REASONS
FOR JUDGMENT
V.A. Miller J.
[1]
Each of the Appellants was employed by Native
Leasing Services (“NLS”) and their appeals were heard consecutively. The
question in each appeal is whether the employment income earned by the
Appellants from NLS during the relevant period was the personal property of an
Indian situated on a reserve within the meaning of section 87 of the Indian
Act and therefore exempt from tax under the Income Tax Act.
[2]
The evidence with respect to NLS was given by
way of a Statement of Agreed Facts and I have summarized it below. There was
also a Statement of Agreed Facts for each of the Appellants and I have included
those facts with the evidence given in each appeal.
[3]
Throughout this decision when I use the term
“Aboriginal”, it includes Indian (both status and non-status), Métis and Inuit
peoples.
The Appellants
[4]
I will briefly describe each of the Appellants
in this section of my decision and will discuss the details of their
circumstances as they relate to the “connecting factors” in the Analysis
section of the decision.
Art Zoccole
[5]
Art Zoccole’s appeal related to his 2010
taxation year. His income tax liability was assessed on May 24, 2011 to include
in his income the amount of $64,911, his employment income from NLS.
[6]
Zoccole is a member of Lac de Mille Lac First
Nation Reserve. In 2010 he lived in Toronto and worked as the Executive
Director of 2-Spirited People of the 1st Nations (“2-Spirited”) in Toronto.
[7]
Zoccole has been employed by NLS since 2000.
According to his contract of employment with NLS, he was placed as the
Executive Director with 2-Spirited on April 1, 2003. His job description was
included as a schedule to his contract of employment.
Laura Baldwin
[8]
Laura Baldwin is a member of the White Fish
River First Nation, Birch Island, Ontario.
[9]
Her appeal related to her 2010 taxation year.
Her tax liability was assessed and confirmed on the basis that her income of
$22,788 from NLS was taxable.
[10]
During 2010, Baldwin lived in Toronto. She
provided her services as a tenant relations worker/payroll clerk through NLS to
Nishnawbe Homes Incorporated (“Nishnawbe Homes”) at its building located at 244 Church Street in downtown Toronto.
Virginia
Forsythe
[11]
Virginia Forsythe is a status Indian and is a
member of the Wahgoshig First Nation Reserve which is near Matheson, Ontario. In 2010, she lived in Cochrane, Ontario.
[12]
Forsythe was employed by NLS since November 4,
1999 to perform the duties of an HIV/AIDS Coordinator with the Ontario Métis
Aboriginal Association.
[13]
On April 1 2005, NLS signed a Placement
Agreement with the Ontario Aboriginal HIV/AIDS Strategy (“OAHAS”) to provide it
with employees for various positions including that of an HIV/AIDS Coordinator.
Ms. Forsythe held that position with OAHAS in 2010 and she worked in its office
located in Cochrane, Ontario.
[14]
She was assessed by notice dated June 16, 2011
to include the amount of $54,275, her earnings from NLS, in her income for
2010.
Carrie Martin
[15]
Carrie Martin is a status Indian and a member of
Listuguj Mi’gmaq Government Indian Band. In 2010, she lived in LaSalle, Québec.
LaSalle is a borough of the City of Montréal.
[16]
In 2010, she earned $41,519.69 from her
employment with NLS.
[17]
Through her employment with NLS in 2010, Martin
provided various services to the Native Women’s Shelter of Montreal (“NWSM”).
NLS has had a placement agreement with NWSM since May 8, 1992 whereby it would
provide NWSM with employees for a number of positions.
[18]
During the period, Martin had a series of employment
contracts with NLS. In 2010, she performed the duties of Harm Reduction
Coordinator and Aboriginal Healing Foundation Evaluation Coordinator for NWSM.
Diane Sheridan
[19]
Diane Sheridan is a status Indian and is a
member of the Hiawatha First Nation. Her appeal relates to her 2009 taxation
year in which she earned $16,275 from her employment with NLS. In 2009, she was
employed by NLS for the period February 23 to July 10 to perform the duties of
a Healthy Babies Healthy Children’s Program worker. She was placed by NLS to
perform her duties through the Barrie Native Friendship Centre (“Friendship
Centre”) which was located in Barrie, Ontario.
[20]
In 2009, she had a residence on the Hiawatha
First Nation Reserve. However, she lived in a basement apartment in Barrie from Monday to Friday and travelled to her home on the Hiawatha First Nation
Reserve on Friday after work. She returned to Barrie on Sunday or Monday
morning depending on the weather. Sheridan insisted that her main residence was
on the Hiawatha First Nation Reserve but, in spite of this, she used the
address of the Friendship Centre as her mailing address. She had an office at
the Barrie Friendship Centre.
The Employer – NLS
[21]
Roger Obonsawin is a status Indian and a member
of the Odanak First Nation which has its reserve in Odanak, Quebec. Although he
is not a member of the Six Nations First Nation, he established a residence on
the Six Nations Reserve. According to the Statement of Agreed Facts, one of his
reasons for establishing this residence was the “tax litigation”.
[22]
Obonsawin operates two businesses, NLS and O.I.
Employee Leasing Inc. (“OIEL”). Both businesses provide organizations with a
variety of administration services. Both businesses are for-profit entities.
NLS is carried on by Obonsawin as a sole proprietorship and OIEL is
incorporated with Obonsawin as the President and sole shareholder. These
businesses offer the same services but to different types of organizations. NLS
provides employment placement services to not-for-profit Aboriginal organizations,
while OIEL provides services to for-profit businesses that may have Aboriginal
or non-Aboriginal people in their programs.
[23]
NLS offers organizations a variety of support
services including payroll services, human resource support, employee leasing/outsourcing,
bookkeeping and staffing.
