2014 Ruling 2014-0520431R3 - Advanced Income Tax Ruling Request

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 the corporation would be considered a public body performing a function of government.

Position: Yes.

Reasons: See facts in ruling.

XXXXXXXXXX
2014-052043

XXXXXXXXXX, 2014

Dear XXXXXXXXXX:

Re: Public Body 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 acknowledge your additional submissions of XXXXXXXXXX, as well as various telephone conversations (XXXXXXXXXX).

To the best of your knowledge and that of the taxpayer, none of the issues involved in the ruling request are:

(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 expired; or
(v) The subject of a ruling previously issued by this Directorate to the taxpayer or a related person.

In this letter, unless otherwise expressly stated, all statutory references are to the Income Tax Act (Canada), R.S.C. 1985, 5th Supplement, c.1, 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 and facts is as follows:

DEFINITIONS

(a) "Agreement" means the land claims agreement to be entered into among the Organization, the First Nations, Her Majesty the Queen in Right of Canada (as represented by the Minister of Indian Affairs and Northern Development) and XXXXXXXXXX;

(b) "Band List" means a list of individuals, who are members of a band, maintained pursuant to the Indian Act (Canada);

(c) "Effective Date" means the date on which the Agreement comes into effect in accordance with the terms of the Agreement;

(d) "First Nations" means XXXXXXXXXX ("First Nation A") and XXXXXXXXXX ("First Nation B");

(e) XXXXXXXXXX;

(f) "Lands" means the lands to be held in fee simple by the Organization as set out in the Map Atlas and Appendix XXXXXXXXXX to the Agreement. The Lands are referred to as "XXXXXXXXXX" under the Agreement. The Lands are comprised of XXXXXXXXXX square kilometers of land, XXXXXXXXXX square kilometers of which is in XXXXXXXXXX and XXXXXXXXXX square kilometers of which is in XXXXXXXXXX. The Lands include XXXXXXXXXX square kilometers of land XXXXXXXXXX;

(g) "XXXXXXXXXX" means an individual who is enrolled pursuant to Article XXXXXXXXXX of the Agreement, and for the purposes of Part XXXXXXXXXX of the Agreement, means an individual who is enrolled, or who is eligible to be enrolled, pursuant to Article XXXXXXXXXX of the Agreement. Under the Agreement, XXXXXXXXXX are referred to as XXXXXXXXXX;

(h) "Map Atlas" means the series of map sheets containing the maps that graphically represent the boundaries of the Lands illustrated in Appendix XXXXXXXXXX of Article XXXXXXXXXX of the Agreement;

(i) "Members" means the members of the Organization;

(j) "Organization" means XXXXXXXXXX, the corporation to be incorporated under the Canada Not-for-profit Corporations Act S.C. 2009, c.23, which is also referred to as "XXXXXXXXXX" under the Agreement;

(k) "Settlement Area" means XXXXXXXXXX, the settlement area identified in Appendix XXXXXXXXXX of Article XXXXXXXXXX of the Agreement. The Lands and the Shared Lands are part of the Settlement Area;

(l) "Shared Lands" means those lands held in fee simple by either:

(a) The "X" Organization, an entity to be created in which the Organization will have a XXXXXXXXXX percent interest and XXXXXXXXXX will have a XXXXXXXXXX percent interest, XXXXXXXXXX; or

(b) The "Y" Organization, an entity to be created, in which the Organization will have a XXXXXXXXXX percent interest and XXXXXXXXXX will have a XXXXXXXXXX percent interest, XXXXXXXXXX; and

(m) XXXXXXXXXX.

FACTS

1. The First Nations are "bands" within the meaning of the Indian Act (Canada) and have reserves located in XXXXXXXXXX. They have asserted treaty and aboriginal rights within the meaning of section 35 of the Constitution Act, 1982 to lands and resources in XXXXXXXXXX.

2. XXXXXXXXXX.

3. The First Nations, Her Majesty the Queen in Right of Canada (as represented by the Minister of Indian Affairs and Northern Development) and XXXXXXXXXX are in the process of negotiating the Agreement. The objects of the Agreement are:

(a) to provide for certainty and clarity of rights to the ownership and the use of lands and resources, and the rights of XXXXXXXXXX to participate in decision-making concerning the use, management and conservation of land, water and resources;

(b) to provide XXXXXXXXXX with wildlife harvesting rights and the right to participate in decision-making concerning wildlife harvesting;

(c) to provide XXXXXXXXXX with financial compensation and a means of participating in economic opportunities; and

(d) The encouragement of self-reliance and the cultural and social wellbeing of XXXXXXXXXX.

4. The Agreement will be a treaty within the meaning of section 35 of the Constitution Act, 1982.

5. The Agreement requires the creation and use of the Organization to carry out the terms of the Agreement.

6. The First Nations will incorporate the Organization. The Organization's registered office will be located in XXXXXXXXXX. The Organization will file its tax returns through the XXXXXXXXXX Taxation Office.

7. The purpose of the Organization will be to constitute an open and accountable organization to represent XXXXXXXXXX in a fair and democratic way, that will safeguard, administer and advance the rights and benefits that belong to XXXXXXXXXX as an aboriginal people, so as to promote their economic, social, and cultural well-being through succeeding generations. In particular, the Organization will:

(a) implement the terms of the Agreement on behalf of XXXXXXXXXX, including any collateral agreements, and specifically, carry out those functions of the Organization as described in the Agreement;
(b) ensure that the rights and benefits flowing to XXXXXXXXXX through the Agreement are secured and defended in law;
(c) represent XXXXXXXXXX in the negotiation and conclusion of any amendments to the Agreement;
(d) hold and manage rights and benefits flowing to XXXXXXXXXX through aboriginal title, statutory recognition, land claims agreements and any other means;
(e) promote the enhancement of the rights, benefits and opportunities of XXXXXXXXXX as an aboriginal people by entering into agreements with industry, government and other entities to achieve such goals;
(f) seek to facilitate the preservation and strengthening of XXXXXXXXXX language, traditions and beliefs;
(g) manage land and water use, wildlife, environmental review, and XXXXXXXXXX.

8. Pursuant to specific authority conferred under the Agreement, the Organization will represent the interests of XXXXXXXXXX in the negotiation, management and enforcement of rights in numerous specified circumstances. These circumstances include:

(a) the enforcement and implementation of XXXXXXXXXX rights under the Agreement;

(b) the continued administration of the Agreement for and on behalf of XXXXXXXXXX;

(c) the right to be consulted by the Government of Canada or XXXXXXXXXX prior to the enactment of any federal law or law of XXXXXXXXXX relating to compensation for impacts to harvesting rights pursuant to Section XXXXXXXXXX of the Agreement;

(d) the right to represent Members regarding compensation for impacts to harvesting rights;

(e) providing consent to the Government of Canada authorizing any new commercial wildlife harvesting activity on the Lands;

(f) providing consent to persons wanting to harvest fish for commercial purposes on bodies of water wholly contained within the Lands;

(g) XXXXXXXXXX;

(h) XXXXXXXXXX;

(i) XXXXXXXXXX;

(j) XXXXXXXXXX;

(k) the ownership in fee simple to the Lands;

(l) XXXXXXXXXX;

(m) XXXXXXXXXX;

(n) the right, subject to Article XXXXXXXXXX of the Agreement, to grant entry and access to persons other than XXXXXXXXXX upon the Lands;

(o) XXXXXXXXXX;

(p) the right to be consulted by the Government regarding access to the Lands for the conduct of research in the public interest, including wildlife, fish and migratory bird management and research;

(q) the right to be consulted by the Government regarding access to the Lands to establish navigational aids, hydrometric gauges, weather stations and fuel caches;

(r) the right to be consulted by persons authorized under law to provide electrical power, telecommunications services or similar utilities to the public, other than pipelines for the transmission of hydrocarbons, to have access to the Lands to carry out assessments, surveys and studies in relation to the proposed services;

(s) the exclusive right to use water on the Lands, the right to negotiate with third parties regarding the use of water on the Lands and the right to compensation for impacts to water rights on the Lands generally;

(t) the right to be consulted by XXXXXXXXXX prior to issuing any license, permit or authorization in relation to a use of land or water or deposit of waste on the Lands;

(u) the right to be consulted by XXXXXXXXXX when preparing the terms of reference for a review panel to be established in relation to the Lands, and when conducting an environmental assessment on the Lands;

(v) the appointment of members to the implementation committee established pursuant to Part XXXXXXXXXX of the Agreement for the purpose of executing the Implementation Plan referred to in the Agreement;

(w) the appointment of members to the enrolment appeal board established pursuant to Part XXXXXXXXXX of the Agreement to hear and determine appeals from the decisions of the enrolment registrar; and

(x) the appointment of members to the ratification committee established pursuant to Part XXXXXXXXXX of the Agreement to be responsible for all aspects of the conducting of XXXXXXXXXX ratification process.

9. Section XXXXXXXXXX of the Agreement provides that every power, function and authority exercised by the Organization under this Agreement will be deemed to be exercised on behalf of and for the benefit of Members.

10. The by-laws of the Organization will provide for the governance of the Organization by the Members and the Organization's board of directors.

11. The board of directors of the Organization will consist of up to XXXXXXXXXX directors:

(a) XXXXXXXXXX of which will be elected by the members of First Nation A; and

(b) XXXXXXXXXX of which shall be elected by the members of First Nation B.

Each director will also be a Member of the Organization.

12. The board of directors of the Organization will appoint the officers of the Organization.

13. There will be three classes of Members, namely, the Initial Members, the First Nation A Members and the First Nation B Members.

14. The Initial Member class of membership will be comprised of the XXXXXXXXXX applicants of incorporation who will incorporate and organize the Organization. The Initial Membership category will only exist until the Organization has at least XXXXXXXXXX First Nation A Members and at least XXXXXXXXXX First Nation B Members. Thereafter, there will be no Initial Members.

15. The following conditions of membership will apply to the Members:

(a) Membership will be comprised of each individual who is a Canadian citizen or a permanent resident of Canada, is at least XXXXXXXXXX years of age, is enrolled pursuant to Article XXXXXXXXXX of the Agreement, and:

i. is, or is entitled to be, on the Band List of their respective First Nation on the date on which the Agreement comes into effect pursuant to Part XXXXXXXXXX of the Agreement;
ii. for First Nation A Members, is a descendant of a XXXXXXXXXX individual who was on the Band List of the XXXXXXXXXX at the signing of Treaty XXXXXXXXXX on XXXXXXXXXX; or for First Nation B Members, is a descendant of a XXXXXXXXXX individual who was on the Band List of the XXXXXXXXXX at the adhesion to Treaty XXXXXXXXXX on XXXXXXXXXX;
iii. was adopted as a child under the laws recognized in Canada or under any XXXXXXXXXX custom, by an individual described in (a)(i) above; or
iv. is a descendant of an individual described in (a)(i) above;

(b) The term of membership of a Member will commence on the date that he or she is enrolled pursuant to Article XXXXXXXXXX of the Agreement and shall end on the date that the membership of the Member is terminated in accordance with the by-laws of the Organization; and

(c) Each Member is entitled to receive notice of, attend and vote at all meetings of Members and each such Member will be entitled to one vote at such meetings, except for meetings at which only Members of another class are entitled to vote separately as a class.

16. The Lands are not a "reserve" within the meaning of the Indian Act (Canada) or lands reserved for Indians within the meaning of the Constitution Act, 1867. Neither are the Shared Lands or the Settlement Area.

17. Pursuant to Article XXXXXXXXXX of the Agreement, the Organization will not be subject to property taxes in connection with its ownership of the Lands, or any interest in the Lands, on which there is no improvement or on which there is an improvement all or substantially all of which is used for a public purpose and not for a profit purpose.

18. XXXXXXXXXX.

Ruling Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, and provided that the facts continue to describe the Organization and describe the activities of the Organization, we rule as follows:

A. Provided that the Agreement is signed and the Organization is actively and directly involved in the negotiation of the Agreement and continues to be actively and directly involved in the administration and implementation of the Agreement, the Organization will be considered to be a public body performing a function of government on the Lands in Canada within the meaning of paragraph 149(1)(c) of the Act and, accordingly, will be exempt from tax under Part I of the Act.

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 or future amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R6 "Advance Income Tax Rulings and Technical Interpretations", dated August 29, 2014, and is binding on the Canada Revenue Agency provided that the proposed corporation is incorporated and the agreement is ratified by a date no later than XXXXXXXXXX years from the date of this letter.

We strongly encourage you to seek a supplemental ruling closer to the date that the Agreement becomes law.

This letter is based solely on the facts described above. The documentation submitted with your request does not form part of the facts, except as expressly referred to herein, and any references thereto are provided solely for the convenience of the reader.

Nothing in this advance income tax ruling should be construed as implying that we are ruling on any other issue related to the Corporation.

Yours truly,

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