6 October 2011 Ministerial Correspondence 2011-0420371M4 - Application of Bill C-3

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 ten year tax refund is available to Indian who is newly entitled to be registered under Bill C-3.

Position: No. Tax refund is only available back to effective date of Bill C-3 (January 31, 2011).

Reasons: Definition of Indian; section 2 of Indian Act. Tax exemption depends on when individual is entitled to be registered. This is consistent with application of tax exemption for Bill C-31 Indians (effective date of April 17, 1985).

October 6, 2011

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your correspondence of August 22, 2011, concerning the tax exemption available to Aboriginal individuals who are now registered or entitled to be registered as Indians for the purposes of the Indian Act under Bill C-3, also referred to as the Gender Equity in Indian Registration Act. You ask whether there is a distinction between individuals registered as Indians under Bill C-3 and those individuals registered under what is commonly referred to as Bill C-31, for the purpose of this tax exemption.

Section 87 of the Indian Act gives a tax exemption for the personal property of an Indian situated on a reserve. Personal property, for this purpose, includes employment income. The Canada Revenue Agency (CRA), relying on relevant court decisions, usually considers employment income to be situated on a reserve if the individual’s duties of employment are performed on a reserve.

An Indian is defined in section 2 of the Indian Act as a person who is registered or entitled to be registered as an Indian under the Indian Act. Aboriginal Affairs and Northern Development Canada (AANDC), formerly Indian and Northern Affairs Canada, is responsible for determining who is registered or entitled to be registered under the Indian Act.

The Indian Act tax exemption applies to the personal property of an Indian. Consequently, the tax exemption does not apply to income that an individual earns before he or she is registered or entitled to be registered as an Indian, even if the individual later becomes entitled to registration.

Bill C-31 and Bill C-3 came into effect on April 17, 1985, and January 31, 2011, respectively. As AANDC indicates in various documents discussing Bill C-31 and Bill C-3, an individual is only entitled to be registered as an Indian for purposes of the Indian Act based on the effective date of the particular amendment. You can find information on Bill C-31 and Bill C-3 on the AANDC Web site at www.aandc.gc.ca.

The CRA accepts that the Indian Act tax exemption is available on the earliest date an individual was entitled to be registered under the Indian Act. For an Indian who is entitled to be registered under Bill C-31, the effective date is April 17, 1985. For an Indian who is entitled to be registered under Bill C-3, the effective date is January 31, 2011. These dates apply regardless of when AANDC registered the Indian. However, the CRA generally requires a copy of the registration documents that AANDC provided to an individual as confirmation that the individual was entitled to be registered as an Indian.

The CRA administers the Indian Act tax exemption in the same way for individuals registered under Bill C-3 as it does for those registered under Bill C-31. In both cases, the CRA looks at the appropriate effective date, rather than the date of registration, in applying the tax exemption. Individuals who were first entitled to be registered as Indians under Bill C-3 can get the tax exemption only for income earned on a reserve on or after January 31, 2011. This means that Indians registered under Bill C-3 cannot get a tax refund for income they earned before that date, regardless of where they earned the income.

I trust that the information I have provided is helpful.

Yours sincerely,

Gail Shea, P.C., M.P.

Eliza Erskine/ 613-957-8973
2011-042037