Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether we can rule on whether a band owned corporation is exempt from tax.
Position: No.
Reasons: Insufficient documentation provided to determine if the band meets the criteria to be considered a municipality as set out in Otineka. No proposed transactions were given on which we could rule.
XXXXXXXXXX 2000-001685
D. Shugar
Attention: XXXXXXXXXX
April 3, 2000
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling Request
This is in reply to your letter of March 20, 2000 wherein you asked whether the information you provided is sufficient for us to provide you with a ruling that the XXXXXXXXXX (the "First Nation") is a municipality.
The information you provided is not sufficient to enable us to provide a ruling on whether the First Nation is a municipality exempt from tax under paragraph 149(1)(c) of the Income Tax Act (the "Act") or that any First Nation owned corporation is exempt from tax. In addition, you have not provided us with proposed transactions on which we could rule.
An income tax ruling is a written statement given by the Directorate to a taxpayer stating how the Canada Customs and Revenue Agency will interpret and apply specific provisions of existing Canadian income tax law to a definite transactions or transactions which the taxpayer is contemplating. If this is an ongoing situation with no proposed transaction, your enquiry should be addressed to the local tax services office.
As explained in our letter to you of November 15, 1999, for an Indian band to be considered a municipality in Canada, it would have to demonstrate that it fits within the facts of the Otineka case. Sufficient documentation should be provided to support that conclusion.
In order to make a determination that the First Nation provides substantially the same services to its band members on the reserve as any municipality in Canada of comparable size, a review must be made of all the relevant facts and circumstances to determine if they are similar to the facts in the Otineka case. You have provided us with a list of services provided to members of the First Nation. Although the information provided indicates that the First Nation may be a municipality, the documentation provided is not sufficient to make that factual determination. To demonstrate this would require documentation describing the extent and magnitude of the First Nation's involvement in the services and programs listed.
You have also provided us with a list of by-laws of the First Nation. However, the list does not indicate under which section of the Indian Act the bylaws were passed. Depending on the situation, we may require additional documentation such as copies of the signed bylaws, copies of ministerial approval of the bylaws passed under section 81 or 83 of the Indian Act, and evidence of the manner in which the bylaws are being enforced during the periods you are concerned with.
For taxation years and fiscal periods that begin after 1998, a corporation may be exempt from Part I tax on its taxable income for a particular period under paragraph 149(1)(d.5) of the Act if not less than 90% of its capital is owned by one or more municipalities in Canada and the income of the corporation from activities carried on outside the geographical boundaries of the municipalities does not exceed 10% of its income for the period.
Paragraph 149(1)(d.5) of the Act is subject to subsections 149(1.2) and (1.3) of the Act. Subsection 149(1.2) of the Act excludes certain income from the determination of whether more than 10% of the income of a corporation is derived from activities carried on outside the geographical boundaries of the municipality or municipalities that own the corporation. Specifically, income derived from activities carried on pursuant to an agreement in writing with Canada, a province, or a municipality, within its geographical boundaries, is not included in the determination. Subsection 149(1.3) of the Act provides that 90% of the capital of a corporation that has issued share capital is to be considered to be owned by one or more municipalities only if the municipalities are entitled to at least 90% of the votes associated with the shares of the corporation.
Should you decide to proceed with a request for a ruling as set out in Information Circular IC70-6R3 which we sent to you with our previous response, and provide the necessary documentation, we will consider your request at that time.
Yours truly,
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
- 2 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2000
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2000
Email this Content