2009 Ruling 2008-0294231R3 - Paragraph 149(1)(c); Limited Partnership

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) of the Act will apply to certain First Nations to exempt the partnership income allocated to these First Nations by a limited partnership. Whether proposed paragraph 149(1)(d.5) of the Act will apply to exempt business income earned by a corporation owned by a First Nation. Whether paragraph 149(1)(c) of the Act will apply to the First Nation to exempt income received from its wholly-owned corporation.

Position: Yes, paragraph 149(1)(c) of the Act will apply to all four First Nations to exempt income received from the limited partnerships and the corporation. As paragraph 149(1)(d.5) of the Act is proposed, we cannot provide a ruling but we can comment that if the paragraph is enacted as proposed the current structure of the corporation and the proposed transaction are such that income earned by the corporation from a limited partnership will be exempt from tax.

Reasons: All four First Nations represent their members and provide to their members services similar to those provided by a municipality. The corporation will be wholly owned by the First Nation. The corporation will be earning income through a limited partnership from activities carried on in a province under a written agreement with a provincial crown corporation.

XXXXXXXXXX 									2008-029423

XXXXXXXXXX , 2009

Dear XXXXXXXXXX :

Re: Advance Income Tax Ruling Request
XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX , in which you requested an advance income tax ruling on behalf of the above-named taxpayers. We also acknowledge your subsequent submissions of XXXXXXXXXX , and related telephone conversations (XXXXXXXXXX ).

We understand that, to the best of your knowledge and that of the taxpayers, none of the issues involved in the ruling request is:

(i) in an earlier return of the taxpayers 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 taxpayers or a related person,
(iii) under objection by the taxpayers or a related person,
(iv) before the courts, or
(v) the subject of a ruling previously issued by the Directorate to the taxpayers 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.

DEFINITIONS

In this letter, the following terms have the meanings specified:

XXXXXXXXXX

"XXXXXXXXXX Project" is a project involving the construction, ownership and operation of a XXXXXXXXXX ;

"XXXXXXXXXX " means the Province of XXXXXXXXXX ;

"XXXXXXXXXX " means the corporation XXXXXXXXXX , all of the shares of which are owned by XXXXXXXXXX and which is controlled and operated by XXXXXXXXXX through the XXXXXXXXXX ;

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

FACTS

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

XXXXXXXXXX

1. XXXXXXXXXX began development of XXXXXXXXXX on the XXXXXXXXXX for the purpose of producing XXXXXXXXXX in the late XXXXXXXXXX . The first of XXXXXXXXXX projects completed was the XXXXXXXXXX in XXXXXXXXXX .

2. In the early XXXXXXXXXX XXXXXXXXXX began construction of the XXXXXXXXXX projects. The XXXXXXXXXX projects produced adverse effects on the lands traditionally used by the First Nations.

3. XXXXXXXXXX

4. XXXXXXXXXX

5. As a result of the above mentioned agreements, XXXXXXXXXX must provide notice to the First Nations of any planned developments in the area of the First Nations' traditional lands.

XXXXXXXXXX

6. XXXXXXXXXX is an Indian Band, as defined by the Indian Act. The community is located in XXXXXXXXXX . XXXXXXXXXX has XXXXXXXXXX reserves all in XXXXXXXXXX and is where the majority of members reside. As of XXXXXXXXXX , the population of XXXXXXXXXX was XXXXXXXXXX . Approximately XXXXXXXXXX band members live on reserve lands.

7. XXXXXXXXXX mailing address is XXXXXXXXXX is served by the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Tax Centre. Its business number is XXXXXXXXXX .

8. XXXXXXXXXX is governed by an elected council consisting of an elected Chief and XXXXXXXXXX council members. It conducts elections in accordance with section 74 of the Indian Act. The band has created an election code, which must be ratified by the community and will be submitted to the Minister of Indian Affairs.