[24]
NLS refers to its placement of employees in
organizations as ‘leasing’ and the organizations are referred to as ‘placement
organizations’. In most cases, there was a pre-existing employer/employee
relationship between the placement organization and the employee. In order to
change their employer, the employee signed a contract with NLS and provided a
release to the placement organization, their former employer. The NLS concept
of leasing employees is that it leases an employee to a placement organization
and it provides all the administration and human resource support services as
the employer. I will refer to these employees as employees or “leased
employees” to distinguish them from the administrative staff employed by NLS.
[25]
The majority of the placement organizations are
operated by boards of directors. Many of the placement organizations are
Friendship Centres, shelters and health organizations operated for the benefit
of Aboriginals and funded by government. NLS did not have any representatives
on the boards of directors of any of the placement organizations in 2009 and
2010, the period in issue in these appeals. NLS did not determine the
objectives of the placement organizations and did not have first-hand knowledge
of the funding agreements between the placement organizations and the
government funders. NLS was not a party to any contracts to provide the
services which the placement organizations provided. It was only responsible
for the human resources administration of its employees at the placement
organizations.
[26]
The placement organizations are responsible for
delivering their services and for determining their objectives.
[27]
The NLS leased employees report on a day-today
basis to a supervisor agreed on by NLS and the placement organization. The
employees get their instructions and directions with respect to their duties
from this supervisor. They report to the placement organizations and are
supervised by the placement organizations. If there is a problem with an employee,
then the placement organization calls NLS.
[28]
To receive their income, employees fill out a
timesheet which is approved by the onsite supervisor at the placement
organization. A summary of the time sheets is sent to the NLS office a week
prior to the employees’ payday. NLS then prepares invoices which it sends to
the placement organizations. The amount of these invoices includes the
employees’ earnings, NLS’ service fee, CPP, EI and the WCB.
[29]
NLS charged a service fee of 5% (sometimes 6%)
calculated on the cost to the placement organization inclusive of those
charges. This service fee was paid by the placement organization in some
instances or by the employee in those situations where the placement
organization could not afford it. When paid by the placement agency, the
service fee was added to its invoice. If the employee paid the service fee, it
was deducted from their salary.
[30]
NLS has its operating account at the CIBC branch
on the reserve in Hobbema, Alberta. As part of the mechanics of the payroll service,
the placement organization was required to open a CIBC bank account near their
place of business and make payments on its agreement with NLS into that CIBC
RapidTrans account. For 2009 and 2010, any new placement organizations would
have the payments taken from their account by pre-authorized debit.
[31]
The key functions for NLS are conducted at its
office on the Six Nations Reserve. Its administrative staff checked the
timesheets received from the placement organizations; entered the information
into the payroll system; calculated the amounts for vacation pay; and,
deposited the employees’ wages into their accounts electronically.
[32]
NLS paid each of the Appellants’ wages from its
office on the Six Nations Reserve. Each of the Appellants’ wages was deposited
into their bank account which was also located on a reserve. Each of the
Appellants treated the income they received from NLS as being exempt from
taxation.
[33]
From time to time, NLS offered training to the
employees in the form of workshops. Training was usually off-reserve and
purchased from and provided by a non-Aboriginal third party commercial
business. In 2009 and 2010, the total expense for all out-sourced training was
$2,274. However, in 2009 and 2010, NLS staff did provide, at most, three free
training workshops for the leased employees.
[34]
NLS administrative staff compiled a list of
training opportunities which they sent to leased employees. These opportunities
were usually one or two day seminars of a generic nature, addressing some skill
sets within the placement organizations.
[35]
The placement organizations also provided direct
training to the leased employees.
[36]
Only NLS’ administrative staff provided services
on the Six Nations Reserve. The leased employees did not provide services on
the Six Nations Reserve. In 2009 there were 477 NLS leased employees. In 2010
there were 365 NLS leased employees. Almost without exception those employees
were primarily providing their services off-reserve. In 2009, there were 11
administrative staff at the offices of NLS and in 2010, there were 13
administrative staff.
[37]
The only source of revenue for NLS was the
service fees it earned from the placement organizations off reserve.
[38]
While income tax was not the initial reason for
the creation of the employee leasing model, after becoming aware of the
decision in Nowegijick v R, [1983] 1 S.C.R. 29, Obonsawin thought that if
he operated his employee leasing business from a reserve, then the income his
employees earned would be exempt from taxation. This was one of the reasons
NLS was located on a reserve and its key functions and files were conducted on
a reserve.
The Appellants’ Position with respect
to the interpretation of section 87 of the Indian Act
[39]
It was the Appellants’ position that the common
law rule for the situs of a debt which was applied in Nowegijick
remains the authority for the location of employment income in respect of
section 87 of the Indian Act. Counsel for the Appellants argued that the
Supreme Court of Canada in Williams v Canada, [1992] 1 S.C.R. 877 did not
specifically overrule Nowegijick. Rather, in Williams, Gonthier J.
made the following observation at paragraph 32 of the decision:
It may be that the
residence of the debtor remains an important factor, or even the exclusive one.
However, this conclusion cannot be directly drawn from an analysis of how the
conflict of laws deals with such an issue.
[40]
Counsel submitted that Gonthier J. incorrectly
assumed that the rule for the situs of a debt originated with the
conflict of laws. Counsel stated that the rule is part of the common law and it
can be traced back to at least the sixteenth century with its root in the law
of probate. Although the Supreme Court of Canada has repeatedly stated that a
liberal, purposive approach should be adopted when interpreting statutes
dealing with Aboriginal people, this approach should not exclude the
application of other principles. In particular, when interpreting a statutory
provision, it is presumed that the legislature does not intend to change the
existing law or to depart from established common law principles.
[41]
In his written submissions, after analyzing Bastien
Estate v Canada, 2011 SCC 38 and discussing the decision in McDiarmid
Lumber Ltd v God’s Lake First Nation, 2006 SCC 58, counsel for the
Appellant concluded:
1. The Williams
“connecting factors” approach to the determination of the location of property
is not applicable in every case. In particular, if it is possible to determine
the location of the property by applying “traditional common law approaches”, then
it will be unnecessary to invoke the “connecting factors” test.
2. It
follows that the default position to determining where property is situated
pursuant to s. 87 are the “traditional common law approaches”.
3. That
being the case, the onus is on the party that wishes to invoke other factors
to demonstrate why a “traditional common law” approach is inapplicable. In
this particular case, it follows that the Crown bears the onus of demonstrating
why the Common Law Rule is inadequate to the task.
[42]
Counsel for the Appellants concluded that when
the common law rule for the situs of a debt is applied to the facts in
these appeals, the Appellants’ wages are situated on a reserve where their
employer NLS has its offices. In the alternative, if the “connecting factors”
test must be used, then the relevant factors are the location where the debt
for wages is recoverable; the location of payment; and, the place of
contracting. All of these locations are on the Six Nations Reserve as are the
Appellants’ wages.
The Respondent’s position with respect
to the interpretation of section 87 of the Indian Act
[43]
It was the Respondent’s position that the
“connecting factors” test which was established in Williams and
confirmed by the Supreme Court of Canada in Bastien is the test to be
applied in order to attribute a location to property for the purposes of
section 87 of the Indian Act.
The Law
[44]
Paragraph 87(1)(b) of the Indian Act
provides that:
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 Management Act, the following property is exempt from taxation:
…
(b)
the personal property of an Indian or a band situated on a reserve.
[45]
The exemption in the Indian Act is
incorporated into the Income Tax Act by paragraph 81(1)(a) which
reads in part:
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 …
[46]
It was decided in Nowegijick that income
was both personal property and intangible property. The only question to be
decided in these appeals is whether the employment income of each Appellant is
“situated on a reserve”.
[47]
I disagree with the Appellants that the situs
of the debt is the appropriate test to determine this question. I understand
from the decision in Williams that the “residence of the debtor test”
used in Nowegijick to determine whether income was “situated on a
reserve”, no longer applies in the context of section 87 of the Indian Act.
In this regard, in Williams, Gonthier J. stated:
25 The factor
identified in previous cases as being of primary importance to determine the situs
of this kind of property is the residence of the debtor, that is, the person
paying the income.
…
27 The only
justification given in these cases for locating the situs of a debt at
the residence of the debtor is that this is the rule applied in the conflict of
laws. The rationale for this rule in the conflict of laws is that it is at the
residence of the debtor that the debt may normally be enforced.
…
28 …This may be
reasonable for the general purposes of conflicts of laws. However, one must
inquire as to its utility for the purposes underlying the exemption from taxation
in the Indian Act.
…
32 In resolving
this question, it is readily apparent that to simply adopt general conflicts
principles in the present context would be entirely out of keeping with the
scheme and purposes of the Indian Act and Income Tax Act. The
purposes of the conflict of laws have little or nothing in common with the
purposes underlying the Indian Act. It is simply not apparent how the
place where a debt may normally be enforced has any relevance to the question
whether to tax the receipt of the payment of that debt would amount to the
erosion of the entitlements of an Indian qua Indian on a reserve. The
test for situs under the Indian Act must be constructed according
to its purposes, not the purposes of the conflict of laws. Therefore, the position
that the residence of the debtor exclusively determines the situs of
benefits such as those paid in this case must be closely re-examined in light
of the purposes of the Indian Act. It may be that the residence of
the debtor remains an important factor, or even the exclusive one. However,
this conclusion cannot be directly drawn from an analysis of how the conflict
of laws deals with such an issue. (emphasis added)
[48]
It is of little consequence whether the rule for
the “situs of a debt” derives historically from the common law or from
the conflict of law. The Supreme Court of Canada has instructed that in
determining whether property is “situated on a reserve”, one must have regard
to the purpose of the Indian Act and the Income Tax Act.
[49]
In identifying that the analysis of “connecting
factors” was the appropriate test to determine whether income was “situated on
a reserve” for the purposes of section 87, Gonthier J. did not limit the use of
the test to unemployment insurance benefits. Rather, he envisioned that the
“connecting factors test” would apply to any type of income. This
interpretation was affirmed by the Supreme Court of Canada in Bastien
when it stated that the “connecting factors test” applied to determine the
location of intangible personal property; that is, the test applies to all
types of income. In Bastien, Cromwell J. explained:
2…One determines the
location of intangible personal property such as the interest income in issue
in this case by conducting a two-step analysis. First, one identifies
potentially relevant factors tending to connect the property to a location and
then determines what weight they should be given in identifying the location of
the property in light of three considerations: the purpose of the exemption
from taxation, the type of property and the nature of the taxation of that
property.
…
16 Where, because of
its nature or the type of exemption in question, the location of property is
not objectively easy to determine, courts must apply the connecting factors
approach set out in Williams v. R., [1992] 1 S.C.R. 877 (SCC) , in order
to attribute a location to the property. While this search for location may
seem at times to be more the stuff of metaphysics than of law, the attribution
of location is what the Indian Act provisions require. The difficulty of
doing so means that it is not generally possible to apply a simple, standard
test to determine the location of intangible property.
[50]
In Williams and again affirmed in Bastien,
the court cautioned against having a single criterion test or a test which
contained only one or two factors because the test would be open to
manipulation and abuse.
