15 March 2004 GST/HST Interpretation 37395 - Band-Empowered Entity

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX (with attachments) concerning the entitlement of the XXXXX to file general rebate applications as a band-empowered entity. We apologize for the delay in responding to your enquiry.

Statement of Facts

The XXXXX is an incorporated non-profit organization that was created to provide employment and counseling services for First Nations and Métis people. The program is part of the Aboriginal Human Resources and Development Strategy.

The XXXXX has entered into three federal agreements (Human Resources Development Canada, Indian and Northern Affairs Canada and Public Works and Government Services) that provide the funding for the participating First Nations and the XXXXX.

The XXXXX provides employment services on reserve at locations hosted by the XXXXX member bands in addition to its XXXXX.

The Board of Directors of the XXXXX consists of XXXXX delegates from the bands that are voting members. According to the by-laws of the XXXXX Directors are elected from the voting members.

To be a voting member, a First Nation band or an individual member from each First Nation band applies to the Directors to be a voting member of the XXXXX.

The XXXXX maintains its administrative office at XXXXX, however, all Board of Directors' meetings are held on reserve. The annual budget and allocation formulas are approved at the annual meeting by the Board of Directors, all of whom are delegated band members.

Ruling Requested

You have requested confirmation that the XXXXX qualifies as a band-empowered entity. Also, you have asked under what circumstances would the XXXXX qualify for tax relief if ruled to be a band-empowered entity?

Ruling Given

Based on the information provided, the XXXXX qualifies as a band-empowered entity.

Explanation

To be considered a band-empowered entity, an entity must meet either the requirement of ownership or control as outlined in Technical Information Bulletin B-039R, GST Administrative Policy - Application of GST to Indians (B-039R). A "band-empowered entity" is a corporation, board, council, association, society, or other organization that is owned or controlled by a band, a tribal council, or a group of bands other than a tribal council. B-039R is only applicable to those band-empowered entities situated on a reserve. A band-empowered entity is considered to be situated on a reserve when the entity maintains a presence on reserve.

An entity is considered to be controlled by the band, tribal council or group of bands if:

•   the band, tribal council, group of bands or individual members of the band, tribal council or group of bands, appoint or elect a majority of the members of the governing body of the entity (e.g., directors); and

•   the entity is required by legislation, by-laws, or an operating agreement, to submit to the band, tribal council or group of bands, its operating budget and where applicable, its capital budget for review and approval.

Based on the information provided, the XXXXX would qualify as a band-empowered entity as it is controlled by a group of bands, and the Board of Directors, which is made up of the XXXXX participating First Nations, reviews and approves the operating budgets for the XXXXX programs and provides the direction for the programs on behalf of the First Nation members.

The XXXXX Board of Directors generally meets on the XXXXX First Nation's reserve, although some meetings are hosted on other reserves by one of the other participating First Nations. As the mind and management over the XXXXX is exercised on a reserve (i.e., its Board of Directors holds its meetings on a reserve and decisions which direct the operations of the XXXXX are made during those meetings), the XXXXX is considered to have a presence on reserve. Therefore, XXXXX meets the requirement of being situated on reserve.

Additional Information

B-039R provides tax relief to band-empowered entities that are involved in band management activities. Band management activities are defined in B-039R as activities or programs undertaken by a band or band-empowered entity situated on reserve that are not commercial activities for which they would otherwise be entitled to an input tax credit.

Section 10 of Part VI of Schedule V to the Excise Tax Act (ETA) exempts a supply made by a public sector body (e.g., a non-profit organization) of any property or service where all or substantially all of the supplies of the property or service by the body are made for no consideration, but not including a supply of blood or blood derivatives. Therefore, where a non-profit organization, for example, provides employment-related counseling free of charge for the benefit of a segment of the public (e.g., Aboriginal people), government funding received by the non-profit organization for this public purpose is generally viewed as not being consideration for a supply. Accordingly, if a band-empowered entity that is a non-profit organization receives government funding for this purpose, it would not be considered to be involved in commercial activities with respect to this activity. The activity, therefore, would meet the definition of band management activities.

As noted in B-039R, incorporated band-empowered entities may acquire property on reserve without paying the GST/HST where the property is for band management activities and the appropriate documentation has been provided to the vendor. Information on appropriate documentation can be found on page five of the B-039R, which has been enclosed for your convenience.

Tax relief also applies to services acquired by band-empowered entities on or off reserve "for band management activities or for real property on reserve." This phrase is read as one; thus, a service for real property off reserve would not qualify for tax relief. Example - construction services acquired by a band-empowered entity for an office building off-reserve would not qualify for tax relief.

An exception exists under B-039R for off-reserve purchases of transportation, short-term accommodation, meals and entertainment, which are not tax relieved at time of purchase. However, the band-empowered entity may file a General Application for Rebate of GST/HST to recover the GST/HST paid on these purchases when the services are purchased for band management activities or for real property on reserve.

There is another rebate of which you should be aware: A band-empowered entity that is a non-profit organization that receives at least 40% of its annual revenues in the form of "government funding" is regarded as a qualifying non-profit organization and is entitled to a 50% rebate of the GST/HST for "non-creditable tax charged". Please refer to the enclosed guide GST/HST Public Service Bodies' Rebate, for further details on the Public Service Bodies' rebate.

Additional information is also available on the CRA website at www.cra-arc.gc.ca.

These rulings are subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by these rulings provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above or any other GST/HST matter, please do not hesitate to contact me at (613) 952-9264.

Yours truly,

Cindy Christmas
Aboriginal Affairs Unit
Public Service Bodies & Governments Division
Excise and GST/HST Rulings Directorate