Date: 20010327
Docket: 1999-2985-IT-I
BETWEEN:
JEANNE NAPONSE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Sarchuk J.T.C.C.
[1]
These are appeals by Jeanne Naponse from assessments of tax with
respect to her 1995 and 1996 taxation years. In computing her
income for those years the Appellant excluded the amounts of
$21,504.76 and $24,349.28, respectively,[1] on the basis that they were exempt
from tax pursuant to the provisions of paragraph 87(b) of
the Indian Act[2] and paragraph 81(1)(a) of the Income Tax
Act (the Act).
[2]
The Appellant filed notices of objection and by way of further
reassessments, the Minister of National Revenue (the Minister)
allowed an exclusion of 20% of the Appellant's total salary
and deleted from her 1995 and 1996 incomes the amounts of
$11,683.41 and $12,174.64, respectively. It is the
Appellant's position that the Minister erred in so assessing
and further says that in fact she was entitled to exclude 100% of
her income pursuant to the relevant provisions of the Indian
Act and the Act.
Background Facts
[3]
The Appellant is a status Indian who has been living on the
Whitefish Lake Reserve #6 in Naughton, Ontario since 1971. She
earned a Masters Degree in Higher Education from the Central
Michigan State University and has been employed as a teacher by
the Cambrian College of Applied Arts and Technology (Cambrian
College) in Sudbury for a number of years. Cambrian College as a
community college is a post-secondary institution. It is publicly
funded and is open to all adult students and graduates from
secondary school.
[4]
The Appellant testified that she had been elected as a council
member of the Whitefish Lake Reserve and subsequently served a
term as Chief. During her time in the latter position, she became
involved with what she described as First Nation politics and
became aware of the challenges facing Indian reserves. These
concerns were shared by others and a group of Indian people in
the Sudbury area formed a working committee to deal with native
education issues. The committee approached the President of
Cambrian College with a proposal and as a result in 1986,
Cambrian College established the Wabnode Institute/School of
Anishnaabe Studies (Wabnode Institute). Initially, one specific
program was developed as a two-year pilot project. It was
considered to have been successful and in or about 1991, the
Anishnaabe Affairs Committee was formed. The role of this
committee on behalf of the Board of Governors is to provide
ongoing direction, support and/or advice to Cambrian College with
respect to certain aspects of its mandate.[3] The Board of Governors of Cambrian,
upon the recommendation of the committee, appoints the members of
the committee, and must include at least two individuals from the
Board of Governors.
[5]
It is an accepted fact that Wabnode Institute was and continues
to be a department of Cambrian College. Funding for all programs
and services offered at Cambrian was provided to it by way of an
operating grant from the provincial Ministry of Education and
Training, Colleges and Universities. Additional revenue was
generated for Cambrian College from student enrolment, i.e.
tuition fees. The Appellant observed that Cambrian may apply for
a grant from the Department of Indian Affairs each year but this
grant was not always given.[4] As well funding for support services was
available for "First Nation Indian students" attending
Cambrian College.[5] In so far as Wabnode Institute was concerned, each
year it was necessary for its representative to meet with the
finance department of Cambrian College to discuss and agree on
the budget accounts for it. In the taxation years in issue this
had been the responsibility of the Appellant.
[6]
In 1995 and 1996, Wabnode Institute was offering nine specific
native programs.[6]
The only admission requirement to them was an Ontario Secondary
School Diploma or equivalent or mature status. Students in the
programs are not required to be residents of a reserve nor are
they required to be "Indian" as defined in the
Indian Act. In fact a number of the students the Appellant
taught did not live on reserves. During the taxation years in
issue, the Appellant was a teaching professor for one of the
programs, Native Early Childhood Education (the program).[7] She described it as
consisting of a two-year, five-semester diploma program with a
required field practicum component during which students are
required to do their field training for a period of six weeks.
The majority of the students who took this particular course
completed their placements at a daycare centre on a reserve while
the rest attended daycare centres located off reserve. To
graduate, participants were required to have the skill and
knowledge necessary for employment in licensed childcare settings
and would be entitled to seek employment in any licensed
childcare setting in Ontario.
[7]
The Appellant says that during the taxation years in issue, she
assumed the duties of a field placement supervisor and was the
only teacher responsible for placements in those years. Her
duties included contacting employers or daycare centres to make
arrangements for the students; updating the field placement
manual; grading the students' assignments and on-site visits
with the supervisor and the students to perform evaluations. She
states she was given eight assigned complementary hours per week
for her work in that capacity, but concedes that she had not been
specifically appointed nor was she paid as a "faculty field
placement supervisor" pursuant to her employment contract.[8]
Appellant's Position
[8]
The Appellant referred to a number of cases relating to the
exemption from tax arising out of the interaction of section 87
of the Indian Act and paragraph 81(1)(a) of
the Act but relies principally on Williams v.