[51]
The Appellants position is not novel. This is
not the first time this argument has been made in an appeal where NLS was the
employer. As an example see Horn et al v The Queen, 2008 FCA 352; Hester
v The Queen, 2010 TCC 647; and Baptiste v The Queen, 2011 TCC 295.
In each case, as here, the argument was found to have no merit. In its recent
decision in The Estate of Charles Pilfold v The Queen, 2014 FCA 97, the
Federal Court of Appeal affirmed that the search for the situs of income
for the purposes of section 87 “requires a complete consideration of all facts
relating to the income which must include but cannot be limited to the formal structure
through which the income is received”.
[52]
There is no merit to the Appellants’ argument
respecting the test applicable to the interpretation of section 87 of the Indian
Act.
[53]
According to Bastien, the first step in
determining whether the Appellants’ income is situated on a reserve is to
identify potentially relevant factors which tend to connect the income to a
location. The second step is to weigh each factor in light of the purpose of
the exemption from taxation, the type of property, and the nature of the
taxation.
The
“connecting factors”
[54]
In Desnomie v R, [1998] 4 CTC 2207 (TCC),
Archambault J. considered the following “connecting factors” to analyze whether
employment income was “situated on a reserve”:
1. the residence of the employer;
2. the residence of the employee;
3. where the employee was paid;
4. where the work was performed; and
5. the nature of the services performed or the special circumstances in
which they were performed.
Justice
Archambault’s decision was affirmed by the Federal Court of Appeal ([2000] 3
CTC 6) and leave to appeal to the Supreme Court of Canada (265 NR 398) was
denied. It is my view that these factors continue to be relevant in a section
87 analysis with respect to employment income.
The type of
property
[55]
Each of the Appellants received wages in
exchange for the services they provided. The property at issue in these appeals
is employment income.
The nature of
the taxation
[56]
Employment income is taxed pursuant to
subsection 5(1) of the Income Tax Act. It is taxable when it is
received.
The purpose of
the exemption
[57]
The purpose of the exemption is to preserve the
entitlements of Indians to their reserve lands and to ensure that the use of
their property on their reserve lands is not eroded by the ability of
governments to tax: Williams at paragraph 16 and affirmed in Bastien
at paragraph 23. The Supreme Court of Canada and the Federal Court of Appeal
have informed us that the following principles are important and should be
remembered in any analysis of section 87.
1.
The words “situated on a reserve” should be
interpreted consistently throughout the Indian Act to mean “within the
boundaries of the reserve”: Union of New Brunswick Indians v New Brunswick (Minister of Finance), [1998] S.C.R. 1161.
2.
Both Gonthier J. in Williams and LaForest
J. in Mitchell v Sandy Bay Indian Band, [1990] 2 S.C.R. 85 cautioned that
the purpose is not to confer a general economic benefit upon Indians by
ensuring that they can acquire, hold and deal with property in the commercial
mainstream on different terms than their fellow citizens.
3.
The availability of the exemption does not
depend on whether the property is integral to the way of life on the reserve or
that it benefits the traditional Indian way of life.
4.
The purpose of the requirement in section 87 is
to “determine whether the Indian holds the property in question as part of the
entitlement of an Indian qua Indian on the reserve”: Williams at
paragraph 19.
5.
The question is whether the property is situated
on a reserve not whether the owner of the property is situated on a reserve: Kelly
v Canada, 2013 FCA 171 at paragraph 52.
6.
It is important not to give so much weight to
the ‘commercial mainstream’ factor that it “undercuts the purposes of section
87”: Kelly at paragraph 64.
Analysis
[58]
I will address the factors “Location of
employer”, the “Location where the Appellant’s were paid”, and “Residence of
the Appellant” globally as the facts pertaining to these factors are the same
for all Appellants except Diane Sheridan who had a residence on a reserve. I
will also include an analysis of the facts with respect to Sheridan’s residence
in the section I have labelled “Residence of the Appellant”. Then, I will
address the other connecting factors for each Appellant separately as the
nature of their employment and the services they delivered differed for each
Appellant.
Location of
employer
[59]
According to Williams, the location of
the employer is a factor that should be analyzed in the connecting factors
test. However, there should be little weight given to this factor unless there
is evidence to show the scope of the employer’s activities on the reserve, or
some benefit flowing to a reserve from the employer’s presence: The Queen v
Monias, 2001 FCA 239 at paragraph 50.
[60]
NLS located its office on the Six Nations
Reserve. The key functions of its employee leasing operation – human resources
administration, payroll and benefits administration, invoicing and accounting,
general administrative support – are conducted from this location. All NLS
files including staff and financial records are kept on the reserve.
[61]
The placement agreements with the placement
organizations and the contracts of employment with the Appellants were signed
on the Six Nations Reserve.
[62]
More specific to the leased employees, NLS
provided the following services:
a)
If a placement organization accepted NLS’s
suggestion and established a performance evaluation system, then the
evaluations were done by the supervisor at the placement organization or by
NLS;
b) If there was a problem with an employee, then the agreement between
the placement organization and NLS required the placement organization to
contact NLS who attempted to resolve the problem. If the problem could not be
resolved, then it was NLS who terminated the employee’s employment.
c)
NLS offered optional benefit packages, training
and networking to the leased employees.
[63]
Although NLS conducted its key activities on the
Six Nations Reserve, there was no evidence that a benefit flowed to the reserve
from its activities. The only employees which NLS had at its office on the Six
Nations Reserve were its administrative staff. In 2009 it had 11 administrative
staff and in 2010 it had 13 administrative staff. There was no evidence that
any of these staff members lived on a reserve or that they were Indian or that
their employment with NLS benefited a reserve.
[64]
NLS’s only source of revenue was the fees from
providing the employees to the placement organizations. There was no evidence
with respect to its earnings or its profit in 2009 and 2010. There was no
evidence that NLS’s presence on the Six Nations Reserve benefited the reserve.