9. XXXXXXXXXX is affiliated with the XXXXXXXXXX and is a member of the XXXXXXXXXX .

10. XXXXXXXXXX has established nine departments to assist its elected council. Each department has established policies and procedures and is managed by a program director who reports to the member of council responsible for the department. The departments are:

(a) Finance and Administration;
(b) Intergovernmental Affairs;
(c) Public Works;
(d) Health & Welfare;
(e) Economic Development;
(f) Education & Training;
(g) Natural Resources;
(h) Future Development; and
(i) Culture & Recreation and Policing and Emergency Response Services.

11. XXXXXXXXXX has been involved in community planning with the purpose of providing and enhancing services to its members since the late XXXXXXXXXX . These plans are updated regularly to reflect changes and ideas from the members.

12. XXXXXXXXXX update outlined new services which are now being offered to the members, and projects which are partially or totally completed. These services and projects include:

(a) the creation and operation of a nursing station;
(b) providing personal home care;
(c) building a new office for the finance department;
(d) expanding the existing arena;
(e) construction and opening of XXXXXXXXXX ;
(f) expanding the school;
(g) completing wastewater and water servicing upgrades;
(h) upgrading the roads;
(i) upgrading drainage; and
(j) creating a new landfill cell.

13. XXXXXXXXXX , through its Chief and council provides the following community functions to its members:

(a) Education: Around XXXXXXXXXX assumed control of the education program XXXXXXXXXX and established the XXXXXXXXXX which is responsible for all education in the community. The XXXXXXXXXX administers programs from kindergarten to Grade 12, as well as programs at a post-secondary level for members attending college or university off-reserve. There is one school on the reserve, with a population of approximately XXXXXXXXXX students. The school is operated by a school board consisting of XXXXXXXXXX elected representatives.

(b) The operation of a regional learning centre which provides adult literacy and upgrading programs. XXXXXXXXXX has a partnership agreement with the XXXXXXXXXX to provide XXXXXXXXXX members with courses annually based on members' interests.

(c) A community and employment training program established in XXXXXXXXXX which provides support and assistance to members preparing themselves for employment both on and off the reserve. XXXXXXXXXX .

(d) Child and family services are provided under an agreement with the XXXXXXXXXX .

(e) Social programs including:

I. welfare assistance;
II. the provision of elder care; and
III. the provision of home care;

(f) assisting members in finding work opportunities;
(g) the provision of community outreach programs;
(h) offering counselling and programs for those with addiction or abuse issues; and
(i) the provision of social housing.

14. XXXXXXXXXX administers various First Nations, Aboriginal and Inuit health programs XXXXXXXXXX . These services include:

(a) providing non-insured health benefits;
(b) operating the "Environmental Health Program";
(c) operating the "Aboriginal Diabetes Initiative";
(d) offering the "Home and Community Care Program";
(e) operating the "Aboriginal Head Start On Reserve" program;
(f) operating the "Canada Prenatal Nutrition Program";
(g) operating the "Fetal Alcohol Spectrum Disorder Program"; and
(h) providing integrated health services.

15. XXXXXXXXXX funds and operates a recreation program focused on youth participation in sports and cultural events.

16. XXXXXXXXXX funds, operates and maintains numerous community facilities including:

(a) an administration office;
(b) a public works garage;
(c) a band hall;
(d) a youth centre;
(e) a band constable station;
(f) an indoor arena;
(g) a daycare centre;
(h) a nursing station;
(i) a personal care home;
(j) XXXXXXXXXX ; and
(k) teachers' housing.

17. XXXXXXXXXX has a public works department which operates and maintains the following community infrastructure on the reserve:

(a) a road system of approximately XXXXXXXXXX kilometres within the community;
(b) water and wastewater treatment plants;
(c) a sanitary landfill;
(d) essential services including fire protection and emergency response services;
(e) a volunteer fire department comprised of XXXXXXXXXX members;
(f) an ambulance service;
(g) a band constable program, which has XXXXXXXXXX staff; and
(h) security services for all its community facilities.

18. The XXXXXXXXXX was established and operates under an agreement with XXXXXXXXXX . Its mandate is to regulate XXXXXXXXXX is governed by a board of directors consisting of XXXXXXXXXX members of XXXXXXXXXX . It is accountable to the members of XXXXXXXXXX through the Chief and council.

19. XXXXXXXXXX established, funds and operates a XXXXXXXXXX which XXXXXXXXXX within the community.

20. XXXXXXXXXX established a Future Development department which is responsible for implementing and enforcing on-going agreements between the XXXXXXXXXX , and provincial and federal governments or agencies or departments of these governments. These agreements include:

(a) XXXXXXXXXX : employment provisions and provisions related to XXXXXXXXXX continue to be dealt with under the terms of this agreement.

(b) XXXXXXXXXX
(c) XXXXXXXXXX

(d) In XXXXXXXXXX , XXXXXXXXXX signed an agreement to monitor water levels and flows XXXXXXXXXX in relation to the operating water regime established under the XXXXXXXXXX should outside events cause the established parameters to be unable to be met. An amendment to this agreement is currently being negotiated XXXXXXXXXX .

21. The XXXXXXXXXX created resource co-management arrangements with the purpose of discussing, planning and making decisions about land and resource management including the issuing of permits and licenses for land use and resource harvesting in an area defined XXXXXXXXXX is governed by a board of directors consisting of XXXXXXXXXX .

XXXXXXXXXX

22. XXXXXXXXXX is an Indian Band, as defined by the Indian Act. The community is located in XXXXXXXXXX has one reserve consisting of approximately XXXXXXXXXX has a land entitlement of approximately XXXXXXXXXX . As of XXXXXXXXXX , the population of XXXXXXXXXX was XXXXXXXXXX individuals, with XXXXXXXXXX living on reserve land XXXXXXXXXX .

23. XXXXXXXXXX mailing address is XXXXXXXXXX is served by the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Tax Centre. Its business number is XXXXXXXXXX .

24. XXXXXXXXXX has an elected Chief and council. Elections are held under customs established and documented by XXXXXXXXXX . XXXXXXXXXX council currently consists of XXXXXXXXXX council members and the Chief. XXXXXXXXXX .

25. XXXXXXXXXX has established the following four departments to assist the Chief and council:

(a) Finance and Administration;
(b) Health and Social Services;
(c) Education; and
(d) Public Works.

26. Each department listed in 25 herein has established policies and procedures in place and is managed by a program director who reports to the Chief and council. Annual plans and budgets are developed and followed. The Chief and council have developed a XXXXXXXXXX and are currently developing a long term economic strategy.

27. XXXXXXXXXX manages and administers the following programs on behalf of its members:

(a) An education program for members living both on and off the reserve. XXXXXXXXXX offers kindergarten to XXXXXXXXXX and is operated in conjunction with the XXXXXXXXXX . XXXXXXXXXX manages and administers a post secondary education program for members attending college or university XXXXXXXXXX .

(b) XXXXXXXXXX on the reserve, which offers adult literacy and upgrading classes in conjunction with XXXXXXXXXX .

(c) A community employment and training program, which provides support and financial assistance to members training in trades and other technical or professional careers who hope to find employment XXXXXXXXXX .

(d) A variety of health care XXXXXXXXXX . The programs include:

a. "Brighter Futures";
b. "Building Healthy Communities" (support for mental health and solvent abuse);
c. the Environmental Health Program;
d. the Home and Community Care Program;
e. the Canada Prenatal Nutrition Program; and
f. the "National Native Alcohol and Drug Abuse Program."

28. XXXXXXXXXX delivers the following social programs for members of the community:

(a) the provision of welfare;
(b) the provision of elder care;
(c) the provision of home care;
(d) assistance to members in finding work opportunities;
(e) the provision of community outreach programs; and
(f) the provision of social housing.

29. XXXXXXXXXX funds, administers, operates and maintains several community facilities including an administration office, a public works garage, a band hall and a daycare centre.

30. XXXXXXXXXX public works department maintains community infrastructure, including a road system of approximately XXXXXXXXXX kilometres of road on the reserve and a sanitation vehicle.

31. XXXXXXXXXX is currently developing a long term economic strategy to enhance its participation in the provincial economy.

32. XXXXXXXXXX

XXXXXXXXXX

33. XXXXXXXXXX is an Indian Band, as defined by the Indian Act. It has XXXXXXXXXX reserves all located in XXXXXXXXXX .

34. XXXXXXXXXX mailing address is XXXXXXXXXX . It is served by the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Tax Centre. XXXXXXXXXX business number is XXXXXXXXXX .

35. XXXXXXXXXX

36. XXXXXXXXXX is represented by a Chief and XXXXXXXXXX council members who are elected through the customary practices of the Band. Elections and the procedures to follow are decided upon XXXXXXXXXX at public community meetings. All decisions made by the Chief and council are made at meetings called in accordance with XXXXXXXXXX customs, and only when a quorum is present.

37. XXXXXXXXXX established the following four departments to assist the Chief and its elected council:

(a) Finance and Administration;
(b) Health and Social Services;
(c) Education; and
(d) Public Works.

38. Each department listed in 37 herein is managed by a Program Director who reports to the Chief and council and is responsible to the members of the community. Annual plans and budgets are developed for each department.

39. XXXXXXXXXX . Under these agreements XXXXXXXXXX has been given the responsibility for providing the following services to its members:

(a) Social services including:

a. welfare;
b. elder care;
c. home care;
d. work opportunities;
e. community outreach; and
f. social housing.

(b) XXXXXXXXXX :

a. the Brighter Futures Program;
b. the Building Healthy Communities Program (support for mental health and solvent abuse);
c. the Environmental Health Program;
d. the Home and Community Care Program;
e. the Canada Prenatal Nutrition Program;
f. the National Native Alcohol and Drug Abuse Program; and

(c) community facilities and infrastructure, including:

a. an administration office;
b. a public works garage;
c. a band hall;
d. a youth centre;
e. a band constable station;
f. an indoor arena;
g. a daycare centre;
h. a nursing station;
i. a personal care home;
j. XXXXXXXXXX ; and
k. teacher's housing.

(d) Economic development;
(e) Housing;
(f) Community services; and
(g) Operations and maintenance.

40. XXXXXXXXXX also provides the following services and programs to members of its community:

(a) a primary school which offers classes from kindergarten to Grade 8;
(b) a post-secondary education program for members attending college or university in XXXXXXXXXX ;
(c) XXXXXXXXXX which provides support and financial assistance to members training in trades and other technical or professional careers in preparation for employment XXXXXXXXXX ;
(d) adult literacy and upgrading classes are offered at the learning centre in cooperation with XXXXXXXXXX ;
(e) a public works department which offers, services, maintains and operates:

I. the road system;
II. the water and waste treatment plant system;
III. home repairs;
IV. the sanitary landfill;
V. garbage pickup;
VI. policing services which employs one band constable; and
VII. an emergency measures program which provides first responders and medical transportation to the community.

41. A joint committee called the XXXXXXXXXX was established under XXXXXXXXXX . The board consists of representatives from XXXXXXXXXX and has responsibility to promote land use planning and resource management plans. The board also engages in strategic planning in response to initiatives XXXXXXXXXX .

42. XXXXXXXXXX has established or is in the process of establishing the following programs to assist its members with the XXXXXXXXXX :

(a) XXXXXXXXXX : its purpose is to provide XXXXXXXXXX with the tools and resources required to XXXXXXXXXX ;
(b) XXXXXXXXXX : this program encourages and fosters the strengthening of communal traditional and cultural infrastructure among XXXXXXXXXX ;
(c) XXXXXXXXXX : this program provides an alternative method of dealing with situations involving the justice system and XXXXXXXXXX ;
(d) XXXXXXXXXX : this program provides safe and secure emergency shelter as well as intervention, personal capacity building and public education;
(e) XXXXXXXXXX : the purpose of this program is to provide XXXXXXXXXX and visitors with an understanding and appreciation for the culture, history, life experiences and traditions XXXXXXXXXX ;
(f) XXXXXXXXXX whose purpose is to identify, re-consecrate and protect community burial sites;
(g) XXXXXXXXXX : the purpose of this program is to strengthen the cultural identity of XXXXXXXXXX by creating an opportunity XXXXXXXXXX to speak XXXXXXXXXX ;
(h) XXXXXXXXXX : the purpose of this program is to provide opportunities for young adult members of XXXXXXXXXX to experience a traditional lifestyle over a year's cycle of seasonal activities; and
(i) XXXXXXXXXX : the purpose of this program is to provide XXXXXXXXXX who are resource users, and whose resource use area will experience adverse effects XXXXXXXXXX .

XXXXXXXXXX

43. XXXXXXXXXX is an Indian Band, as defined by the Indian Act. The community has one reserve, the XXXXXXXXXX , located at XXXXXXXXXX . The reserve is the main community for XXXXXXXXXX . As of XXXXXXXXXX there were XXXXXXXXXX members of XXXXXXXXXX , with XXXXXXXXXX of these members living on the reserve.

44. XXXXXXXXXX mailing address is XXXXXXXXXX . XXXXXXXXXX is served by the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Tax Centre. Its business number is XXXXXXXXXX .

45. XXXXXXXXXX

46. XXXXXXXXXX

47. XXXXXXXXXX

48. XXXXXXXXXX established a joint committee known as the XXXXXXXXXX , which consists of representatives from XXXXXXXXXX . The board handles resource issues which affect XXXXXXXXXX . The functions of the board are to:

(a) investigate fish, wildlife, forest, plant, land and water resources, their use and any influences on them;
(b) monitor activities within the resource management area;
(c) propose subjects for research;
(d) prepare information and communication strategies;
(e) consult with members and others publicly and privately;
(f) develop and recommend resource management plans;
(g) develop and recommend land use plans; and
(h) carry out any other duties as determined by XXXXXXXXXX .

49. XXXXXXXXXX

50. XXXXXXXXXX

51. XXXXXXXXXX

52. XXXXXXXXXX is represented by a Chief and XXXXXXXXXX councillors who are elected through customary practice. The Chief and councillors make decisions at meetings called in accordance with these customs, and only if a quorum is present.

53. Decisions regarding elections and electoral procedures are made by members of the band through public community meetings. XXXXXXXXXX .

54. XXXXXXXXXX has established the following departments to support and assist the Chief and council:

(a) Finance and Administration;
(b) Health;
(c) Education-XXXXXXXXXX ;
(d) Housing-XXXXXXXXXX ;
(e) Social Services; and
(f) Public Works.

55. XXXXXXXXXX . Through this agreement, XXXXXXXXXX administers and delivers the following community programs:

(a) Social services including:

a. the provision of welfare;
b. the provision of elder care (through the XXXXXXXXXX );
c. the provision of home care;
d. operating a daycare (through the XXXXXXXXXX ); and
e. arranging child and family services, which are provided through the XXXXXXXXXX of which XXXXXXXXXX is a member.

(b) Community facilities and infrastructure including:

a. an administrative office building;
b. a public works garage;
c. a band hall;
d. a youth centre;
e. a band constable/RCMP station;
f. a fire hall;
g. a daycare centre;
h. teacher's housing;
i. an indoor arena; and
j. XXXXXXXXXX .

(c) Economic development.

(d) Community services such as:

a. water and sewer services;
b. fire protection;
c. road construction and maintenance; and
d. garbage pick-up.

(e) Education is provided through the XXXXXXXXXX , which operates the XXXXXXXXXX on the reserve. The school offers education for up to XXXXXXXXXX students from kindergarten to Grade 9. The authority also administers a secondary education program for members attending schools inXXXXXXXXXX . In addition there is a post secondary program offered for members attending college or university in XXXXXXXXXX .

56. XXXXXXXXXX the following programs:

(a) Building Healthy Communities;
(b) Brighter Futures;
(c) non-insured health benefits, specifically medical transportation;
(d) Environmental Health Program (drinking water program);
(e) the National Native Alcohol and Drug Abuse Program;
(f) the Aboriginal Head Start On Reserve Program;
(g) the "Community Health Promotion and Injury/Illness Prevention Program"; and
(h) security services in health facilities.

57. XXXXXXXXXX .

58. XXXXXXXXXX

59. XXXXXXXXXX

60. XXXXXXXXXX also delivers the following services and programs:

(a) the maintenance of community infrastructure on reserve including XXXXXXXXXX of all weather roads, XXXXXXXXXX , water and sewage lines, a water treatment plant, a sewage lagoon and a sanitary landfill; and

(b) policing services which employs XXXXXXXXXX band constables, XXXXXXXXXX .

61. XXXXXXXXXX has passed a by-law under XXXXXXXXXX .

XXXXXXXXXX

62. In XXXXXXXXXX , XXXXXXXXXX initiated discussions with XXXXXXXXXX to explore the possibility of XXXXXXXXXX purchasing XXXXXXXXXX , an agreement in principle was signed by XXXXXXXXXX . The agreement in principle established the principles governing the negotiation of the XXXXXXXXXX .

63. XXXXXXXXXX were invited to join as XXXXXXXXXX in the project and on XXXXXXXXXX .

PROPOSED TRANSACTIONS

XXXXXXXXXX

64. XXXXXXXXXX will establish the XXXXXXXXXX to hold their joint interest in the XXXXXXXXXX corporation XXXXXXXXXX .

65. All income and losses of the XXXXXXXXXX , for both accounting and income tax purposes, will be allocated to each First Nation partner and the general partner in proportion to the number of limited partnership units held by each of them.

66. XXXXXXXXXX will incorporate a corporation under the XXXXXXXXXX Business Corporations Act. All the shares of this corporation will be owned by XXXXXXXXXX . The corporation intends to pay XXXXXXXXXX for each year in which the financial position of the corporation allows for such a payment.

67. XXXXXXXXXX will establish the XXXXXXXXXX . XXXXXXXXXX will be the limited partner and will hold XXXXXXXXXX % of the units of the limited partnership. The general partner will hold XXXXXXXXXX % of the limited partnership units and will be a corporation incorporated by XXXXXXXXXX under the XXXXXXXXXX Business Corporations Act. XXXXXXXXXX will hold all the shares of the general partner.

68. The income and losses of the XXXXXXXXXX , for both accounting and income tax purposes, will be allocated to XXXXXXXXXX and the general partner in proportion to the number of limited partnership units held by each of them.

XXXXXXXXXX

69. The XXXXXXXXXX will be signed by XXXXXXXXXX . The agreement acknowledges that the XXXXXXXXXX .

70. The XXXXXXXXXX provides that the parties will establish the XXXXXXXXXX to complete the planning and design of the XXXXXXXXXX and to carry on the business of the XXXXXXXXXX . The general partner will be a wholly-owned subsidiary of XXXXXXXXXX (the "XXXXXXXXXX General Partner"). The limited partners will be the XXXXXXXXXX .

71. XXXXXXXXXX will operate and maintain XXXXXXXXXX and control the operation and dispatch of the XXXXXXXXXX on the terms set out in the XXXXXXXXXX .

72. XXXXXXXXXX will purchase from the XXXXXXXXXX all of the XXXXXXXXXX on the terms set out in the XXXXXXXXXX .

73. The XXXXXXXXXX may determine, at any time prior to the date on which XXXXXXXXXX , that it does not wish to proceed with the construction of the XXXXXXXXXX in which case the XXXXXXXXXX will terminate in the manner provided in the XXXXXXXXXX .

74. The XXXXXXXXXX will make a substantial construction start XXXXXXXXXX .

75. Under the terms of the XXXXXXXXXX , the XXXXXXXXXX will enter into agreements with each First Nation to address adverse effects arising from the XXXXXXXXXX .

76. Members of the First Nations have had and will continue to have opportunities for pre-project training for jobs on the XXXXXXXXXX as described in the XXXXXXXXXX . As well, there will be opportunities for members of the First Nations to be employed by contractors, including First Nation businesses, in the construction of the XXXXXXXXXX .

XXXXXXXXXX

77. XXXXXXXXXX

78. XXXXXXXXXX

79. XXXXXXXXXX

80. The income and losses of the XXXXXXXXXX , for both accounting and income tax purposes will be allocated to XXXXXXXXXX in proportion to the number of limited partnership units of XXXXXXXXXX held by each of them. XXXXXXXXXX .

XXXXXXXXXX

PURPOSE OF PROPOSED TRANSACTIONS

82. The purpose of the proposed transactions is to allow each of the First Nations to participate in the economic benefits derived from the XXXXXXXXXX and thereby create employment for their members and generate income to support the governance, public works, infrastructure and development of the First Nations.

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:

RULINGS

A. Because XXXXXXXXXX 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 on the partnership income allocated to XXXXXXXXXX .

B. Because XXXXXXXXXX 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 on the partnership income allocated to XXXXXXXXXX from the XXXXXXXXXX .

C. Because XXXXXXXXXX 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 on the XXXXXXXXXX .

D. Because XXXXXXXXXX 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 on the partnership income allocated to XXXXXXXXXX .

The above advance income tax rulings, which are based on the Act and Regulations in their present form and do not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R5 Advance Income Tax Rulings, dated May 17, 2002, and are binding on the Canada Revenue Agency provided that the proposed transactions are completed by XXXXXXXXXX .

OPINIONS

The following opinions are given provided that subsections 148(1) and (4) of the proposed legislation contained in Bill C-10 (Second Senate Reading December 4, 2007),1 which amend paragraphs 149(1)(d.5) and 149(1.2)(a) of the Act respectively, as applicable to taxation years that begin after May 8, 2000, are enacted as proposed:

1. Provided that the ownership of XXXXXXXXXX remains as described in 66 herein, XXXXXXXXXX will be exempt from taxation under Part I of the Act by virtue of proposed paragraph 149(1)(d.5) of the Act for any amounts received XXXXXXXXXX .

2. We confirm that paragraph 149(1.2)(a) applies such that the income of XXXXXXXXXX from activities carried on outside the geographical boundaries of XXXXXXXXXX does not include the partnership income allocated to XXXXXXXXXX .

In accordance with paragraph 22 of Information Circular 70-6R5, the comments in the immediately preceding paragraphs are only an expression of opinion, and as such should not be construed as an advance income tax ruling, nor are they binding on the Canada Revenue Agency.

CAVEATS

Nothing in this letter should be construed as implying that the Canada Revenue Agency has reviewed any of the partnership agreements referred to in the facts or proposed transactions set out above. In particular, this letter does not confirm that:

1. any of the partnership agreements referred in this letter create a legal partnership for income tax purposes;

2. the Canada Revenue Agency has agreed to or accepted either expressly or implicitly the reasonableness of any allocations of income referred to in this letter.

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,

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

ENDNOTES

1 Bill C-10 received second reading in the Senate on December 4, 2007 but Parliament was prorogued before this bill was enacted. The proposed amendments contained in this bill have yet to be re-introduced.