M.N.R,[9]
Folster v. Canada,[10] Canada v. Poker,[11] Monias et al v. The Queen[12] and
McNab v. Canada.[13] She says that her circumstances are similar to
those in McNab andPoker. First, she has lived on a
reserve from childhood, continues to do so and is an active
member of that community. While the employment in Poker
was not on the reserve, the nature and purpose of it was closely
connected to the reserve and most of the students were Indian.
She submits that although she was employed off reserve by
Cambrian College, her work was even more closely connected to
reserves than in Poker because the beneficiaries of her
work were the Indian students who were taught at the Wabnode
Institute as well as those Indian organizations that employed
their graduates. The Appellant further submitted that on the
facts, the principle of special circumstances applies because her
employment as well as her employer were directly involved in
benefiting and strengthening Indian reserves.[14]
[9]
The Appellant also contends that the position which she held in
1995 and 1996 was not of a commercial nature in that she was not
competing with other Canadian citizens for business or for the
job itself. She argues that only an Indian familiar with the
traditions and cultures and values of her people could have done
her job. She contends that training individuals to work on
reserves in a manner consistent with their traditions is integral
to the reserves and to Indians as Indians and asserts that the
purpose of the Wabnode Institute was to directly assist reserves
by training individuals to work on reserves.
Analysis
[10] The
Appellant is an Indian as defined in the Indian Act. The
Minister included in her income certain amounts as employment
income for the taxation years 1995 and 1996. The Appellant claims
that this income is exempted from tax pursuant to section 87 of
the Indian Act and subsection 81(1) of the Act
which provides:
87(1) 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,
(a)
the interest of an Indian or a band in reserve lands or
surrendered lands; and
(b)
the personal property of an Indian or a band situated on a
reserve.
87(2) No Indian or band is
subject to taxation in respect of the ownership, occupation,
possession or use of any property mentioned in paragraph
(1)(a) or (b) or is otherwise subject to taxation
in respect of any such property.
81(1) 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;
[11] The sole
issue before the Court is whether the Appellant is entitled to
the claim exemption from income tax in respect of her employment
income as "personal property situated on a
reserve" within the meaning of
paragraph 87(1)(b) of the Indian Act.
[12] In
Williams v. The Queen,[15] Gonthier J. after discussing the nature and
purpose of the exemption from taxation (including specific
references to Mitchell v. Peguis Indian Bank and
Nowegijick v. The Queen[16]) proposed the following approach:
IV - The Proper Test
Because the transaction by which a taxpayer receives unemployment
insurance benefits is not a physical object, the method by which
one might fix its situs is not immediately apparent. In
one sense, the difficulty is that the transaction has no
situs. However, in another sense, the problem is that it
has too many. There is the situs of the debtor, the
situs of the creditor, the situs where the payment
is made, the situs of the employment which created the
qualification for the receipt of income, the situs where
the payment will be used, and no doubt others. The task is then
to identify which of these locations is the relevant one, or
which combination of these factors controls the location of the
transaction.
The appellant suggests that in deciding the situs of the
receipt of income, a court ought to balance all of the relevant
"connecting factors" on a case by case basis. Such an
approach would have the advantage of flexibility, but it would
have to be applied carefully in order to avoid several potential
pitfalls. It is desirable, when construing exemptions from
taxation, to develop criteria which are predictable in their
application, so that the taxpayers involved may plan their
affairs appropriately. This is also important as the same
criteria govern an exemption from seizure.
Furthermore, it would be dangerous to balance connecting factors
in an abstract manner, divorced from the purpose of the exemption
under the Indian Act. A connecting factor is only relevant
in so much as it identifies the location of the property in
question for the purposes of the Indian Act. In particular
categories of cases, therefore, one connecting factor may have
much more weight than another. It would be easy in balancing
connecting factors on a case by case basis to lose sight of
this.
However, an overly rigid test which identified one or two factors
as having controlling force has its own potential pitfalls. Such
a test would be open to manipulation and abuse, and in focusing
on too few factors could miss the purposes of the exemption in
the Indian Act as easily as a test which indiscriminately
focuses on too many.
The approach which best reflects these concerns is one which
analyzes the matter in terms of categories of property and types
of taxation. For instance, connecting factors may have different
relevance with regard to unemployment insurance benefits than in
respect of employment income, or pension benefits. 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.
This approach preserves the flexibility of the case by case
approach, but within a framework which properly identifies the
weight which is to be placed on various connecting factors. Of
course, the weight to be given various connecting factors cannot
be determined precisely. However, this approach has the advantage
that it preserves the ability to deal appropriately with future
cases which present considerations not previously apparent.
[13] The
property in issue in this appeal is employment income. The
potentially relevant connecting factors are, in no particular
order, the residence of the Appellant, the residence of the
Appellant's employer, the location of the work performed, the
nature of the services performed and the circumstances in which
they were performed.
[14] The
Appellant contended that no substantial distinction exists
between her case and those of Folster, Poker and
McNab. In those cases, the Courts concluded that the
circumstances surrounding the employment and the income therefrom
overwhelmingly pointed to the reserve. That is not the case here.
