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.
Principal Issues: Whether paragraph 149(1)(c) will apply to exempt the fishing income to be received by the First Nation from a limited partnership.
Position: Yes.
Reasons: The First Nation can be considered a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c).
XXXXXXXXXX 2004-008032
XXXXXXXXXX, 2004
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling
XXXXXXXXXX (the "First Nation") XXXXXXXXXX
We are writing in response your letter dated XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the First Nation. We also acknowledge receipt of your emails dated XXXXXXXXXX, and our various telephone conversations (XXXXXXXXXX).
To the best of your knowledge, and that of the First Nation, none of the issues involved in the ruling request is:
i. in an earlier return of the First Nation or a related person;
ii. being considered by a tax services office or a tax centre in connection with a tax return already filed by the First Nation or a related person;
iii. under objection by the First Nation or a related person;
iv. before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; and
v. the subject of a ruling previously issued by the Directorate to the First Nation or a related person.
Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definitions unless otherwise indicated.
Our understanding of the facts, the proposed transactions and the purpose of the proposed transactions is as follows:
Facts
1. The First Nation is an "Indian band" within the meaning of the Indian Act.
2. The First Nation has XXXXXXXXXX reserves, within the meaning of the Indian Act XXXXXXXXXX (Hereinafter the XXXXXXXXXX reserves are referred to collectively as the "Reserves").
3. The First Nation is comprised of approximately XXXXXXXXXX members (the "Members"), approximately XXXXXXXXXX of which live on the Reserves.
4. The First Nation has been exercising active control over the community, including the following types of activities:
(a) the election of a Chief and Councillors to perform those activities contemplated by the Indian Act. These elections are conducted under Section 74 of the Indian Act; and
(b) the negotiation of agreements for the settlement of claims with the Federal Government and Provincial Governments.
5. The First Nation has, with the agreement of the Federal Government, assumed responsibility for the following programs affecting Members:
(a) education;
(b) environment;
(c) housing;
(d) community justice;
(e) social development;
(f) economic development;
(g) employment and training;
(h) community and public health;
(i) capital infrastructure; and
(j) governance.
6. The First Nation has assumed responsibility for the recreational and community activities of the First Nation and has constructed the XXXXXXXXXX, which it maintains and manages. The First Nation has also established recreational programs for this facility.
7. The First Nation employs approximately XXXXXXXXXX Members to provide the above programs.
8. The First Nation has been authorized by order of the Governor in Council under Section 69 of the Indian Act to manage its own revenue monies.
9. The First Nation has passed money by-laws pursuant to Section 83 of the Indian Act, which provide for:
(a) the collection of taxes in relation to the use and occupation of the Reserves;
(b) the collection of taxes from any Indian or Band who acquires tobacco on any of the Reserves; and
(c) the collection of taxes from any person who purchases tobacco products, fuel or alcoholic beverages on any of the Reserves.
10. The First Nation has passed the following by-laws pursuant to Section 81 of the Indian Act:
(a) Animal Control By-law No. XXXXXXXXXX;
(b) By-Law No. XXXXXXXXXX for the Preservation, Protection and Management of Fish;
(c) Fishing By-law XXXXXXXXXX; and
(d) By-law No. XXXXXXXXXX Waste Management.
11. The First Nation recently incorporated XXXXXXXXXX (the "Corporation") under the laws of the Province of XXXXXXXXXX, with a business address at XXXXXXXXXX.
12. There is 1 issued and authorized share of the Corporation (the "Share"), which is held by XXXXXXXXXX in trust (the "Trust") for the sole and beneficial use and ownership of the First Nation, as represented by the Band Council. The Trust will act as an agent for the First Nation with respect to all dealings concerning the Share.
Proposed Transactions
13. The First Nation and the Corporation will enter into an agreement (the "Agreement") to form the XXXXXXXXXX (the "LP") pursuant to the Partnership Act (XXXXXXXXXX).
14. As the general partner under the Agreement, the Corporation will not be required to contribute any capital to the LP and will be allocated XXXXXXXXXX% of the income or losses of the LP.
15. The First Nation will contribute $XXXXXXXXXX to the capital of the LP in exchange for XXXXXXXXXX LP units at $XXXXXXXXXX each. As the only limited partner, the First Nation will be allocated XXXXXXXXXX% of the income or losses of the LP.
16. Income and losses for income tax purposes will be allocated to the First Nation and the Corporation in the same manner as described in 14 and 15 above.
17. The Partnership will carry on the business of fishing (the "Business"), i.e., catching and selling fish.
Purpose of the Proposed Transactions
The purpose of the proposed transactions is to allow the First Nation to carry on the Business without having to assume unlimited financial risk for its liabilities.
Ruling
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, we rule as follows:
A. The First Nation is a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c) of the Act and, accordingly, no tax will be payable under Part I of the Act by the First Nation on the income allocated by the LP as described in 15 above.
The above advance income tax ruling, which is based on the Act in its present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular IC 70-6R5, dated May 17, 2002, and is binding on the Canada Revenue Agency provided the proposed transactions are implemented before XXXXXXXXXX.
Yours truly,
XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch
??
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, 2004
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, 2004