There was no evidence that NLS made payments to Six Nations Reserve. Its
operations could have been conducted from any place. There was no evidence to
demonstrate that NLS was actually ‘connected’ to the reserve beyond having its
office there.
[65]
Although its administrative staff deposited the
Appellants’ wages in their bank accounts on a reserve from the Six Nations
Reserve, NLS “did little more than act as a conduit” between the placement
organizations and the Appellants: McIvor v The Queen, 2009 TCC 469 at
paragraph 85. I have given little weight to the fact that NLS had its bank
account on-reserve. In my view this was a contrivance to link the transfer of
the Appellants’ wages from the placement organizations to a reserve.
[66]
In conclusion, there is a slight connection in
respect of the location of the employer but I ascribe very little weight to it.
NLS’s office on the Six Nations Reserve was really a location of convenience.
This does not situate the Appellants’ employment income on a reserve: Monias
at paragraph 50.
Location where
the Appellants were paid
[67]
Each Appellant was paid by having her/his wages
deposited into her/his bank account on a reserve. There was no reason given by
any Appellant for having a bank account on a reserve and I have inferred from
Exhibit A-7, tab 8 that it was a requirement of their employment with NLS. In
my view this was an attempt by the Appellants and NLS to manipulate the test
for locating the situs of the employment income. I have attached no
weight to this factor.
Residence of
the Appellants
[68]
The residence of an individual may be a relevant
factor connecting employment income to a reserve. It can indicate whether the
income was acquired or used on a reserve: Monias at paragraph 20. However,
the Appellants off-reserve residence may locate their employment income
off-reserve as well.
[69]
The decision in Dubé v R, 2011 SCC 39
informs us that although this factor may be potentially relevant, it should be
given little weight. The objective is to find a location for the Appellants’
employment income not where the Appellants were located.
[70]
Each of the Appellants, except Diane Sheridan,
lived off-reserve. For those Appellants whose residence was located
off-reserve, this factor indicates an off-reserve location to the employment
income but I attribute little weight to this factor.
[71]
I also attribute little weight to this factor
for Diane Sheridan. She lived in Barrie five days a week and traveled to her
residence on the Hiawatha First Nations Reserve for the weekend. There was no
evidence to demonstrate that there was a nexus between her employment income
and her residence on the Hiawatha First Nations Reserve. She returned to her
home on the reserve for personal reasons and not for any reason connected to
her employment. No evidence was provided with respect to how she used her
employment income. There was no evidence to show that her employment income
benefited the reserve.
Location,
nature of the services performed and the special circumstances in which they
were performed
[72]
The location and nature of the Appellants work
is the most important factor to consider in this section 87 analysis. This
flows from the type of property involved – employment income. The income is
earned as a result of the services provided and therefore the services
themselves may be an aid in determining the location of income. In Shilling
v Minister of National Revenue, 2001 FCA 178 the scope of this factor was
described as follows:
49 …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.
Art Zoccole
[73]
In 2010, Zoccole worked at 2-Spirited’s office
in downtown Toronto. As Executive Director of 2-Spirited, he coordinated the
activities of the organization. He managed and administered its operation in
accordance with its by-laws and policies. He was responsible for recruitment,
selection and management of all staff; and, he was in charge of the financial
management and administration of the organization.
[74]
2-Spirited is a non-profit social services
organization which provides services to gay, lesbian, bisexual, transgender and
inter-sexed (“LGBT”) Aboriginals who are living with HIV and AIDS. Its Mission
Statement specifies that its membership consists of Aboriginal LGBT people in Toronto whereas its Information Guide includes Aboriginal LGBT people in North America as
its members.
[75]
Zoccole testified that 95% of the people
2-Spirited provides services to are First Nations people who come from across
Canada to Toronto either for medical reasons or because they have been
discriminated against or ostracized in their home community. In 2010, 70% of
its clients lived in Toronto. 2-Spirited also provides indirect services to
people on-reserve through partnership with an on-reserve group. An example of
work they do directly with a reserve is repatriating the remains of a deceased.
In direct examination, Zoccole described his duties as follows:
That of the
executive director; so overseeing the operations of the agency, ensuring that
the services that we need to do in terms of providing services to over I would
say hundreds of aboriginal people who are living with HIV and AIDS in City of
Toronto and elsewhere throughout Canada basically, because people utilize our
services right across the country. And we have a website that some of the
documents that we've prepared to help people to work with our community have
been utilized by First Nations communities across Canada.
[76]
2-Spirited was incorporated in 1995 with Zoccole
as one of its first directors. According to the constating documents for
2-Spirited, four of its objects were:
(i) To educate the
aboriginal community and the general public, through cultural programs, historical
reviews and other educational activities, about the traditional role and place
of honour held by homosexual, lesbian and gay persons in the aboriginal
community prior to the arrival of non-aboriginal persons to Canada.
(ii) To provide a
forum to educate persons about the cultural practices, roles, knowledge and
history of aboriginal persons in general and those relating to homosexual,
lesbian and gay aboriginal persons in particular, which existed prior to the
arrival of non-aboriginal persons to Canada.
(iii) To promote all
aspects of a healthy lifestyle and healthy community among aboriginal persons
including supplementing the activities of existing health services and
assisting in the prevention of the further spread of the Human Immunodeficiency
Virus and other similar health-related conditions.
(iv) To improve the
quality of life of aboriginal persons infected and affected by the Human
Immunodeficiency Virus and other similar health-related conditions by providing
counselling, information, advice, assistance, supportive care and accommodation
to them and to their families and friends before and after death and by
offering programs and projects designed to dispel their sense of alienation and
isolation from other members of the community.
[77]
In 2010, 2-Spirited was funded by the Ontario Ministry of Health and Long Term Care Aids Bureau (“Aids Bureau”) and the Toronto
Central Local Health Integration Network Long Term Care Program. The Program
Plan which 2-Spirited submitted to the Aids Bureau for its 2009/2010 and
2010/2011 fiscal years showed that its programs and services included workshops
to both Aboriginal and non-Aboriginal organizations in Toronto, Thunder Bay,
London, Windsor and Kingston; support services to its members; sharing its
resources with community organizations; distributing a pamphlet on HIV
prevention to its members and to First Nations communities; participating in
the Toronto Aboriginal Research Project. Its focus was on working with
Aboriginal people in urban or rural areas. It did not provide services to
reserves.
[78]
In 2010 Zoccole did not travel to reserves.
[79]
Given these facts, Zoccole’s employment does not
indicate any connection to a reserve. His services were performed off-reserve
and according to the Mission Statement for 2-Spirited, its membership was
intended to be the Aboriginal LBGT people in Toronto. Any work done by
2-Spirited with people on-reserve was incidental to its core activities. The
location, nature of the services performed by Zoccole and the special
circumstances in which the services were performed situate his employment
income off-reserve.
Laura Baldwin
[80]
In 2010, Baldwin provided her services as a
tenant relations worker/payroll clerk through NLS to Nishnawbe Homes at its
building located at 244 Church Street in downtown Toronto.
[81]
The thrust of Baldwin’s duties was to help
manage 244 Church Street. Her duties included administration work, payroll,
hiring staff, interviewing tenants, tenant support, secretarial and
receptionist. She also took care of paperwork regarding the tenants and
collected rents. She spent 75% of her time dealing with tenants and the rest of
her time was spent on administrative duties.
[82]
Nishnawbe Homes opened the building at 244 Church Street in Toronto in 2008 as a renovated three-storey apartment building. The
building has 60 furnished single room occupancy units with shared kitchens and
washrooms. This building also houses the office for Nishnawbe Homes. It was
purchased and renovated with funds provided from the Canada-Ontario Affordable
Housing Program. Pursuant to a Contribution Agreement, Nishnawbe Homes received
operating assistance in the form of property tax exemption, planning
application exemption and building permit exemption from the City of Toronto.
[83]
A small number of the tenants at 244 Church Street were students who came from a reserve to attend university in Toronto. Most of the tenants were previously homeless or without a permanent address and
living in the Toronto area. All of the tenants were Aboriginal people.
[84]
Baldwin’s statement that
most of the residents of the home at 244 Church Street were status Indians is
unsupported and unreliable. She had no records with her and she had agreed that
Nishnawbe Homes did not keep a record of its tenants’ background or whether
they were coming directly from a reserve. She also agreed that all “eligible
Aboriginal individuals” could access the services of Nishnawbe Homes regardless
of whether they were coming from a reserve or were status Indian.
[85]
To qualify to be a tenant in Nishnawbe Homes, an
individual had to self identify as an Aboriginal; be working or be in receipt
of or qualify to receive income from Ontario Works (“OW”) or Ontario Disability
Support Program (“ODSP”). Tenants had to sign a one year lease and most of them
paid their rent in cash.
[86]
Nishnawbe Homes is a non-profit housing
corporation which housed Aboriginals in the downtown core of Toronto. It was a
participant in the Urban Native Housing Program and as a result, it received
assistance from CMHC to purchase homes to meet the needs of urban Aboriginal
households looking for affordable, adequate and suitable rental housing.
According to Frances Sanderson, executive director of Nishnawbe Homes, the
agreements with CMHC has enabled Nishnawbe Homes to purchase 10 homes. CMHC has
also provided a subsidy for 49 units of the 10 homes.
[87]
Although the Urban Native Housing Program was
administered by CHMC on behalf of the federal government, the federal funding
and the responsibility for the administration of most of the existing federally
funded social housing off-reserve, was transferred to the Province of Ontario. In turn, Ontario has, by statute, devolved the administration of the existing
federally funded social housing portfolio, including housing projects in the
Urban Native Housing Program and social housing programs administered by Ontario, to either municipalities or, in the north, district social service administration
boards as “service managers”. The City of Toronto is the municipal government
service manager responsible for funding and administering social housing and
social housing agreements in Toronto.
[88]
All of Baldwin’s services were performed in Toronto, off-reserve. Even if most of the tenants came from a reserve, they all lived in Toronto when they benefited from her services. This does not serve to connect Baldwin’s employment income to a reserve. She performed services for Nishnawbe Homes whose
purpose was really the same as that of the Urban Native Housing Program; that
is, to assist urban Aboriginal households looking for affordable, adequate and
suitable rental housing. Its programs were all aimed at off-reserve activities.
[89]
The only difference between Baldwin’s duties and
that of other administration staff working in a social services office in
downtown Toronto is that all of her clients are Aboriginal people. This does
not situate her employment income on-reserve.
Virginia
Forsythe
[90]
In 2010, Forsythe worked as a health outreach
worker for the Ontario Aboriginal HIV/AIDS Strategy (“OAHAS”) from their office
in Cochrane, Ontario where she lived.
[91]
The OAHAS program aims “to educate the
Aboriginal public about the causes and effect of and treatments for HIV/AIDS by
offering workshops, seminars, conferences and meetings, and collecting and
disseminating information on that topic”.
[92]
Forsythe’s duties included conducting HIV/AIDS
workshops, information sessions, healthy promotion sessions, healthy sexuality
workshops, giving individual counselling and making referrals. She provided
support to individuals by means of the telephone or Facebook or in person. She
provided education and advocacy to her clients. She stated that she did
outreach which required that she travel to communities to give information
about the services she offered. She did outreach both on- and off-reserve.
[93]
Forsythe stated that she provided individual
counselling which could, on occasion, require her to travel to a reserve, but
it was more likely that the clients who required counselling lived in the urban
areas. In 2010, she provided counselling to approximately 10 people, 3 of whom
lived on a reserve.
[94]
Some communities which Forsythe said she visited
were Taykwa Tagamou, Chapleau Cree First Nations, Brunswick House, Chapleau
Oji-Cree, Mattagami First Nations, Wahgoshig and Constance Lake. She also attended at Monteith Correctional Complex, Jubilee Centre (an addiction
treatment facility in Timmins) and North Cochrane Addiction Services at Smooth
Rock, Migwam Youth Facilities, and Pineger Youth Residence. In cross-examination,
she stated that she also held workshops in Cochrane and in Timmins.
[95]
Forsythe estimated that she spent 70% of her
time away from her office in Cochrane and of that time, 30% of it was spent
working with people on a reserve or with people from a reserve who were in
institutions.
[96]
According to her evidence, many of the persons
she worked with were transient status Indians who came into Cochrane. However,
she had no statistics concerning whether the persons she worked with were
status or non-status Indians, Métis or Inuit.
[97]
It was her evidence that although she worked out
of OAHAS’ office in Cochrane, her duties required that she travel to various
Aboriginal communities, including reserve communities, in the northeast region
of Ontario. Forsythe was closely questioned by counsel for the Respondent to
ascertain if she had any documents which she had prepared in 2010 which would
support her evidence with respect to her clients and her travels. She admitted
that she had to submit travel claims to OAHAS for her travel; that she kept a
copy of these travel claims but she did not bring them to the hearing of her
appeal because they would show where she traveled in 2010. Her evidence was as
follows:
Q. You would
have to submit travel budgets?
A. I put my
travel claims in and then I would...
Q. Who would
you submit them to?
A. I would
send them to the head office.
Q. Whose head
office?
A. Of my
placement agency.
Q. Did you
keep copies of those?
A. Yes.
Q. You didn't
bring them?
A. No.
Q. Because
they would show where you were going?
A. Yes.
[98]
It is my view that Forsythe’s credibility was
completely shaken. Although I believe that she did provide some services
on-reserve, there was nothing to substantiate that she did so in 2010 and if
so, how often she provided the services. She did agree that she only went
on-reserve when she was invited by the Chief or the community health
representative or someone from the Native Aboriginal Addiction Program.
[99]
In 2010, OAHAS was funded primarily by the
Ontario Ministry of Health and Long-Term Care with some funding from the Public
Health Agency Canada.
[100] Frank McGee from the Ministry of Health also testified. He explained
that it was not important for the purposes of the OAHAS program whether the
clients lived on- or off-reserve.
[101] Although Forsythe, on occasion, provided her services on-reserve,
the nature of her employment was to help and inform Aboriginal people no matter
where they lived. The mission of OAHAS was not restricted to on-reserve people.
The evidence indicated that Forsythe spent the majority of her time working
off-reserve with off-reserve people. The evidence submitted at the hearing did
not demonstrate that the location and nature of her work was connected to a
reserve.
Carrie Martin
[102]
In 2010, Martin held three different positions
with the Native Women’s Shelter of Montréal (“NWSM”). From January 1 to March
31, she worked as a Harm Reduction Coordinator. This position was funded by the
Public Health Agency of Canada (“PHAC”) from its Non-Reserve First Nations,
Inuit and Métis Communities HIV/AIDS Project Fund (the “Non-Reserve Fund”). The
funding from PHAC ended on March 31 and Martin then provided the services of an
Aboriginal Healing Foundation (“AHF”) Evaluation Coordinator to NWSM for the
period April 1 to June 30. Finally from July 1 to December 31, she returned to
the position of Harm Reduction Coordinator which was now funded by the Province of Québec.
[103] As the Harm Reduction Coordinator, Martin assisted women who were
permanent residents in the City of Montréal area and women who came to Montréal
from a reserve to obtain services which were not offered on reserves. She
stated that this latter category of women was returning to a reserve after they
received their treatments and she estimated that they comprised 50% of her
clientele.
[104] As a Harm Reduction Coordinator, Martin worked with Aboriginal women
who were HIV, Hep-C or STI-positive, or were at risk. Her job was to provide
educational awareness and prevention activities to those women. She facilitated
workshops on topics related to harm reduction; accompanied women to
appointments; arranged for HIV testing; organized ceremonies such as sweat
lodges and traditional healing activities; participated in street patrols to
help women; and networked with other social service agencies.
[105] When Martin was the Evaluation Coordinator, she completed the final
quarterly report and archived files for several projects which NWSM had carried
out over the prior 10 years. All of this work was done in the shelter in Montréal.
[106] The evidence demonstrated that, regardless of the position Martin
held, all of her services, were provided in Montréal and off-reserve. The
funding from the Non-Reserve Fund of PHAC for her position as Harm Reduction
Coordinator specified that it supported only off-reserve activities. The nature
of the services performed; the circumstances under which they were performed
and the funding which allowed for the services all indicate that Martin’s
employment income was situated off-reserve. The focus of her work was to service
Aboriginal women in the Montréal area.
[107] Martin stated that 50% of her clients came from a reserve to access
services in Montréal and returned to the reserve after they received the
services. The fact that her clients could only receive these services
off-reserve does not assist in placing Martin’s employment duties on a reserve:
Monias at paragraph 42.
Diane Sheridan
[108] Sheridan worked out of the Barrie Native
Friendship Centre (“Friendship Centre”) in Ontario as a Healthy Baby Healthy
Children worker. Her position was funded by the Province of Ontario through the Ministry of Community and Social Services.
