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: Does a particular First Nation qualify as a public body performing a function of government for purposes of paragraph 149(1)(c)?
Position: Yes
Reasons: The First Nation has entered into a Health Services Transfer Agreement with the federal government. The First Nation provides primary schooling to its Members. The First Nation provides and administers a fairly extensive list of public works, social services and infrastructure programs.
XXXXXXXXXX 2005-014200
XXXXXXXXXX, 2005
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling
XXXXXXXXXX (the "First Nation")
This is in reply to your letter of XXXXXXXXXX in which you request an advance income tax ruling on behalf of the above-named taxpayer. We also acknowledge your subsequent submission of XXXXXXXXXX and the information provided during our telephone conversations (XXXXXXXXXX).
We understand that, to the best of your knowledge and that of the taxpayer, none of the issues involved in the ruling request is:
(i) in an earlier return of the taxpayer or a related person,
(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a related person,
(iii) under objection by the taxpayer or a related person,
(iv) before the courts, or
(v) the subject of a ruling previously issued by the Directorate to the taxpayer or a related person.
Unless otherwise stated, all references to a statute are to the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.), as amended to the date of this letter, (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.
Facts:
Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:
1. The First Nation is a "band" within the meaning of this term as defined under subsection 2(1) of the Indian Act.
2. The First Nation has one reserve, located XXXXXXXXXX (the "Reserve"), within the meaning of this term as defined under subsection 2(1) of the Indian Act. The Reserve is comprised of approximately XXXXXXXXXX.
3. The First Nation's mailing address is XXXXXXXXXX. It is served by the XXXXXXXXXX Tax Services Office and files its returns with the XXXXXXXXXX Tax Centre.
4. The First Nation has approximately XXXXXXXXXX members (the "Members"), approximately XXXXXXXXXX of which live on the Reserve. All of the Members of the First Nation are status Indian for purposes of the Indian Act.
5. All of the First Nation's offices, along with any facilities under its control, are located on the Reserve. These facilities include:
? band offices,
? primary school,
? police station,
? fire hall,
? public works offices,
? adult education centre,
? community centre,
? library,
? health centre,
? water pump house,
? sewage lift station and lagoons,
? garbage transfer station,
? playground, and
? ball field.
6. The First Nation's chief and council are democratically elected by the Members under Band Custom and are responsible for governance of the First Nation. They represent the First Nation in all matters.
7. The First Nation maintains a number of programs through funding provided by Indian and Northern Affairs Canada ("INAC") under a Comprehensive Funding Agreement. Some of these programs include:
? police, fire and emergency services;
? economic development;
? education services;
? communication services;
? forestry services;
? family support services;
? youth services;
? community services;
? social and education counselling;
? literacy enhancement;
? road and public work maintenance;
? garbage collection;
? child development services;
? health services;
? social housing;
? animal control; and
? social assistance.
8. The First Nation operates a housing support program to assist eligible Members with the construction of homes on the Reserve.
9. The First Nation maintains its own water and sewage systems on the Reserve.
10. The First Nation owns and operates an elementary school for children up to grade 4 and provides bus services to XXXXXXXXXX for children in grades 5 to 8. The First Nation also provides bus service to secondary school age children to a secondary school located in XXXXXXXXXX.
11. The First Nation has passed by-laws pursuant to section 81 of the Indian Act. The section 81 by-laws have specific enforcement procedures set out in the by-law itself and pertain to:
? preservation of wildlife;
? observance of law and order for the prevention of disorderly conduct and nuisance;
? establishment of community centre for public games;
? regulation of the sale and use of fireworks pyrotechnic devises;
? regulation of traffic;
? construction and repair of housing;
? regulation of health; and
? animal control respecting the control of dogs.
12. Pursuant to section 83 of the Indian Act, the First Nation has enacted a financial administration by-law that is currently awaiting ministerial approval and is currently in the process of developing an additional by-law regarding taxation.
13. In XXXXXXXXXX, the First Nation constructed an independent living centre for the First Nation's elders.
14. The First Nation has entered into a Health Services Transfer Agreement with Her Majesty in right of the Government of Canada in XXXXXXXXXX.
15. The First Nation has entered into a Memorandum of Understanding with XXXXXXXXXX
Proposed Transactions
16. The First Nation will incorporate a new wholly-owned corporation (the "Corporation") under the XXXXXXXXXX Business Corporations Act.
17. The First Nation and the Corporation will enter into a limited partnership agreement (the "Agreement") where the First Nation will be the limited partner subscribing to XXXXXXXXXX partnership units and the Corporation, as the general partner, will acquire XXXXXXXXXX partnership unit.
18. The limited partnership (the "LP") will begin operations in the XXXXXXXXXX business and will undertake the XXXXXXXXXX project, as noted in 15 above, as their first business venture.
19. 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.
20. As the only limited partner, the First Nation will be allocated XXXXXXXXXX% of the income or losses of the LP.
21. Income and losses for income tax purposes will be allocated to the Corporation and the First Nation in the same manner as described in 19 and 20 above.
22. The Agreement stipulates that there will be no distribution of assets to the partners of the LP except upon its dissolution. Income may be distributed to the partners in the same manner as described in 19 and 20 above.
Purpose of the Proposed Transactions
The purpose of the proposed transactions is to provide the First Nation with a source of funding over the longer-term for their governance obligations and to promote economic development and employment opportunities to the First Nation Members.
Ruling Given
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 20 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.
Note:
This letter is based solely on the facts and proposed transactions described above. The documentation submitted with your request does not form part of the facts and proposed transactions and any references thereto are provided solely for the convenience of the reader.
Yours truly,
XXXXXXXXXX
for Director
Financial Sector and Exempt Entities 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, 2005
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, 2005
Email this Content