2006 Ruling 2006-0168841R3 - First Nation as a public body government

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 provides and administers many public works, social services and infrastructure programs. Further, the First Nation is engaged in negotiating a specific claim with Indian and Northern Affairs Canada

XXXXXXXXXX 								2006-016884

XXXXXXXXXX, 2006

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling - XXXXXXXXXX (the "First Nation")

This is in reply to your firm's letter of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the First Nation. We also acknowledge your firm's subsequent submissions of XXXXXXXXXX.

We understand that, to the best of your knowledge and that of the First Nation, none of the issues involved in this ruling is:

(i) in an earlier return of the First Nation 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 First Nation or a related person,

(iii) under objection by the First Nation or a related person,

(iv) before the courts, or

(v) the subject of a ruling previously issued by the Directorate to the First Nation or a related person, with the exception of Ruling 2004-009196 issued XXXXXXXXXX, 2006 (the "Prior Ruling").

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.

Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:

1. The First Nation is an Indian band as defined in subsection 2(1) of the Indian Act R.S.C. 1985, c.I-5, as amended. Its mailing address is XXXXXXXXXX.

2. The First Nation is served by the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Tax Centre.

3. The First Nation has a reserve, identified as XXXXXXXXXX (the "Reserve"), which satisfies the definition of "reserve" in section 2 of the Indian Act.

4. The First Nation has a total registered population of XXXXXXXXXX members with approximately XXXXXXXXXX members residing on the Reserve and approximately XXXXXXXXXX members residing off the Reserve.

5. The First Nation is governed by the XXXXXXXXXX, a band council comprised of a Chief and Council, elected pursuant to the custom of the First Nation under paragraph 2(1)(b) of the Indian Act (the "Band Council"). The term of office of elected members of the Band Council is XXXXXXXXXX years. The Band Council exercises control over the administration and development of Reserve lands, represents the First Nation's members in dealing with third parties, including the federal and provincial governments, and has the power to make by-laws in accordance with the Indian Act.

6. The First Nation is authorized, pursuant to section 69 of the Indian Act, to control the spending of its Indian moneys deposited to the revenue account established by the Department of Indian Affairs and Northern Development under the Indian Act.

7. The First Nation provides and administers an extensive list of public works, social services and infrastructure programs for its reserve-resident members including, but not limited to:

• XXXXXXXXXX.
• A water treatment and delivery system.
• The XXXXXXXXXX, which coordinates, oversees and manages all aspects of waste management and recycling. It also works in an advisory capacity to community members requiring environmental expertise.
• Housing programs.
• Legal services through the Court of XXXXXXXXXX, which provides judicial and para-judicial services to the community.

8. The First Nation provides 100% of the funding for the following public works, social services and infrastructure programs for its reserve-resident members:

• Fire protection through the XXXXXXXXXX, which provides reliable mobilization of fire and ambulance response units, practicing and providing rigorous programs of prevention, training, mutual aid and medical transportation.
• The XXXXXXXXXX, which administers and operates community schools on the reserve, such as the XXXXXXXXXX School and administers the programs and services for students attending schools off the Reserve.
• The XXXXXXXXXX, which provides in-patient and out-patient health care services. Programs provided include rehabilitation services, home care, dietician, ophthalmologist, optometrist, dental clinic, adult day centre, diabetic education, pharmacy and a prenatal and baby clinic.
• The XXXXXXXXXX organization, which provides health and social services programs to the community to encourage a healthier lifestyle. Services include health promotion, prevention programs, intervention and postvention programs, youth protection, adult care services, Organizational Development Services (which carries out community-based research and development, organizational research and development and human resource training and development), Healing the Family Circle (which provides awareness, education and activities using a holistic approach to promote healthy relationships and reduce violence in the home), Drama Project, Our Gang, MADD group, Brighter Futures Program, Addiction Services and an Independent Living Centre.
• The XXXXXXXXXX, which provides recreational, educational and social activities for youth in the community. It provides positive alternatives such as sports and fitness, crafts, summer camp and field trips for youth.
• The XXXXXXXXXX, which was established to preserve, promote and enrich the language and culture of the XXXXXXXXXX. Resources include a library, documentation centre, photographic archives and a language centre.
• The XXXXXXXXXX, which provides daycare and child care services to the community. It provides preschool programs and a variety of resource programs aimed at enriching child/family care and development. The First Nation has entered into an agreement with the government of the Province of XXXXXXXXXX with respect to support and funding of this facility.
• The XXXXXXXXXX, the mandate of which is to create jobs, wealth and self-sufficiency for the community by focusing new and existing resources, both human and financial, on an integrated approach to business development and human resource investment.

Although entirely funded by the First Nation, each of the foregoing entities is operated by its own Board of Directors. The Directors of these entities together with an Executive Director of the First Nation comprise what is called the "XXXXXXXXXX". The XXXXXXXXXX meets every month to review operations and to discuss planning.

9. The First Nation provides funding for several additional programs and services for its reserve-resident members. The Directors of these entities do not form part of the XXXXXXXXXX:

• XXXXXXXXXX.
• XXXXXXXXXX.
• XXXXXXXXXX.

10. The First Nation has passed resolutions concerning such matters as: Water and Sanitation Policy; Health Care and XXXXXXXXXX.

11. The First Nation is in the process of negotiating a specific claim with the Government of Canada, as represented by Indian and Northern Affairs Canada. The claim is known as the XXXXXXXXXX claim.

12. The Prior Ruling was issued to the Band Council on XXXXXXXXXX, 2006. The Prior Ruling deals with the establishment of a trust (the "Trust"), the purpose of which was to make it possible for ordinary commercial lenders, such as banks, to grant loans to status Indians acquiring on-reserve housing, in the absence of mortgage security in favour of the commercial lender. Under the arrangement described in the Prior Ruling, the XXXXXXXXXX would provide XXXXXXXXXX commercial lender with insurance even in the absence of mortgage security, on the strength of the Trust arrangement whereby the Trust will partially reimburse XXXXXXXXXX for claims made against XXXXXXXXXX by the commercial lender.

13. The First Nation is the beneficiary of the Trust described in the Prior Ruling. The terms of the Trust authorize annual distributions of income or capital to the First Nation provided XXXXXXXXXX approval is obtained and provided a specified minimum balance is maintained in the Trust.

Proposed Transactions

14. The First Nation will settle the Trust described in the Prior Ruling.

15. The Trust will make distributions of income and capital to the First Nation in accordance with the terms of the Trust, as described in 11, above.

Purpose of the Proposed Transactions

16. The purpose of the proposed transactions is to allow the First Nation to meet the conditions of the loan insurance program set up by XXXXXXXXXX to assist the First Nation to meet the on-Reserve housing needs of its 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:

Because 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 therefore exempt from tax under Part I of the Act, no tax will be payable under Part I by the First Nation on any amounts included in its income as a result of the proposed transactions described above.

The above advance income tax ruling, which is based on the Act and Regulations in their 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 70-6R5 Advance Income Tax Rulings, dated May 17, 2002, and is binding on the Canada Revenue Agency provided that the proposed transactions are completed by 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,

Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch