Amos v. The Queen, docket 96-2503-IT-G

Date: 19980622

Dockets: 96-2506-IT-G; 96-2503-IT-G

BETWEEN:

MARGARET AMOS, SOLOMAN MARK,

Appellants,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Bell, J.T.C.C.

ISSUE

[1] The issue is whether employment income received by the Appellant in 1991, 1992 and 1993 is exempt from taxation pursuant to paragraph 81(1)(a) of the Income Tax Act ("Act") and section 87 of the Indian Act. The term "Appellant" in these Reasons shall refer to each of Margaret Amos and Soloman Mark.

FACTS

[2] The parties filed an AGREED STATEMENT OF FACTS for each appeal. No other evidence was adduced.

[3] Most of the material set forth in the Agreed Statement of Facts with respect to each Appellant is reproduced below. Supporting documents, although referred to in the Agreed Statement of Facts are not referred to in these Reasons.

FACTS COMMON TO BOTH APPELLANTS

The Appellant is an Indian within the meaning of the Indian Act and was at all material times resident on the Ahaminaquus Indian Reserve No. 12 (the "Reserve") and a member of the Mowachaht Indian Band, formerly known as the Nootka Band (the "Band").

The Reserve is a reserve within the meaning of the Indian Act, set apart for the benefit of the Band.

In or around 1959 the Tahsis Company approached the Indian Agent for British Columbia to discuss the possibility of buying or leasing the Reserve in connection with the construction of a proposed pulp mill.

The Band Council was not in favour of selling the reserve but was prepared to lease it. The terms of a proposed lease were discussed with the Band and various Indian agents prior to the surrender for lease of the Reserve by the Band. The Band Council requested that any lease would provide job opportunities for Band members at the mill. The Band, as a result of negotiations, was aware prior to the surrender for leasing of the Reserve that any lease would provide employment opportunities for Band members.

In March of 1963 the Band surrendered the entire 39 acres of Reserve land to the Minister of Indian and Northern Affairs for purposes of leasing it to the Tahsis Company Ltd., later known as Canadian Pacific Forest Products Ltd., and now known as Avenor Inc. (the "Company"). ...

... The Company was one of British Columbia's largest producers of logs, lumber, pulp chips and shingles.

In May of 1963 the Company signed a long term lease (the "1963 Lease") with the Minister of Indian and Northern Affairs for 28.8 acres located on the reserve until 2038 for a yearly fee to be negotiated every five years ...

At the time of the surrender for leasing, most of the Band members resided at Friendly Cove on Nootka Island, but then moved onto a portion of the Reserve not leased by the Company.

At all material times, the Company operated a pulp mill in Gold River, British Columbia (the "Mill") which produced pulp and other products for sale on the world market.

The 1963 Lease was replaced by a Lease dated July 29, 1965 (the "1965 Lease") in respect of the same Reserve land until 2062. ...

In executing the Lease and its modifications, the Company agreed "to give members of the Nootka Band of Indians preference in employment in its operations on the premises to the extent that such members are suitable and available for such employment".

The Company did not post job listings on the Appellant's reserve.

The Mill was physically located partially on the leased Reserve land and partially on non-reserve land owned in fee simple by the Company.

The portion of the Mill situated on the leased reserve land was 28.88 acres, and during the years under appeal, the Company used part of this leased land for the following purposes:

(a) to contain a portion of the hog fuel pile (a fuel source used for the Mill's boilers), as well as to contain portions of two woodchip piles, all of which were related to the production of pulp. Some of the Mill's employees (although not the Appellant) would enter onto the leased Reserve lands to pick up or drop off wood chips and hog fuel; and

(b) as a temporary construction camp where workers lived between 1989 and 1994 while employed to build a separate newsprint mill located at another site.

Prior to the years under appeal, the Company used part of this leased land for the following purposes;

(a) to sublet a portion of the leased land to Gulf Oil to house a Petro Canada Bulk Station which serviced the Mill between 1976 and 1988; and

(b) to store ash in an ash settlement pond until the early 1990's.

At all times the leased land contained trees which provided a screen from the highway.

The portion of the Mill site owned by the Company on non-Reserve land was 439.84 acres. During the years under appeal all of the buildings used for the administration of the Mill and all of the buildings used in the pulp production process were located on the non Reserve lands.

