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 the Indian employees of XXXXXXXXXX (the "Association") are exempt from taxation on their employment income under Guideline 4 of the Indian Act Exemption for Employment Income Guidelines (the "Guidelines").
Position TAKEN:
No.
Reasons FOR POSITION TAKEN:
The Association is not an Indian band or tribal council; consequently, in order for Guideline 4 to apply, the Association must be an Indian organization controlled by one or more Indian bands which have reserves or tribal councils representing one or more Indian bands which have reserves. The facts presented do not indicate that the election of the board of directors of the Association is undertaken in such a manner that bands or tribal councils control the Association.
The Association's mandate (main objects) under its corporate charter and its membership, according to its constitution and by-laws, are very broad and do not satisfy the element of Guideline 4 that the Association be dedicated exclusively to the social, cultural, educational, or economic development of Indians who for the most part live on reserves (XXXXXXXXXX).
5-952068
XXXXXXXXXX M. Azzi
Attention: XXXXXXXXXX
September 12, 1995
Dear Sir:
Re: XXXXXXXXXX
This is in reply to your letters of July 26 and September 5, 1995 requesting our views as to whether the Indian employees of XXXXXXXXXX (the "Association") are exempt from taxation on their employment income under Guideline 4 of the Indian Act Exemption for Employment Income Guidelines (the "Guidelines").
Our understanding of the facts is as follows:
XXXXXXXXXX
Guideline 4 requires a) that the employer is resident on a reserve; b) that the employer is an Indian band which has a reserve, or a tribal council representing one or more Indian bands which have reserves, or an Indian organization controlled by one or more such bands or tribal councils, if the organization is dedicated exclusively to the social, cultural, educational, or economic development of Indians who for the most part live on reserves; and c) that the duties of the employment are in connection with the employer's non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves. These elements must all be satisfied in order for Guideline 4 to apply.
As requested, we have assumed that the Association is resident on reserve; however, we would like to point out that satisfaction of the requirement that the employer be resident on a reserve is always of some concern where the head office of an organization is located on a reserve but its main place of business is located off reserve.
The Association is not an Indian band or tribal council; consequently, in order for Guideline 4 to apply, the Association must be an Indian organization controlled by one or more Indian bands which have reserves or tribal councils representing one or more Indian bands which have reserves. The concept of control in Guideline 4 is the kind that exits where there is power to command and direct. Where a band or tribal council can replace the directors of an organization, the band or tribal council could be said to control the organization. The facts presented do not indicate that the election of the board of directors of the Association is undertaken in such a manner that bands or tribal councils control the Association. Accordingly, in our view, this element of Guideline 4 has not been satisfied.
The intention of the word "exclusively" is to restrict Guideline 4 to those organizations which are dedicated only to the social, cultural, educational or economic development of Indians living on reserve. It would not be sufficient to have these being only part of an organization's objectives. Guideline 4 is a generous interpretation of the direction provided by the Courts in Williams (92 DTC 6320, (1992) 1 CTC 225), so it is appropriate to restrict its application to situations that fit squarely within it. In our view, the Association's mandate (main objects) under its corporate charter and its membership, according to its constitution and by-laws, are very broad and do not satisfy the element of Guideline 4 that the Association be dedicated exclusively to the social, cultural, educational, or economic development of Indians who for the most part live on reserves.
We would also like to point out that the employment duties of each particular Indian employee would have to be considered to determine if they were in connection with the employer's non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves. While the Association may have a non-profit mandate, this does not necessarily mean that all its activities are non-commercial. Furthermore, we note that your facts state that "the duties of the Indian employees of the Association are in connection with the Association's non-commercial activities carried on for the benefit of Indians who for the most part live on reserve." Under Guideline 4, however, the non-commercial activities must be carried on "exclusively for the benefit of Indians..." That is, these activities must not also benefit persons other than status Indians.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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