The one point of similarity is the fact that each of these
Appellants at all relevant times resided on reserve. On the other
hand, in Poker and McNab, the situs of both
the employee and employer was on reserve while in Folster,
the employer was physically situated adjacent to the reserve. In
that case, the Court determined that to attribute great
significance to that fact would obscure the true nature of the
employment income in that case. Insofar as the Appellant is
concerned, her employer was not resident in any sense of the word
on the reserve. The Appellant also maintained that a
"significant portion of my work actually took place on
reserves". The evidence, however, indicates otherwise. I
particularly note that when teaching responsibilities were
assigned for each semester, every faculty member at Cambrian
College was required to sign a Standard Workload Form which
prescribes the total workload for that member.[17] The Appellant's three
Workload Forms for 1995 disclose that she taught four courses
during the first semester, three during the second and five
during the third. Only one Workload Form was available for the
1996 taxation year. It reflected the January–February
semester during which the Appellant taught four courses. With one
exception all of the courses were taught at the Cambrian College,
Wabnode Institute Department, Sudbury campus. The single
exception (and then only to a limited extent) was the field
practicum seminar which the Appellant described as designed to
prepare students to know what to expect during their field
placements. Furthermore, a substantial portion of her work on
reserve related to preparation of material for her regular
classes which she did at her residence. It cannot be seriously
argued that this was a duty which she was required to perform on
a reserve by virtue of her contract.
[15] I am also
unable to accept the Appellant's assertion that her
employment was not in the commercial mainstream. In the taxation
years in issue and for a number of years prior to that, Cambrian
College was her employer. At all relevant times, she was a member
of the Ontario Public Service Employees' Union, Local 655,
which is a general teacher's (faculty) Local and is not
specific to Aboriginal people. As a member of this Local she
benefited from all of the collective bargaining agreements
including the provisions regarding workload distribution and
salary. The Appellant does not suggest nor is there any support
in the guidelines for funding programs for Aboriginal students or
in the Anishnaabe Affairs Committee mandate[18] to even remotely suggest that
teaching positions at the Wabnode Institute were restricted in
any way.
[16] The
Appellant also argued that training individuals to work on
reserves in a manner consistent with Indian culture, traditions
and values is integral to the reserves and to Indians as Indians.
She says that since the purpose of Wabnode Institute was to
directly assist reserves by training individuals to work there,
it is necessary to consider the fact that her employment was
aimed at providing benefits to Indians on reserves. In the same
vein, the Appellant argued that although Cambrian College was not
on the reserve, the fault for that circumstance lies with the
federal and provincial governments and that in order to minimize
the failure of the adequate provision of educational services by
the respective governments, her reserve as well as several other
reserves use what resources were available to establish programs
for the sole purpose of benefiting the reserves in question.
Several observations with respect to this submission are
warranted. First, there is no evidence that the beneficiaries of
her employment were exclusively Indian. Second, many of the
students enrolled in the programs were not resident on a reserve.
Third, the training equipped them for employment in the
commercial mainstream in any licensed childcare setting in
Ontario and was not limited to reserves.
[17] A similar
proposition was considered by Archambault J. in Desnomie v.
The Queen[19] who observed that:
The fact that the clientele of the employer was made up of
native students coming from reserves should not be given much
weight. Those native students were living off the reserve for at
least eight to ten months while they benefited from the services
provided to them by the MIEA. It should also be stressed that it
is Mr. Desnomie's personal property that has to be
"situated on a reserve" and not the personal property
of native students. Expressed in a slightly different manner, 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 this person.
The necessity argument raised in Desnomie v. The Queen,
supra, was also dealt with by the Federal Court of Appeal[20] where Rothstein
J.A. observed:
The necessity argument in effect says that the employer,
employee and place of employment would be on a reserve if that
were possible and therefore the employment income should be
treated as if it were located on a reserve. The difficulty with
this argument is that in the circumstances of this case, it does
not deal with the issue at hand, namely, whether the
appellant's employment income is his property on a reserve.
This is a locational, or situs determination, based upon
the location of the relevant transactions. The implication of the
appellant's argument is that as long as an Indian is
performing work for an Indian employer and for Indians from
reserves, his employment income should be tax exempt,
irrespective of where he, his employer, or the place of the
employment is located, or where he is paid. There is no doubt the
nature of the appellant's work is related to assisting
reserve Indians when they move off the reserve. There is also no
doubt that his employer is an Indian organization. The problem is
that these considerations do not connect the appellant's
employment income to any particular reserve. Even if it could be
argued that the section 87 exemption applies when the property of
an Indian is located on a reserve other than his own, in this
case the nature of the employer and the employment alone do not
identify a specific reserve to which the appellant's property
can be connected. Therefore, these considerations do not help to
locate his employment income.
The ratio in Desnomie applies equally to the present
appeals.
[18] I have
therefore concluded that the imposition of tax by the Minister in
this particular case does not amount to the erosion of the
Appellant's entitlement of the Indian qua Indian on a
reserve. Accordingly, the appeals are dismissed.
Signed at Ottawa, Canada, this 27th day of March, 2001.
"A.A. Sarchuk"
J.T.C.C.
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