The non-Reserve portion of the Mill also contained a reservoir, a marina, deep sea dock, woodchip piles and other components all of which were related to the production of pulp.

At all material times, the Company's head office and Board of Director's meetings were in Montreal, Quebec and not on reserve land.

FACTS RESPECTING APPELLANT AMOS

During the years under appeal, the Company employed the Appellant to perform janitorial duties at the Mill site.

The Company never indicated to the Appellant, and the Appellant does not know whether she was extended any type of preferential treatment when hired by the Company. The Appellant understood that the Company was to give Band members priority when applying for employment at the Mill, according to the Lease.

At all material times the Appellant performed all of her employment duties at various locations throughout the non-Reserve portion of the Mill site.

. The Appellant picked up her pay cheque from the Company at the payroll office located on the non-reserve portion of the Mill.

The Appellant earned and received $31,416.43, $20,988.67 and $6,847.13 of employment income from the Company in her 1991, 1992 and 1993 taxation years, respectively, which amounts she included in income for those years. ...

The Minister of National Revenue assessed the returns as filed.

By Notice of Objection dated October 26, 1995, the Appellant claimed that her employment income was exempt from tax because it was the property of an Indian situated on a reserve and objected to the 1991, 1992 and 1993 assessments.

FACTS RESPECTING APPELLANT MARK

The Company first employed the Appellant in 1970 and then again in 1973 as a labourer performing yard clean up at the Mill site.

The Company never indicated to the Appellant, and the Appellant does not know whether he was extended any type of preferential treatment when hired by the Company The Appellant understood that the Company was to give band members priority when applying for employment at the Mill, according to the Lease.

In 1975, while still employed by the Company, the Appellant started training to be a tugboat operator.

The Appellant operated a tugboat for the Company as an employee during this 1993 and 1994 taxation years. The Appellant used the tugboat to position log booms adjacent to the Mill site.

At all material times the Appellant performed all of his duties for the Company out on the ocean, generally within a few hundred yards of the Mill site, which was not part of any reserve, or on the non-Reserve portion of the Mill site.

The Appellant picked up his pay cheque from the Company at the payroll office located on the non-reserve portion of the Mill.

The Appellant earned and received $48,851.41 and $42,728.00 of employment income from the Company in his 1993 and 1994 taxation years, respectively, which amounts he included in income for those years.

By Notice of Objection dated October 26, 1995, the Appellant claimed that his employment income was exempt from tax because it was the property of an Indian situated on a reserve and objected to the 1993 and 1994 assessments. ...

A copy of the plan of the Reserve and the Company lands was presented to the Court. It showed, at the east side of the 39 acres of Reserve land, a portion of 10 acres which was used as a residential area. The remaining 28.8 acres were used by the Company for the purposes set forth above and the main portion of the Company's Mill was on land to the west of the said 39 acres.

ANALYSIS AND CONCLUSION

[4] Section 87(1)(b) of the Indian Act exempts from taxation the personal property of an Indian or a band situated on a reserve. It reads as follows:

Notwithstanding any other Act of Parliament or any Act of the legislature of a province, but subject to section 83, the following property is exempt from taxation, namely, ...

(b) the personal property of an Indian or a band situated on a reserve

[5] Section 87(2) provides that no Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph 87(1)(b), or is otherwise subject to taxation in respect of any such property.

[6] Section 87(3) provides that no succession duty, inheritance tax or estate duty is payable on the death of any Indian in respect of any property mentioned in section 87(1)(b), et cetera.

[7] The word "reserve" is defined in section 2 of the Indian Act to mean a tract of land, legal title of which is vested in Her Majesty, that has been set apart for the use and benefit of a band and, with certain exceptions, includes designated lands.

[8] The term "designated lands" means a tract of land, or any interest therein, legal title to which remains vested in Her Majesty, and in which the band for whose use and benefit it was set apart as a reserve has, otherwise than absolutely, released or surrendered its rights or interests, whether before or after the coming into force of the definition of "designated land".

