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 will be considered a public body performing a function of government and thus qualify for exemption under paragraph 149(1)(c) of the Income Tax Act.
Position: Yes, the First Nation is considered a public body performing a function of government in Canada as per paragraph 149(1)(c) of the Act.
Reasons: The first nation has passed by-laws under both sections 81 and 83 of the Indian Act. In addition, the First Nation has negotiated a treaty land settlement and provides and administers an extensive list of public works, social services and infrastructure programs.
XXXXXXXXXX
XXXXXXXXXX 1-981830
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1998
Dear Sirs:
Re: XXXXXXXXXX
Advance Income Tax Ruling (“Advance Ruling”)
Our File No. 3-981609
We are writing in reply to your letter of XXXXXXXXXX requesting amendments to the Advance Ruling 3-981609 of XXXXXXXXXX, 1998. As a result of your request, we are issuing this current ruling which cancels and replaces Advance Ruling 3-981609.
We understand that, to the best of your knowledge and that of the taxpayers, none of the issues raised in this ruling is being considered by a Taxation Services Office or Taxation Centre in connection with an income tax return already filed, is the subject of any notice of objection or is under appeal.
Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:
1. XXXXXXXXXX (the “First Nation”) is also known as the XXXXXXXXXX and is an Indian Band as defined under section 2 of the Indian Act.
2. The First Nation has a reserve, known as the XXXXXXXXXX.
3. The First Nation has democratically elected Chief and XXXXXXXXXX Council members, who govern the First Nation.
4. The First Nation passed an XXXXXXXXXX, pursuant to paragraphs 81(1)(a), (d), (e), (q), and (r) of the Indian Act, on XXXXXXXXXX. In a letter dated XXXXXXXXXX, this bylaw was declared by the Minister to come into force on XXXXXXXXXX. This bylaw is being enforced, as the First Nation has entered into a contract for XXXXXXXXXX. In addition, policies and procedures have been designed and the community has been advised of the bylaw and as to how it will be enforced.
5. On XXXXXXXXXX, the First Nation passed the XXXXXXXXXX, pursuant to section 83 of the Indian Act. This bylaw received ministerial approval on XXXXXXXXXX. The bylaw is being enforced, and taxation revenues have been assessed and collected under this bylaw.
6. The First Nation provides and administers an extensive list of public works, social services and infrastructure programs including but not limited to:
a) land claims
b) economic development
c) lands management
d) forestry services
e) family support services
f) youth services
g) community services
h) social and education counseling
i) library
j) literacy enhancement
k) road and public work maintenance
l) custodial services in respect of all First Nation lands and premises
m) health services
n) policing
o) animal control
p) taxation.
7. Facilities maintained by the First Nation include:
a) Band offices
b) Community hall
c) Library
d) Health station
e) Family resource building
f) Police station
g) Tennis courts
h) Softball field
i) Ice rink
j) Garage
k) Water pump house
l) Gathering centre
m) Beach
n) Picnic areas
o) Playground
p) Camping and Pow Wow grounds.
8. The First Nation is currently not making any assertion as to whether or not it is a Canadian municipality.
9.
XXXXXXXXXX.
10.
XXXXXXXXXX.
11. The Band has claimed that it never agreed to the alienation of the land and has claimed that the land was not properly alienated.
12. Canada has entered into a settlement agreement in order to resolve the claim arising out of the expropriation/alienation of the XXXXXXXXXX acre parcel of land from the reserve.
13. As compensation to settle the claim, Canada has paid $XXXXXXXXXX (the “compensation”) to the First Nation. The settlement agreement was approved by the membership on XXXXXXXXXX, and as a consequence, the compensation has been paid into the revenue account of the Consolidated Revenue Fund maintained by the First Nation.
14. The First Nation is subject to an Order-in-Council under section 69 of the Indian Act, giving it permission to control, manage or expend its revenue moneys.
15. Pursuant to the Settlement Agreement, within six months the First Nation may vote to have the compensation transferred to a Trust. The terms of the trust are still being drafted and it is anticipated that a vote will be held on XXXXXXXXXX.
16. The proposed transactions are being undertaken to provide for the settlement of the compensation in a tax effective manner and for the receipt of income either from the consolidated revenue fund or from a trust which is yet to be created in a tax effective matter. In order to achieve this objective, the First Nation would like assurances that it is “a public body performing a function of government in Canada” and consequently is exempt from income tax pursuant to paragraph 149(1)(c) of the Income Tax Act.
Rulings
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions, and purpose of the proposed transactions, and that there are no other transactions which may be relevant to the ruling requested, our ruling is as follows:
In any year in which the First Nation continues to provide community sevices of the type and magnitude referred to above and providing the First Nation does not rescind the bylaws referred to above, the First Nation will be considered to be a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c) of the Act. Accordingly, no tax is payable under Part I on the taxable income of the First Nation.
The ruling is given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 31, 1996.
The above ruling is based on the Act in its present form and does not take into account any proposed amendments to the Act which, if enacted, could have an effect on the ruling provided herein.
Yours truly,
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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