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: Whether an Indian band is tax exempt under 149(1)(c).
Position: Question of Fact
Reasons: Description.
2002-015882
XXXXXXXXXX Renée Shields
(613) 948-5273
October 31, 2002
Dear XXXXXXXXXX:
Re: Tax Status of an Indian Band
This is in response to your letter of August 16, 2002 inquiring about whether an Indian band is tax exempt as a public body performing a function of government under paragraph 149(1)(c) of the Income Tax Act (the "Act").
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.
Generally, Indian bands, as defined in subsection 2(1) of the Indian Act, that perform a function of government may be exempt from taxation under paragraph 149(1)(c) of the Act. Previously, the CCRA would only consider an Indian band as a public body performing a function of government when one of the following conditions was met:
? the band had passed by-laws under both sections 81 and 83 of the Indian Act; or
? the band had reached an advanced stage of development as was formerly required by section 83 of the Indian Act.
More recently, the CCRA has taken the position that Indian bands that do not meet either of these requirements can be considered on a case-by-case basis to determine whether the band performs a function of government such as negotiating and implementing Treaty Land Entitlements. Whether a particular entity would qualify as an Indian band and whether the particular entity would be exempt from tax under paragraph 149(1)(c) of the Act are questions of fact.
The following are situations that the CCRA would consider to be functions of Government:
1. The existence of Health Services Transfer Agreements between Her Majesty the Queen in Right of Canada and the Indian band. These agreements provide for the transfer of control of health programs and services and associated resources from the Minister of Health to the Indian band.
2. The Indian band is providing elementary and secondary education in band-operated schools.
3. The band has been involved in the negotiation of a settlement agreement with Canada and will continue to be involved in the administration and implementation of the settlement agreement.
4. The band has entered into an arrangement with Canada to assume responsibility for the delivery of programs and services such as land management, social and economic development programs and capital infrastructure.
In your letter, you have reiterated the various positions taken by this Directorate in respect of the application of paragraph 149(1)(c) of the Act to Indians. To date, we have not been able to take a general position that all Indian bands qualify as "public bodies performing a function of government." Consequently, this determination is a question of fact. If you have a particular proposed transaction in mind, we would consider the issue in the context of an advance income tax ruling. If your concern relates to specific completed transactions, you should request an opinion from the appropriate Tax Services Office.
We trust that these comments will be of assistance.
Yours truly,
Mickey Sarazin, C.A.
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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