[5] Section 81(1)(a) of the Income Tax Act reads as follows:

There shall not be included in computing the income of a taxpayer for a taxation year,

(a) 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;

[6] Appellant's counsel said that there was no dispute as to whether the employment income is "personal property" within the meaning of the Indian Act, or whether the income is owned by the Appellant. She stated that the dispute concerns only whether the "situs" of the employment income is on the Reserve for exemption under section 87(1)(b) of the Indian Act.

[7] In Mitchell v. Peguis Indian Band, 1992 S.C.R. 85 at 130 Laforest, J., said:

The exemptions from taxation and distraint have historically protected the ability of Indians to benefit from this property in two ways. First, they guard against the possibility that one branch of government, through the imposition of taxes, could erode the full measure of the benefits given by that branch of government entrusted with the supervision of Indian affairs.

He continues, at 131, after referring to a Royal Proclamation of 1763, saying:

From that time on, the Crown has always acknowledged that it is honour-bound to shield Indians from any efforts by non-natives to dispossess Indians of the property which they hold qua Indians, i.e., their land base and the chattels on that land base.

The purpose of the exemption from tax is set forth by the Supreme Court of Canada in Mitchell where at 133, Laforest, J., said:

These provisions are not intended to confer privileges on Indians in respect of any property they may acquire and possess, wherever situated. Rather, their purpose is simply 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.

Linden, J.A. in Folster v. Her Majesty the Queen, 97 DTC 5315 at 5319, in reference to situs, said:

In order to resolve this conundrum, Gonthier, J.[1] crafted a new test based on the foundation of La Forest, J.'s purposive analysis in Mitchell. He recognized that, although there are necessarily many factors which may be of assistance in determining the situs of intangible property such as unemployment insurance or employment income, the relevance of these "connecting factors" must be assessed on the basis of their ability to further the purpose of section 87. Further, the weight to be given to each factor may change from case to case.

Linden, J.A. continues at 5320, using the words of Gonthier, J., namely:

The first step is to identify the various connecting factors which are potentially relevant. These factors should then be analyzed to determine what weight they should be given in identifying the location of the property, in light of three considerations: (1) the purpose of the exemption under the Indian Act; (2) the type of property in question; and (3) the nature of the taxation of that property. The question with regard to each connecting factor is therefore what weight should be given that factor in answering the question whether to tax that form of property in that manner would amount to the erosion of the entitlement of the Indian qua Indian on a reserve.

[8] In Williams, the issue was the determination of situs of unemployment income. The connecting factors set out therein were clarified in Folster by Linden, J. so far as employment income was concerned. In Folster, Linden, J. found that the employment of a nurse who resided on a reserve and worked in a hospital off the reserve was intimately connected with the reserve. He said, at page 5324:

On the facts of this case, the residence of the taxpayer, the nature of the service performed, the history of the institution in question, and the circumstances surrounding the employment all received great weight in the purposive interpretation of section 87. On the contrary, the residence of the employer, even if that could be determined, and the metes and bounds location where the duties were performed, although certainly relevant, were granted less weight than in other cases.

[9] Analyzing the connecting factors set out in Folster, it is apparent that the Mill's operation was purely a commercial endeavour conducted by the Company wholly unrelated to any Reserve activity. Further, the Appellant s ' employment with the Company is unrelated to residence and the Mill's occupancy of the Reserve lands. Although a portion of the Mill where the Appellant worked was situated on the leased Reserve land, the occupation of that land was ancillary to the Mill's operation. The provision in the lease to give members of the Nootka Band of Indians preference in employment in the operations on the premises to the extent that such members were suitable and available for such employment does not create a discernible nexus between the employment income and the occupancy of Reserve lands by the Appellant.

[10] In light of the considerations to be applied to these findings, including, the purpose of the exemption under theIndian Act, it is apparent that the type of property in question, is not meant to be protected from the taxation in question. The taxation in question does not dispossess the Appellant of the property held qua Indian on a Reserve. The situs of employment income is off the Reserve. For the purpose of section 81 of the Income Tax Act and Section 87 of theIndian Act, the Appellant's employment income is not personal property situated on a Reserve. Accordingly, the appeals are dismissed.

Signed at Ottawa, Ontario this 22nd day of June, 1998.

"R.D. Bell"

J.T.C.C.

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