2008 Ruling 2008-0295711R3 - Indian Band-Public Body & Function of 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: Is the Indian band a public body performing a function of government?

Position: Yes.

Reasons: The Indian Band is governed by an elected band council. The Indian Band performs several functions of government. The Indian Band has passed by-laws under the FSMA regarding property taxation. The Indian Band has a Health Services Transfer Agreement with Health Canada for various health services. The Indian Band operates, in conjunction with XXXXXXXXXX other First Nation communities, a community school for grades kindergarten to 12. The Indian Band provides for its community public works, social programs and infrastructure, such as road maintenance, fire protection and community water supply and maintenance.

XXXXXXXXXX
2008-029571

XXXXXXXXXX , 2008

Dear XXXXXXXXXX :

Re: Advance Tax Ruling - XXXXXXXXXX (the "Indian Band")

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 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.

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

Definitions:

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

(a) "Indian Act" means the Indian Act, R.S.C. 1985, c.I-5, as amended; and

(b) "Reserve" means those lands identified as:

XXXXXXXXXX

Facts:

1. The Indian Band is a "band" as defined in subsection 2(1) of the Indian Act.

2. The Reserve is a "reserve'" as defined in subsection 2(1) the Indian Act.

3. The mailing address for the Indian Band is XXXXXXXXXX . The Indian Band is serviced by the XXXXXXXXXX Tax Services Office and files its returns with the XXXXXXXXXX Tax Centre. The business number for the Indian Band is XXXXXXXXXX .

4. The Indian Band is comprised of approximately XXXXXXXXXX members (the "Members"), of whom approximately XXXXXXXXXX live on the Reserve.

5. The Indian Band is governed by a band council, comprised of a chief and a council. The chief and council are elected pursuant to the Indian Act (the "Band Council"). The term of the office of the Band Council is XXXXXXXXXX years. The Band Council exercises control over the administration and development of the Reserve, represents the Members in dealing with third parties, including the provincial and federal governments, and has the power to make by-laws in accordance with the Indian Act.

6. The Band Council has appointed standing committees with respect to the following areas:

i. education;
ii. social development;
iii. finance;
iv. housing;
v. community economic development and natural resources;
vi. aboriginal rights and title; recreation; and
vii. health.

7. The Indian Band has established comprehensive financial management and accountability policies. Such policies include the presentation of annual budgets to the Members for approval, the presentation of audits to the Members, an auditor tendering process and general conflict resolution.

8. XXXXXXXXXX

9. XXXXXXXXXX .

10. The Indian Band administers a number of programs for the Members, in part through funding provided by Indian and Northern Affairs Canada ("INAC"), including programs that relate to:

i. social development;
ii. education programs for kindergarten to grade 12;
iii. post-secondary programs;
iv. village maintenance; and
v. various capital projects.

11. Under a health services transfer agreement entered into with Health Canada in XXXXXXXXXX , the Indian Band manages health services for the Members in respect of the following:

i. a community health nurse,
ii. a nutritionist;
iii. home care nurses;
iv. mental health;
v. alcohol and drug addiction;
vi. elder care;
vii. youth care; and
viii. child advocacy.

12. The Indian Band provides and administers an extensive list of public works, social services and infrastructure programs for the Members including, but not limited to:

i. recreational programming;
ii. road maintenance;
iii. community planning;
iv. fire protection;
v. snow removal;
vi. flood protection;
vii. community water supply and maintenance; and
viii. managing XXXXXXXXXX provincial parks in the general area.

13. With the assistance of funds provided by INAC, the Indian Band, in conjunction with the First Nation communities of XXXXXXXXXX , operates the XXXXXXXXXX community school for students in kindergarten through to, and including, grade 12. This includes school operations and maintenance, school transportation and general programming. The XXXXXXXXXX community school is situated on the Reserve.

14. In addition to the XXXXXXXXXX community school, the Indian Band owns and operates the XXXXXXXXXX (a provincially licensed infant/toddler centre), before and after school care, and a preschool for four year olds. The XXXXXXXXXX , the before and after school care and the preschool are situated on the Reserve.

15. The Indian Band owns and maintains the following public facilities on the Reserve:

i. an administration office;
ii. a youth centre;
iii. a medical center;
iv. a school;
v. a preschool; and
vi. various other public works facilities.

16. The Indian Band has established laws in relation to the taxation of real property pursuant to the First Nations Fiscal and Statistical Management Act, S.C. 2005 c.9 (the "FSMA"). XXXXXXXXXX. These laws have been put to the First Nations Tax Commission (as appointed under the FSMA) for approval and have been approved.

Proposed Transaction

The Indian Band will purchase, with cash, a $XXXXXXXXXX redeemable, renewable, guaranteed investment certificate (the "GIC") issued by XXXXXXXXXX through the branch located at XXXXXXXXXX . This GIC will earn interest at a rate of XXXXXXXXXX %.

Purpose of the Proposed Transaction

The purpose of the proposed transaction is to generate additional income for the Indian Band to fund and support the governance, public works, infrastructure, social services and general development of the Indian Band.

Ruling Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purposes of the proposed transactions, we rule as follows:

Because the Indian Band 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 of the Act by the Indian Band on any interest from the GIC included in its income as a result of the proposed transaction 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 transaction is completed by XXXXXXXXXX .

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
A/Manager
Non-Profit Organizations and Aboriginal Issues Section
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch