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 a corporation will be exempt from tax under paragraph 149(1)(d) if not less than 90% of its shares are owned by an Indian band.
Position TAKEN:
Question of fact.
Reasons FOR POSITION TAKEN:
A corporation may qualify pursuant to paragraph 149(1)(d) of the Act where not less than 90% of the shares or capital of the corporation is owned by Her Majesty in right of Canada or a province or by a Canadian municipality. In the Otineka Development Corporation Ltd. case, the Tax Court of Canada concluded that the Indian band in question was a municipality for the purposes of paragraph 149(1)(d) of the Act and, therefore, that corporations owned by the band were exempt from taxation as municipally-owned corporations. Since the decision rendered in the Otineka case hinged upon the particular facts of the case, only corporations that can demonstrate that they are in exactly the same position as those in Otineka will be exempt from taxation.
3-950280
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
June 27, 1995
Dear Sir:
Re: Advance Income Tax Ruling Request
XXXXXXXXXX
We are writing in reply to your letter of January 12, 1995, wherein you requested an advance income tax ruling on behalf of the above-mentioned corporation. Specifically, you asked us to rule that XXXXXXXXXX would, by virtue of paragraph 149(1)(d) of the Income Tax Act (the "Act"), be exempt from tax under Part I of the Act, provided that, at all relevant times, not less than 90% of the issued shares of XXXXXXXXXX are owned by XXXXXXXXXX.
As indicated in Information Circular 70-6R2, a copy of which is enclosed, the Department does not generally provide an advance income tax ruling where satisfactory evidence is lacking that a proposed transaction is being seriously contemplated. As your ruling request does not involve a proposed transaction, we cannot give you an advance income tax ruling. Accordingly, a refund of your deposit will be sent under separate cover.
Instead, we are providing you with our general views regarding paragraph 149(1)(d) of the Act, as it applies to corporations owned by Indian bands. We stress that the following comments are necessarily of a general nature and are not binding on the Department.
A corporation or a wholly-owned subsidiary of such a corporation may qualify pursuant to paragraph 149(1)(d) of the Act where not less than 90% of the shares or capital of the corporation or the subsidiary is owned by Her Majesty in right of Canada or a province or by a Canadian municipality. Accordingly, in order for a corporation whose shares are owned by an Indian band to qualify under paragraph 149(1)(d) of the Act, the Indian band must be considered a Canadian municipality.
In the Otineka Development Corporation Ltd. et al. v. The Queen, 94 DTC 1234 (T.C.C.) case, the Tax Court of Canada concluded that, since there is no definition of a "Canadian municipality" in the Act, the term must be given its ordinary meaning and is not to be solely determined by the provincial legislation governing municipalities. In the Court's view, the powers conferred under the Indian Act and their exercise by the band created a form of self-government that is an essential attribute of a municipality. In this case, the band had passed by-laws to regulate water and sewers, garbage disposal, weed control, domestic animal control, law and order, the provision of housing and other by-laws. It also provided services to band members in areas such as education, health care, social services, employment and training services, counselling and economic development. In the end, the Court concluded that the band was a municipality for the purposes of paragraph 149(1)(d) of the Act and, therefore, that corporations owned by the band were exempt from taxation as municipally-owned corporations.
Since the decision rendered in the Otineka case hinged upon the particular facts of the case, only corporations that can demonstrate that they are in exactly the same position as those in Otineka will be exempt from taxation. However, we cannot determine from the information you have provided whether the XXXXXXXXXX is in the same position as Otineka. Your local Tax Services office should be able to make such a determination if all the relevant facts are provided.
We trust our comments will be of assistance to you.
Yours truly,
R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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