10 November 1992 Income Tax Severed Letter 9228550 - Indian Bands - Municipal Corporations?

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

                     CANADIAN TAX FOUNDATION
                         NOVEMBER, 1992

QUESTION 66

Whether Indian Bands Qualify as Municipal Corporations

Do Indian Bands qualify as municipal authorities for the purposes of the exemption under paragraph 149(1)(c) of the Income Tax Act? Do corporations owned by Bands qualify for the exemption in paragraph 149(1)(d)?

ANSWER:

         An Indian band council is not a "municipality" for
         purposes of the Income Tax Act.  It may, depending on
         all the circumstances, be a public body performing a
         function of government and therefore be exempt from tax
         under that portion of paragraph 149(1)(c) of the Income
         Tax Act. 

         However, the Department's position as set out in
         paragraph 11 of Interpretation Bulletin 
IT-62
 is that
         band councils that have reached the advanced stage of
         development required by Section 83 of the Indian Act
         will qualify for tax exemption under paragraph
         149(1)(c).  Although section 83 of the Indian Act was
         amended in 1988 deleting the reference to the advanced
         stage of development, a band council will continue to
         qualify under paragraph 149(1)(c) of the Income Tax Act
         if it previously qualified or would have qualified under
         the circumstances set out in 
IT-62
. 

         For those band councils not "grandfathered" as
         indicated, our present policy is to regard Indian band
         councils as public bodies performing a function of
         government in Canada for the purposes of paragraph
         149(1)(c) of the Act (exempt from tax) where they
         exercise or have exercised the powers authorized under
         both section 81 and 83 of the Indian Act.  The foregoing
         policy has been maintained pursuant to an undertaking
         given to the House of Commons by a former Minister of
         National Revenue (see Hansard report of March 21, 1977). 
         However, it does not extend to paragraph 149(1)(d) of
         that Act.  

         Given that a band council is not a Canadian
         municipality, a band owned corporation will not
         qualify for exemption under paragraph 149(1)(d)
         of the Act.

         Although not specifically referred to in the question,
         the above comments would also apply, with appropriate
         changes, to the Department's position regarding band
         councils issuing donation receipts pursuant to the
         charitable gift provisions of the Income Tax Act.  In
         the circumstances outlined previously the Department, as
         an adminstrative policy only, has taken the position
         that a band council may be regarded as a Canadian
         municipality for purposes of both paragraph 118.1(1)(d)
         and subparagraph 110.1(1)(a)(iv) of the Act and may
         issue donation receipts under those provisions for
         donations received.

Glen Thornley 7-922855 November 10, 1992