27 July 2016 Internal T.I. 2016-0645031I7 - 149(1)(c) - Indian Act Bands

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: Policy on whether all Indian Act Bands qualify as public bodies performing a function of government in Canada for purposes of paragraph 149(1)(c).

Position: Yes they do.

Reasons: See comments.

									July 27, 2016

	Charities Directorate 					CRA HEADQUARTERS
	7th Floor, Place de Ville, Tower A 			Income Tax Rulings
	320 Queen Street						  Directorate
	Ottawa, ON, K1A 0L5					Lori Merrigan
									(613) 670-9046
	Attention:  Ann Rénöus
	Policy, Planning and Legislation
	Division							2016-064503

Comments on Indian Act Bands as 149(1)(c) Entities

This is to advise you that we have reviewed our policy with respect to the interpretation of paragraph 149(1)(c) of the Income Tax Act (“Act”) as it relates to Indian bands that are created under the Indian Act.

In 1948, the Act was amended to include a tax exemption for “a municipality or a municipal or public body performing a function of government”. It appears likely that municipalities were considered part of the provincial Crown and were added to the list of tax exempt entities to make it explicit that they are not subject to income tax. There is no definition of “a municipal or public body performing a function of government” in the Act. However, it would seem logical, based on the wording, that it would appear to be an entity that is similar in nature to a municipality and governs people in a particular area.

The federal government, through the Indian Act, specifically creates an Indian band. Under the Indian Act, these bands or First Nations may be able to levy property taxes and create by-laws that affect its members. Consequently, the very nature of an Indian band and its council under the Indian Act is that of a local government, similar in nature to a municipality. This means that their reserve lands, monies, other resources and governance structure are managed by the provisions in the Indian Act. (footnote 1) When a band council makes a by-law under this section, it must be explicitly approved by the Minister of Indigenous and Northern Affairs Canada.

In 2014 the Rulings Directorate instituted a service called Public Body Rulings as a pilot project. During this period Rulings has gathered even more extensive experience with determining whether a band qualifies as a municipal or public body performing a function of government in Canada. As a result, it is our view that all bands created under the Indian Act meet the criteria to be considered municipal or public bodies performing a function of government in Canada for the purpose of paragraph 149(1)(c) of the Act and are therefore exempt from income tax.

If you have any questions with respect to this policy please do not hesitate to contact me. We trust that our comments will be of assistance.

Roger Filion, CPA, CMA
Manager
Non-Profit Organizations and Aboriginal Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 2 (1) In this Act, band means a body of Indians
(a) for whose use and benefit in common, lands, the legal title to which is vested in Her Majesty, have been set apart before, on or after September 4, 1951,
(b) for whose use and benefit in common, moneys are held by Her Majesty, or
(c) declared by the Governor in Council to be a band for the purposes of this Act;