20 December 1995 External T.I. 9525835 - INDIANS - RESIDENCE OF EMPLOYER

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 there is a continuing usefulness in having the college's head office and payroll office situated on reserve.

Position:

No.

Reasons:

The college is resident on reserve by virtue of its Board of Governors meeting and controlling the college from on-reserve locations.

The situs of the payroll office is not a significant connecting factor with respect to employment income.

		952583
XXXXXXXXXX	J.D. Brooks

December 20, 1995

Dear XXXXXXXXXX:

This letter is in reply to your letter of September 29, 1995 in which you requested our views as to whether the XXXXXXXXXX would be considered to be an organization that qualifies under Guideline 4 of the Department's Indian Act Exemption for Employment Income Guidelines. You also queried whether it is necessary for your head office to remain located on a reserve in order to provide its employees with an exemption from income tax on their employment income. As you stated in your letter, your request is further to our meeting (XXXXXXXXXX/Dath/Brooks) of September 22, 1995.

Whether or not an organization qualifies as an organization described in Guideline 4 is a question of fact. This is a significant point to note since our comments are based on statements of fact made by you and we have not attempted to confirm the accuracy of any statements. Questions of fact are best resolved by our Tax Services offices. We also point out that the opinions stated herein represent an expression of opinion and, as stated in Information Circular 70-6R2 dated September 28, 1990, are not binding on the Department. Rulings that are binding on the Department are provided on a fee-for-service basis and are provided only with respect to proposed transactions.

One requirement of Guideline 4 is that the employer must be an Indian organization that is controlled by one or more Indian bands that have reserves or tribal councils representing Indian bands that have reserves. According to the copy of the

XXXXXXXXXX

Guideline 4 also requires the employer to be dedicated exclusively to the social, cultural, educational, or economic development of Indians who for the most part live on reserves. According to the Purposes and Principles of the XXXXXXXXXX it is clear that the XXXXXXXXXX is intended to meet an educational need of Indians. We understand from your comments in our meeting of September 22 that approximately XXXXXXXXXX% of the students of XXXXXXXXXX are Indians that come from reserves. It is a question of fact as to whether XXXXXXXXXX serves Indians who for the most part live on reserve or whether it serves Indians who formerly lived on reserve. The fact that students may have to leave the reserve if they want further education does not alter the fact that the students may have changed their place of residence.

Another requirement of Guideline 4 is that the employer must be resident on reserve. That is, the central management and control of XXXXXXXXXX must be actually located on reserve. The central management and control of an organization is usually considered to be exercised by the group that performs the function of a board of directors of the organization. However, it may be that the real management and control of an organization is exercised by some other person or group. In the case of XXXXXXXXXX, it appears that the Board of Governors controls XXXXXXXXXX, and since the Board meetings are, as you stated, held on reserve (although not necessarily always on the same reserve), it is reasonable to conclude that the test regarding the residency of the employer is met. On the understanding that the Board of Governors controls XXXXXXXXXX and that it performs its function on reserve, the location of the head office of XXXXXXXXXX would appear to be an irrelevant factor. Concerning the payroll office, the location of a payroll office on a reserve would not be a determining factor in establishing that an employer is resident on a reserve. Furthermore, the location of a payroll office bears little or no weight as a factor connecting employment income to a reserve.

Finally, Guideline 4 requires one to consider each employee's duties of employment. Those duties must be in connection with XXXXXXXXXX non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves. We do not have enough information to provide further meaningful comment on this requirement.

We trust that our comments are of assistance.

Yours truly,

B.W. Dath
Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch