9 November 2004 Internal T.I. 2004-0099111I7 - Indian employment income - stand by time

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: Can a reserve-resident status Indian employee include the hours during which he is "on call" in determining the percentage of employment duties performed on a reserve?

Position: No

Reasons: Stand-by time during which an employee is required to be available for work, but is not requested to work, is not considered to be related to a specific location on or off a reserve. Therefore, this time should not be taken into consideration in determining what percentage of employment duties are performed on a reserve for purposes of applying the Guidelines.

			November 9, 2004

	HEADQUARTERS		HEADQUARTERS
	Revenue Collections Branch			Income Tax Rulings
	Trust Accounts Division			  Directorate
				Renée Shields
	Attention:  Pat O'Connor			(613) 948-5273

				2004-009911

Status Indian Employment Income - Stand-by Time

This is in response to your memorandum of October 18, 2004 regarding the taxation of employment income earned by XXXXXXXXXX (the "Taxpayer"). The Taxpayer is a reserve-resident status Indian employed by XXXXXXXXXX. He reports for work to XXXXXXXXXX 37.5 hours per week. In addition, the Taxpayer is on call 24 hours a day, 7 days a week to deal with XXXXXXXXXX, on a number of reserves in the Province.

The Taxpayer receives regular wages for his 37.5 hours per week ("Base Salary"). If he is required to XXXXXXXXXX during regular working hours his remuneration is unchanged. XXXXXXXXXX, the Taxpayer receives wages for XXXXXXXXXX ("Stand-by Wages"). If required to XXXXXXXXXX while on call after hours, the Taxpayer is paid overtime ("Overtime Wages").

The Taxpayer contends that the hours he is on call should count as time spent performing employment duties on-reserve. As a result, in his opinion, all of his employment income would be exempt under Guideline 3. In our view, stand-by time (i.e. time during which the employee is required to be available for work, but was not requested to work) is not considered to be related to a specific location on or off a reserve. Accordingly, for purposes of determining whether the Taxpayer's employment income (Base Salary, Stand-by Wages or Overtime Wages) should be exempt under one of the Guidelines, stand-by time should not be taken into consideration in calculating the percentage of employment duties performed on or off a reserve.

In the event that the Taxpayer is called to an on-reserve XXXXXXXXXX, the time actually XXXXXXXXXX on the reserve (not including time in transit) would be relevant to the tax treatment of his employment income. If, over the course of a calendar year, such on-reserve time results in more than 50% of the Taxpayer's employment duties being performed on a reserve, then Guideline 3 may apply. However, if attending to on-reserve XXXXXXXXXX results in less than 50% of the Taxpayer's employment duties (but more than an incidental proportion - generally understood to be 10%) being performed on reserve, then the proration rule could be applied to the Overtime Wages related to on-reserve duties. It would be incumbent upon the Taxpayer to maintain records of time spent on reserves attending to XXXXXXXXXX in order to substantiate a tax exemption based on the Guidelines.

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 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.

Roxane Brazeau-LeBlond, C.A.

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