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:
Suggestions for Indian employment income guidelines.
Also, whether 2 specific boards are qualifying Indian organizations, and whether pension income is exempt if the employment income was remitted under a remission order.
Position TAKEN:
The boards do not appear to serve the required type of clientele.
Pension income is exempt to the same extent that the related employment income was exempt or remitted.
Reasons FOR POSITION TAKEN:
ADM'S OFFICE (3) ADM#94-0536
RETURN TO RULINGS, ROOM 303, MET. BLDG.
AUTHOR
SUBJECT OR CORPORATE FILE
August 11, 1994
XXXXXXXXXX
Dear XXXXXXXXXX:
I apologize for the delay in replying to your letters of October 21, 1993 and March 31, 1994, in which you made representations on behalf of the XXXXXXXXXX concerning the draft guidelines on the application of the Indian Act tax exemption for employment income. Unfortunately, I was not in a position to reply to you until we had an opportunity to review all the feedback we received as a result of issuing these guidelines.
We have now reviewed that feedback and issued the final version of the guidelines on June 29, 1994, a copy of which was sent to your firm.
In addition to the various points you raised for our consideration in developing the guidelines, you requested us to confirm that the XXXXXXXXXX are included within the category of "Indian organizations" referred to in guideline 4 of the guidelines. In your view, there is no question that the mandate of these organizations is of the type contemplated in guideline 4. You also stated that both organizations are controlled by one or more Indian bands having a reserve or a deemed reserve or by a tribal council.
Whether or not an organization qualifies as one described in guideline 4 is a question of fact. As you pointed out, the term "reserve" in the guidelines includes areas deemed to be reserves, XXXXXXXXXX.
It appears from your letters that the concept of "control" in the guideline is of concern to you. Control refers to the power to command and direct. Where a band is able to replace the directors of an organization, the band could be said to control the organization. It is not clear whether one could conclude that bands have collective control over the boards in question.
It also appears that another concern of yours is whether the boards serve the requisite clientele. Guideline 4 requires the organization to be dedicated exclusively to Indians who for the most part live on reserves. It is noted in your October letter that the school board has responsibility for the education of all persons, native and non-native, on Category I lands. Regarding the health board, you stated that it provides health and social services within Category I lands and that it maintains offices outside these lands in XXXXXXXXXX.
Thus, it is not evident that the boards serve the requisite clientele.
You may wish to discuss this matter further with your client's District Taxation Office to resolve the issues.
XXXXXXXXXX
You also requested us to confirm the treatment of pension benefits. You will note that a section entitled Employment-Related Income has been added to the guidelines. It states that the receipt of registered pension plan benefits will usually be exempt from income tax when received as a result of employment income that was exempt from tax. Where a portion of the employment income was exempt, a similar portion of the pension plan benefits will be exempt. The result would be the same if the employment income were remitted under a remission order.
I wish to thank you for your comments and interest in this matter.
Yours sincerely,
Denis Lefebvre
Interim Assistant Deputy Minister
Policy and Legislation Branch
J.D. Brooks
957-2103
July 19, 1994
941708
ADM 94-0536
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