20 January 1994 External T.I. 9304525 F - Taxation of Indian Employment Income

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.

XXXXXXXXXX

Dear Sir:

RE:  Taxation of employment income

This is in reply to your February, 1994 inquiry made to Ms Jenkins of our Regina District Office seeking the Department's views regarding whether the employment income of XXXXXXXXXX will be exempt under Section 87 of the Indian Act.

You have advised us of the following facts:

XXXXXXXXXX

XXXXXXXXXX

Our Comments:

In 1992, the Supreme Court's decision in the Glenn Williams case, 92 DTC 6320, called into question the conclusions drawn from the earlier Nowegijick case, 83 DTC 5041. Under Nowegijick employment income was a simple debt and the location of the debt determined whether the property was on a reserve or not. In the Glenn Williams case, the taxpayer's employer was located on a reserve, as were his duties of employment. After being laid-off, he received enhanced UI benefits as a result of a job creation project on a reserve. The taxpayer was assessed on the basis that the debtor with respect to the UI payments, the federal Crown, was located off a reserve.

The Court rejected the situs of the debtor test derived from the Nowegijick case as the sole test for determining whether or not a particular property was on a reserve, saying that "any overly rigid test which identified one or two factors as having controlling force ... would be open to manipulation and abuse." Instead, the Court recommended the following approach:

(a)     analyze the matter in terms of categories of property and types of taxation; (b) identify the various connecting factors (i.e. factors connecting the property to a location on or off a reserve) which are potentially relevant; (c) determine the weight to be given the connecting factors in the light of three considerations:

1.     the purpose of the exemption under the Indian Act, 2. the type of property in issue, and 3. the nature of taxation of the property.

In light of the foregoing the Department developed, after meeting with and receiving input from Indian organizations, guidelines for use in applying the Williams decision in various situations. A copy of these guidelines, which were issued on December 15, 1993, is enclosed herewith.

Applying the guidelines to the situation you describe, it would appear that all of the individuals employed by the XXXXXXXXXX whether they live on a reserve or not, would qualify for exemption under Guideline 4 because the duties the employees perform for the XXXXXXXXXX are connected to the reserves served by the XXXXXXXXXX and the employer resides on the reserve.

We trust our comments will be of assistance to you.

Yours truly,

Roberta Albert for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch

Encl.

c.c.:      Cindy Jenkins     Enquiries     Regina D.O.