9 July 2012 Ministerial Correspondence 2012-0442201M4 - Indian Tax Exemption - Bill C3

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: What is the date of application of the Indian tax exemption available to individuals registered under Bill C-3?

Position: The earliest date is January 31, 2011.

Reasons: It's the date Bill C-3 came into effect; determined by AANDC.

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your correspondence concerning the tax exemption available to Aboriginal individuals who are now registered or entitled to be registered as Indians under Bill C-3, Gender Equity in Indian Registration Act. I also received a copy of your correspondence addressed to the Honourable Leona Aglukkaq, Minister of Health and Minister of the Canadian Northern Economic Development Agency. As well, this reply is in response to your correspondence sent to Mr. Bill Jones, Deputy Commissioner of the Canada Revenue Agency (CRA), and Ms. Lynn Atkinson, Director General of the Taxpayer Relief and Service Complaints Directorate. I apologize for the delay in responding.

Paragraph 87(1)(b) of the Indian Act states that the personal property of an Indian or a band situated on a reserve is exempt from tax.

An Indian is defined in the Indian Act as a person who is registered or entitled to be registered as an Indian under that 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 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-3 came into effect on January 31, 2011. As AANDC indicates in various documents discussing Bill C-3, an individual is entitled to be registered as an Indian for purposes of the Indian Act based only on the effective date of this particular amendment. You can find information on Bill C-3 on the AANDC Web site at www.aandc.gc.ca/eng/1305220833814.

The CRA administers the Indian Act tax exemption to apply 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-3, the effective date is January 31, 2011. This date applies regardless of when AANDC registered the Indian. However, the CRA generally requires a copy of the registration documents AANDC provides to an individual as confirmation the individual was entitled to be registered as an Indian.

As noted above, the CRA looks at the appropriate effective date rather than the date of registration when 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. Therefore, 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.

As you have written to the CRA many times and CRA officials have answered your questions to the best of their ability in each of their previous responses, the CRA considers this matter closed. Unless you have new information to provide, the CRA will not respond to future correspondence on this issue.

I trust that the information I have provided clarifies the CRA’s position on this matter.

Yours sincerely,

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

Lori Merrigan
613.957.9229
2012-044220