22 September 2000 External T.I. 2000-0036885 - INDIAN SCHOOL BOARD TRUSTEE

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 the income of a First Nation school board trustee is exempt. The employer is located off a reserve and the trustee does not live on a reserve.

Position: Likely no.

Reasons: We would expect that a significant portion of the Trustee's time, i.e., her employment activities, would be spent attending Board meetings and in the administrative offices of the School Board, which are located off reserve. Further, while an employer may sometimes allow an employee to perform employment duties away from the employer's location, it is our view that the most relevant locations are those at which the employee is required to perform the duties.

XXXXXXXXXX 	J. Gibbons, CGA
		2000-003688
Attention:  XXXXXXXXXX 

September 22, 2000

Dear XXXXXXXXXX:

We are replying to your letter of June 30, 2000, in which you requested further clarification concerning the taxation of the employment income of a native school board trustee (the "Trustee"). Our earlier views on this, as well as other First Nations income tax issues, were set out in a letter to you dated May 26, 1998.

As previously stated, we are unable to confirm the income tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Thus, our comments are of a general nature only.

In our 1998 letter, we stated that Guidelines 1 and 3 of the Indian Act Exemption Guidelines (the "Guidelines"), as well as the proration rule, may provide for the full or partial tax exemption of an Indian's employment income if the employment duties are performed on a reserve. More specifically, we stated that:

1. If substantially all the duties are performed on a reserve, Guideline 1 would apply.

2. If more than half of the duties are performed on the reserve and the trustee lives on the reserve, the income would be exempt under Guideline 3.

3. Guidelines 2 and 4 would not apply to exempt the income as the employer, the School Board, is not resident on a reserve.

Our comments were general, since we didn't know where the duties of employment were conducted or where the trustee was resident. You have now provided the following additional facts:

• The Trustee is a status Indian.
• The Trustee does not live on a reserve.
• The Trustee has been appointed by the XXXXXXXXXX to act as a native representative on the XXXXXXXXXX (the "School Board").
• The Trustee's employment duties are to represent the interests of the native community of the XXXXXXXXX .
• More than 90% of the Trustee's duties are performed on a reserve (the "reserve").
• The reserve is located in XXXXXXXXXX.
• The School Board is the employer and is not situated on the reserve.
• The School Board pays the trustee and is reimbursed 100% by the XXXXXXXXXX.

On the basis of the foregoing facts, you wish to know whether the Trustee's employment income is exempt from income tax and, if so, whether the exemption applies retroactively.

Our Views

Based on the additional facts provided in your latest letter, it is clear that Guideline 1 is the only guideline that may apply to exempt the employment income of a status Indian. In order to be exempt under this guideline, all or substantially all of the income must be earned on the reserve. Generally, substantially all is accepted to mean 90% or more. Although you indicate that this is the case, and have provided a letter from the XXXXXXXXXX (the "letter") to support this position, we are of the view that it is not clear how substantially all of the Trustee's duties could be performed on the reserve. Firstly, the letter states that the Trustee spends approximately 90% of her time dealing with educational issues on the First Nation but does not specify where the actual work is performed. In this regard, we would expect that a significant portion of the Trustee's time, i.e., her employment activities, would be spent attending Board meetings and in the administrative offices of the School Board, which are located off reserve. Further, while an employer may sometimes allow an employee to perform employment duties away from the employer's location, it is our view that the most relevant locations are those at which the employee is required to perform the duties. Thus, in our view, it is not clear to how the Trustee could claim an exemption under Guideline 1.

In regard to your question about applying the exemption retroactively, if an individual feels that the Indian Act Exemption was misapplied in earlier years, he or she may request a reassessment of the income taxes in those years by writing to the applicable Tax Centre. However, as stated above, it is not clear whether the Trustee's income is exempt from income tax under the Guidelines.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate

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