20 October 1994 Internal T.I. 9425306 - INDIAN BANDS - SECTION 83 OF INDIAN ACT

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 an Indian band which qualified under former section 83 of the Indian Act is a municipality or a municipal or public body performing a function of government for purposes of the Income Tax Act.

Position TAKEN:

Such bands do not qualify as municipalities. However, depending upon the facts, they may qualify as a public body performing a function of government. If they so qualify, the Department, as an administrative concession, considers them to be Canadian municipalities for purposes of issuing donation receipts.

Reasons FOR POSITION TAKEN:

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) of the Act. Although section 83 of the Indian Act was amended in 1988 deleting the reference to the advanced stage of development, Indian band councils are regarded as public bodies performing a function of government for the purposes of paragraph 149(1)(c) of the Act, where they exercise or have exercised the powers authorized under both section 81 and section 83 of the Indian Act.

			October 20, 1994

	Charities Division	Head Office
			Rulings Directorate
C. Chouinard
			957-8953

Attention: R.A. Davis, Director

			7-942530

Indian Bands - Paragraph 149(1)(c) of the Income Tax Act

This is in response to your memorandum of September 28, 1994 wherein you asked whether the fact that an Indian band qualified under former section 83 of the Indian Act enables such band to qualify under paragraph 149(1)(c) of the Income Tax Act (the "Act").

While section 83 of the Indian Act provides that Indian bands may enact laws in certain areas which are typically within the jurisdiction of municipal governments, in our view, this similarity falls short of leading to the conclusion that Indian bands are municipalities. They may, however, depending on all the circumstances, be a public body performing a function of government and therefore be exempt from tax under paragraph 149(1)(c) of the Act.

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) of the Act. 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 Act if it previously qualified under the circumstances set out in IT-62.

For those band councils not "grandfathered", our present policy is to regard Indian band councils as public bodies performing a function of government for the purposes of paragraph 149(1)(c) of the Act, where they exercise or have exercised the powers authorized under both section 81 and section 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.

The above comments would also apply, with appropriate changes, to the Department's position regarding band councils issuing donation receipts. In the circumstances outlined above, the Department, as an administrative concession only, has taken the position that a band council may be regarded as a Canadian municipality for purposes of both subsection 118.1(1) and subparagraph 110.1(1)(a)(iv) of the Act and may issue donation receipts under those provisions for donations received. Band councils that are regarded as Canadian municipalities would also qualify as "qualified donees" under subsection 149.1(1) of the Act.

R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch

cc.Rick Owen

Client Assistance