28 April 1994 External T.I. 9322415 - REMOTE LOCATION

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.

Principal Issues:

WHETHER U.I. PAYMENTS, RECEIVED BY AN INDIAN IN RESPECT OF TAXABLE EMPLOYMENT INCOME, ARE EXEMPT?

Position TAKEN:

INDIAN EXEMPTION DOES NOT APPLY IF THE U.I. PAYMENTS RELATE TO TAXABLE EMPLOYMENT INCOME.

Reasons FOR POSITION TAKEN:

PREVIOUS CORRESPONDENCE

		932241
XXXXXXXXXX	W.P. Guglich

April 28, 1994

Dear XXXXXXXXXX:

Re: Tax Status of Employment Income and U.I. Benefits

This is in reply to your letter, which we received August 9, 1993, concerning the tax status of your previous employment income and the current U.I. benefits. We apologize for the delay in responding.

We understand that you were previously employed at a hospital located on "Crown Land" a quarter of a mile XXXXXXXXXX from the reserve.

XXXXXXXXXX

Under the Indian Act the personal property, including income of an Indian, when situated on a reserve, is exempt from taxation. Prior to the Supreme Court decision in Williams v. The Queen, 92 DTC 6320, employment income was considered to be situated at the location of the employer. Since the hospital, your previous employer, was not located on a reserve your employment income did not qualify for exempt status. Related payments, such as U.I. benefits, were considered to be located at the payer's principal place of business. As the federal government is not situated on the reserve, any U.I. benefits which it paid were considered taxable to the recipient.

In the Williams decision the Supreme Court stated that in determining whether employment income of an Indian is on a reserve the location of the employer is not the sole factor and all relevant factors connecting the income to a reserve have to be considered. In the Department's view, the Williams decision requires that income which is ancillary to employment income, such as U.I. benefits, be treated the same as the employment income itself. In other words, if the employment income was exempt under the Indian Act, so too would be the U.I. benefits. A Remission Order was put in place to reflect the adoption of this position back to 1985. This Remission Order remits taxes paid on U.I. that were derived from employment income that was tax exempt, however, this does not apply to your particular situation.

In view of the reference in the Williams decision to connecting factors the Department has developed "INDIAN ACT EXEMPTION FOR EMPLOYMENT INCOME DETAILED GUIDELINES". These draft guidelines were released on December 15, 1993. A copy of these guidelines is attached.

Your employment income would not qualify for exemption on the basis of the guidelines in that your employer was not located on a reserve nor were the duties performed on a reserve. Accordingly the U.I. benefits would also not qualify for exempt status.

We trust our comments will be of assistance to you.

Yours truly,

R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch