10 March 1993 Income Tax Severed Letter 930252A - Glen Williams—Connecting Factors

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.

ADM'S OFFICE (3)                               ADM 920582
RETURN TO RULINGS, ROOM 303, MET. BLDG.
AUTHOR
SUBJECT  OR CORPORATE FILE

March 10, 1993

XXXXXXXXXX

Dear XXXXXXXXXX

          I am writing in response to your letter of January
13, 1993 requesting clarification of my letter dated
December 29, 1992 concerning the impact of the Glenn
Williams decision (
92 DTC 6320).

          A key purpose of the letter was to inform the
Indian community that unemployment insurance benefits
received in respect of employment income exempt from
taxation (personal property of an Indian on a reserve) were
also exempt from taxation.

          Of course, in order to reach that decision the
Court had to conclude that the situs of the debtor (being on
a reserve) is not the sole factor to be considered in
exempting income from taxation since unemployment insurance
benefits are not paid from a reserve.  Rather the Court
indicated that it is more appropriate to weigh all the
factors which link the income of an Indian with a reserve
with a view to meeting the purpose of section 87 of the
Indian Act which is to "preserve the entitlements of
Indians to their reserve lands and to ensure that the use of
their property on their reserve land was not eroded by the
ability of governments to tax, or creditors to seize".

            With a view to fairness, tax paid or payable on
such unemployment insurance benefits received in taxation
year 1985 or later will be refunded.

          The Department must now identify the connecting
factors which will determine whether the income of an Indian
is exempt from taxation.  We have every intention of
adopting a fair and liberal interpretation that will respect
the purpose of section 87 of the Indian Act.  This is
a difficult task for we may not be aware of all the factors.

          With a view to assisting the Indian community, the
Department will issue guidelines that will describe the
situations where the exemption applies.  For instance it has
already been determined that the exemption will apply to: 
-          employment income for duties performed entirely on
           a reserve;

-          employment income for duties performed entirely
           off a reserve where the employer resides on a
           reserve and the Indian lives on the reserve;

-          employment income for duties, a substantial amount
           of which are performed on a reserve and either the
           employer is located on the reserve, or the Indian
           lives on the reserve; and,

-          unemployment, pension and retiring benefits
           received in respect of exempt employment income.

           Of course the Department remains of the view that
it is appropriate to prorate the exemption in cases where
duties are performed both on and off a reserve.

           We appreciate however, that there may be other
situations where the income is linked to a reserve in a
manner that warrants a tax exemption.  In developing the
guidelines, the Department will anticipate as many of those
situations as possible and your assistance would be greatly
appreciated, for your officials may be aware of other
connecting factors.  The guidelines will be published as
soon as possible and situations not covered by the
guidelines will have to be dealt with on a case by case
basis.

           As you know a remission order will be passed to
ensure that no one will be adversely affected by the
Williams decision prior to 1994.

           In concluding, I would like to reiterate that it
would be most useful to have your input in the development
of the guidelines and it would be appreciated if you could
provide us with your views regarding any factors that we
should consider.

              Yours sincerely,

              Denis Lefebvre
              Assistant Deputy Minister
              Legislative and Intergovernmental
                 Affairs Branch

W.P. Guglich (975-2102) 930252