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 a particular First Nation qualifies as a public body performing a function of government for purposes of paragraph 149(1)(c).
Position: Yes.
Reasons: See facts.
XXXXXXXXXX
2012-044507
XXXXXXXXXX, 2012
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling XXXXXXXXXX
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 if a judgment has been issued, the time limit for appeal to a higher court has not yet expired.
We do note that the issue involved in this ruling has been the subject of a ruling previously issued to the taxpayer by this Directorate. However, the taxpayer has requested this ruling as the proposed transactions involve a large amount of compensation to be received from the Government of Canada.
In this letter, unless otherwise expressly stated, all statutory references are to the provisions of 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 relevant definitions, the facts, the proposed transactions and their purpose is as follows:
DEFINITIONS
- "Band Council" means the elected governing council of the First Nation.
- "First Nation" means the XXXXXXXXXX.
- "Indian Act" means the Indian Act R.S.C. I98S, c.l-S, as amended (the "IA").
- "Resident Members of the First Nation" means members of the First Nation who are Indians within the meaning of the IA and who ordinarily reside on the Reserve.
- "Reserve" means the lands of the First Nation with reserve status under the IA.
- "Territory" means all of the lands owned by the First Nation, including those without reserve status under the IA.
FACTS
1. The mailing address of XXXXXXXXXX.
2. The First Nation is served by the XXXXXXXXXX Tax Services Office and by the XXXXXXXXXX Taxation Center.
3. The First Nation is an Indian Band as defined under section 2 of the IA.
4. The First Nation has XXXXXXXXXX hectares of land with reserve status under the IA located XXXXXXXXXX. The Reserve is located more specifically on XXXXXXXXXX and bounded by XXXXXXXXXX.
5. The First Nation is currently comprised of XXXXXXXXXX registered members, of whom XXXXXXXXXX currently live on the Reserve.
6. The First Nation is governed by a Chief and a Band Council elected by the members of the First Nation pursuant to section 11 of the IA. All members of the First Nation are eligible to vote for the Chief and Band Council. The Chief and Band Council are responsible for the governance of the First Nation and represent the First Nation in all matters.
7. All of the members of the First Nation are Indians for the purposes of the IA, although some members reside off-Reserve. Many of the off-Reserve members work on the Reserve.
8. The First Nation is party to the XXXXXXXXXX.
9. The First Nation has implemented a Financial Management Bylaw for the purposes set out in section 83(1) of the IA. The by-law governs the receipt, management, expenditure, control and recording of the First Nation's funds, and the administrative structure of the First Nation that manages the funds.
10. A joint ratification plan is in process which has not been ratified between the First Nation, Aboriginal Affairs and Northern Development Canada ("AANDC") and First Nations Land Management Resource Centre whereby the First Nation would become a signatory to the Framework Agreement under the First Nations Land Management Act. The Framework Agreement establishes a process by which the First Nation could consider the option of assuming control over their Reserve land and resources by:
- developing a land code;
- concluding an individual transfer agreement with the Government of Canada; and
- ratifying the land code and transfer agreement through a vote of eligible voters.
11. Fire services are provided by the First Nation for its Territory using a volunteer fire department. The facilities for the volunteer fire crew are provided by Band Council.
12. Ambulance services are provided by an off-Reserve detachment in the town of XXXXXXXXXX.
13. Police services are provided by XXXXXXXXXX Police Services and are located on the Reserve in a Band Council-owned facility.
14. Water services are provided to all Resident Members of the First Nation and some resident members also receive sewer services. Fees are charged for these services.
15. Garbage collection is provided to all Resident Members of the First Nation and fees are charged for this service. The First Nation has a contract with the Government of Canada Waste for the removal of all waste materials.
17. All areas of the Reserve are serviced with electricity supplied by XXXXXXXXXX. The First Nation has entered into an agreement with XXXXXXXXXX for hydro services to be provided to First Nation facilities located on the Reserve.
15. The First Nation owns and maintains several buildings on the Reserve for the use and safety of its members. These include:
XXXXXXXXXX
18. The First Nation provides and/or administers an extensive list of public works, social services and infrastructure programs, including, but not limited to:
XXXXXXXXXX
19. Recreation facilities, such as XXXXXXXXXX, are maintained and used by members.
20. Non-Indian tenants of the First Nation are subject to maintenance fees for the provision of the following services: police, garbage collection, fire, and road maintenance.
21. The First Nation owns and maintains school buses used for the transportation of students to its school.
22. The First Nation employs several individuals in the course of carrying out its programs, including, among others:
XXXXXXXXXX
23. The First Nation provides housing for eligible members. Funding for these homes is provided by AANDC. Recipients of the First Nation-provided-housing are based on need. The First Nation is in the process of negotiating with a major financial institution to provide mortgage financing to its members.
24. The First Nation has passed twenty-four bylaws pursuant to section 81 of the IA. These bylaws include, among others; regulations on traffic, assessment fees for fire and police, licensing of dogs, speed limits in school zones, establishment of police constables, and regulation of recreational activities.
25. The First Nation provides schooling for all children on the Reserve with primary schooling provided at XXXXXXXXXX which is located on the Reserve. Secondary schooling is provided for off-Reserve.
26. The First Nation undertakes several programs which are federally funded programs and services directly funded by the Government of Canada. The First Nation has signed a Funding Agreement with AANDC.
27. The First Nation has entered into a Consolidated Contribution Agreement with the Government of Canada whereby it is the responsibility of the First Nation to provide health programs and services to their members via transferred programs or targeted programs.
28. The First Nation has entered into an agreement with the XXXXXXXXXX for various targeted programs.
29. The First Nation has entered into an agreement with XXXXXXXXXX for community support services. This agreement provides funding to the First Nation for the XXXXXXXXXX.
30. The First Nation has entered into an agreement with the XXXXXXXXXX to provide funding for the Jobs Connect and Summer Jobs Service Program.
31. The First Nation has undertaken to provide specific programs related to preventative health strategies, health education, nursing, homecare, foot care, etc. Health care services for the First Nation are operated by the XXXXXXXXXX and the XXXXXXXXXX medical personnel through First Nation health care facilities located on the Reserve.
32. The First Nation has an emergency response plan for the Reserve which is operated and maintained by its health and fire services on the Reserve.
33. The First Nation has been and is currently in the process of negotiating several claims with the Government of Canada as follows:
XXXXXXXXXX
34. The First Nation has undertaken to manage its own economic development. The economic development officer designs, manages and delivers training to promote economic development and employment for members.
35. The First Nation owns XXXXXXXXXX.
PROPOSED TRANSACTIONS
36. The First Nation is currently negotiating the XXXXXXXXXX, as described in 33 above, with the Government of Canada. Once an agreement is reached, the First Nation will be in receipt of a large amount of compensation funds from the Government of Canada pursuant to that agreement.
37. The First Nation will use these compensation funds described in paragraph 36 above to set up a trust of which it will be the settlor.
PURPOSE OF THE PROPOSED TRANSACTIONS
38. The purpose of the proposed transactions is to finalize the XXXXXXXXXX with the Government of Canada and to use the funds to set up a trust for the benefit of the First Nation.
RULINGS 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, and provided further that the proposed transactions are completed in the manner described above, we rule as follows:
A. 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, accordingly, no tax will be payable under Part I of the Act by the First Nation on receipt of the compensation funds from the Government of Canada as described in 36 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 described in 36, above, is completed before 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
Manager
Non-Profit Organizations and Aboriginal Issues Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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