[109] As part of her duties, Sheridan offered parenting and pre-natal care
courses; she made home visits to the families who were her clients and she
networked with other organizations to share resources and to refer her clients
or accept referrals as need be. Her clients either came to her because they
were aware of the services she offered or they were referred to her. Families
normally remained as her clients for 3 to 6 months.
[110] It was mandatory that she make monthly home visits to her clients so
that she could see their living arrangements and assess whether the babies were
at risk. In 2009, most of her home visits were made to clients who lived within
the municipal boundary of Barrie.
[111] Sheridan taught courses to her clients to help
them develop healthy life styles. She also taught or facilitated traditional
teachings to assist her clients to heal in a traditional way. These courses
were taught at the Friendship Centre in Barrie.
[112] Sheridan stated that she networked with the
Children’s Aid Society in Barrie and the Barrie Area Native Association. She
assisted the Children’s Aid Society with the development of an Aboriginal
component to their organization. She, the nurse from the Rama Reserve and the
children services person from the Christian Island Reserve met on a regular
basis to share resources and ideas. It was her evidence that they met either on
the reserve or at the Friendship Centre. She gave no details with respect to
the frequency of these meetings or how often they occurred on a reserve or at
the Friendship Centre.
[113] Sheridan worked with families who had custody
issues with their children. In direct examination she described two situations
when she had to work on customary care agreements. In particular, she stated
that there had been two families who were going to lose their children. In one
case, twin babies had been taken from the mother as soon as she gave birth in
the hospital. The twins were in Orillia and Sheridan worked to set up a customary
care arrangement for them with their paternal grandparents on the Christian
Island Reserve. The second situation concerned a mother who lived in Barrie who was going to lose her three children. Sheridan arranged for the mother’s family
to take care of the children. One child was placed with a family member on the
Christian Island Reserve and two children were placed with family in Barrie. She stated that she visited the on-reserve families on occasion but most of her
contact with them was done by telephone.
[114] In direct examination, Sheridan estimated that 50% of her services
related to families who lived on-reserve.
[115] Sheridan’s evidence was far from clear. Her
evidence consisted of estimates and guesses which did not satisfy her onus to
demonstrate that her employment income was “situated on a reserve”. In addition,
in my view she exaggerated the number of on-reserve families she worked with
and the percentage of her services which related to on-reserve families in
2009. My conclusion is based on the following evidence.
[116] In direct examination Sheridan recalled only 2 situations where she
worked with on-reserve families in 2009. In cross-examination, she stated that
she worked with 3 on-reserve families.
[117] Initially in cross-examination she stated that in 2009 she had
between 12 and 15 clients at any one time. After further probing questions from
Respondent’s counsel, Sheridan admitted she did not know how many clients she
had in 2009.
[118] Lance Triskle was an Aboriginal criminal court worker with the
Friendship Centre from September 2005 until July 2007 when he became its
Executive Director. He served in this position until July 2009. He testified
that twin babies were apprehended at birth by the Children’s Aid Society in
June 2006 and that Sheridan worked with them but he didn’t know when she ceased
to work with them. He could not recall if the twins were put into customary
care but he stated that their grandparents, who lived on the Christian Island
Reserve, had unsupervised visits with them.
[119] Lance Triskle also stated that the workers from the Friendship
Centre could not go on a reserve unless they were invited. He stated that “it
could have grave consequences for our relationship with those First Nations,
given that many of their community members lived in our urban centre”.
[120] Gary Sutherland became the Executive Director of the Friendship
Centre on July 6, 2009 but he was with the Centre since its inception in 1988.
It was his evidence that one of the objectives of the Friendship Centre was “to
act on behalf of the Aboriginal people in an off-reserve environment”. In
particular, the Centre’s geographic territory (catchment area) was the city of Barrie and 25 kilometres outside of Barrie. There were no reserves within the Centre’s
catchment area. However, the Centre did not refuse services to people who lived
on-reserve and came to Barrie to seek services from the Centre. He estimated
that no more than 10% of the families receiving services from the Healthy
Babies Healthy Children program would have come directly from a reserve.
[121] He stated that during his tenure, the Healthy Babies Healthy
Children worker was never required to drive to a reserve to perform her
services. He highly doubted if Sheridan drove to a reserve to deliver her
services because her travel budget was minimal – it was an annual amount of
only $1500 – and it had to compensate her for her travel within the catchment
area.
[122] I have concluded that Sheridan performed the majority of her duties
at the Friendship Centre, at Court, at homes in the Centre’s catchment area and
at the Children’s Aid Society office – all of these were locations in Barrie and off-reserve. Any on-reserve clients that she may have had in 2009 came to Barrie, an off-reserve location, to seek her services. The number of on-reserve clients
that she had in 2009 was minimal.
[123] The evidence indicated that the location, nature of the services
performed and the special circumstances in which Sheridan performed her
employment services were off-reserve. I accept that in 2009 she may have had a
small number of clients who lived on-reserve but came to Barrie to receive
services from her and that she contacted them by telephone. These services were
insufficient to situate Sheridan’s employment income on-reserve: Shilling v
Minister of National Revenue, [1999] FCJ No.889 (FCTD) at paragraph 60. The
focus of her services was the Aboriginal community who lived within the
Centre’s catchment area – an off-reserve location. Her work with on-reserve
persons was incidental to the performance of her duties.
Conclusion
[124] I have concluded from my analysis of the connecting factors that the
employment income for each Appellant was situated off-reserve. As a result, the
income for each Appellant was properly assessed as being taxable and the
appeals are dismissed. No costs are awarded in this matter.
Signed at Halifax, Nova Scotia, this 26th day of September
2014.
“V.A. Miller”
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