants’ position, I am not convinced that there is
a strong enough nexus between the appellants’ employment income and a reserve
to enable me to conclude that its situs was on a reserve. Their
employment income is therefore not exempt from taxation. The appeals are
dismissed without costs.
Signed this 2nd
day of October 2013.
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