18 March 2002 External T.I. 2002-0122245 - NATIVE OWNED TRAINING CENTRE

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Taxpayer would like to enter into an arrangement with the federal government for a tax exemption.

Position: CCRA cannot enter into such an arrangement

Reasons: Department of Finance is responsible.

XXXXXXXXXX 2002-012224
C. Rystenbil, CGA

Dear XXXXXXXXXX:

Re: Native Owned Training Centre

This is in reply to your letter of January 30, 2002 in which you ask whether special arrangements can be made with the Québec and Federal governments in respect of your native owned training centre that operates from a site that is approximately half a mile from an Indian reserve to allow a tax exemption on the tuition costs for students and on the profits earned by your business if the profits are used to conduct a feasibility study regarding the building of a training centre on the Indian reserve. You indicated that the students are either status Indian, Métis, Inuit or other.

Our comments

The particular circumstances in your letter on which you have asked for our views appear to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R4, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate tax services office for their views. However, we are prepared to offer the following general comments, which may be of assistance.

When training benefits are received by status Indians, paragraph 81(1)(a) of the Income Tax Act (the "Act") and section 87 of the Indian Act may provide a tax exemption if the income is considered an Indian's personal property situated on a reserve. The Courts have determined that, for the purposes of this exemption, income is personal property. Consequently, what must be determined is whether the training allowance was situated on the reserve.

In our view, training benefits received by status Indians will generally not be connected to a reserve unless the training itself is taken on a reserve. Where the training is taken off of a reserve, the training assistance will generally not be tax exempt. We would also note that it is a question of fact whether an individual is a status Indian under the Indian Act.

With reference to your business income, the most significant factor that serves to connect business income to a location on reserve or off reserve is generally the location where the activities are carried out. If the business is carried on at an off-reserve site and all of the actual revenue-generating activities are off reserve, the business income would be connected to a location off reserve and the income would be taxable under the Act.

Although the Canada Customs and Revenue Agency is responsible for the administration of the income tax legislation, it is the Department of Finance that sets Canada's tax policy, and you may wish to pursue the matter of a special tax exemption with the Department of Finance. The general enquiries line of the Tax Policy Branch, Department of Finance is (613) 992-1573.

We trust that these comments will be of assistance.

Yours truly,

Mickey Sarazin, CA
Manager, Aboriginal Affairs Section
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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