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:

Application of subsection 90(1) of the Indian Act to Maritime fishers following R v. Marshall.

Position: Subsection 90(1) of the Indian Act would not apply.

Reasons:

For income to be exempt under paragraph 81(1)(a) of the Act, it must be situated on reserve. No personal property has been purchased with Indian money and no personal property has been given to Indians or a band pursuant to a treaty such that income would be deemed to be situated on reserve pursuant to subsection 90(1) of the Indian Act.

				February 3, 2003

	CHARLOTTETOWN TSO		HEADQUARTERS
				Income Tax Rulings
	Attention:  Brian Adams			  Directorate
				Renée Shields
(613) 948-5273

				2002-017227

Taxation of fishing income in light of section 90 of the Indian Act,
the decision in R. v. Marshall and DFO allocation of fishing licenses

This is in response to your electronic mail of November 1, 2002 regarding whether the decision in R. v. Marshall together with subsection 90(1) of the Indian Act provide an income tax exemption for income earned off-reserve by Indian fishers in the Maritimes.

Background

In the 1999 Marshall decision the Supreme Court of Canada held that a 1760 Treaty of Peace and Friendship affirmed the right of the Mi'kmaq Indians of Nova Scotia to continue to make a moderate livelihood through hunting and fishing and trading the products of these traditional activities. As stated at paragraph 56 of the judgment of Binnie J:

My view is that the surviving substance of the treaty is not the literal promise of a truckhouse, but a treaty right to continue to obtain necessaries through hunting and fishing by trading the products of those traditional activities subject to restrictions that can be justified under the Badger test. [emphasis added]

Following the Marshall decision, the federal Department of Fisheries and Oceans took steps to provide for increased First Nation access to the commercial fishery. This was initially done through the negotiation of one-year fishing agreements. On February 9, 2001, the federal government launched its longer-term response to the Marshall decision. As part of this longer-term response, DFO is negotiating agreements of one to three-years in length, to provide First Nations with increased commercial fisheries access, along with vessels, gear, training and other capacity building measures. For some First Nations this means initiatives such as aquaculture projects; for others it means new equipment or facilities related to the commercial fishery. Part of the response involves the implementation of a voluntary licence retirement program to make room for new Aboriginal entrants to the commercial fishery.

The Question

In light of the foregoing, the question arises whether subsection 90(1) of the Indian Act applies to deem Maritime Indians' income from fishing to be situated on reserve for purposes of paragraph 87(1)(b) of the Indian Act. If the income is situated on reserve in accordance with paragraph 87(1)(b) of the Indian Act, it may follow that paragraph 81(1)(a) of the Income Tax Act (the "Act") would exempt the income from income tax.

Analysis

Paragraph 90(1)(a) of the Indian Act

Paragraph 90(1)(a) of the Indian Act deems personal property that was purchased by Her Majesty with Indian moneys or moneys appropriated by Parliament for the use and benefit of Indians or bands always to be situated on a reserve.

In the above-described circumstances in the Maritimes, neither the licenses of existing commercial fishermen which have been given to the Indians, nor the fishing boats and equipment provided to the Indians have been purchased with Indian moneys. It is therefore our opinion that paragraph 90(1)(a) of the Indian Act would have no application in this situation.

Paragraph 90(1)(b) of the Indian Act

Paragraph 90(1)(b) of the Indian Act deems personal property that was given to Indians or to a band under a treaty or agreement between a band and her Majesty always to be situated on a reserve.

With regard to paragraph 90(1)(b) of the Indian Act, the Supreme Court of Canada held, in Mitchell v. Peguis Indian Band ((1990) 2 SCR 85), that the words "treaty" and "agreement" take colour from each other and that the use of the word "given" is a distinct and pointed reference to the process of cession of Indian lands. Thus, in our view, an "agreement" would have to be similar in nature to a treaty for the exemption to apply. The agreement would have to implement a treaty; that is, it must be an agreement that implements a treaty obligation. Furthermore, the property that was given must be related to the settlement of land issues.

The Treaty of Peace and Friendship did not give any personal property in settlement of land issues. Nor did it give the Indians the right to fish and trade to secure necessaries. Rather, the Treaty affirmed their right to do so. Furthermore, the Treaty does not require the government to give the Indians fishing licences or fishing boats and equipment. The actions of the Department of Fisheries and Oceans were undertaken as a matter of public policy and not pursuant to a treaty obligation. Therefore, it is our opinion that the process of granting fishing licenses and providing fishing vessels and equipment does not constitute an "agreement" as understood in paragraph 90(1)(b) of the Indian Act.

It follows that if no personal property has been given to Indians or to a band under a treaty or agreement then the employment income earned by the Indian fishers will not be deemed by paragraph 90(1)(b) of the Indian Act to be situated on a reserve.

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We trust that these comments will be of assistance.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Customs and Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

Mickey Sarazin, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch