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 meets the prerequisites in order to be able to issue receipts for gifts under sections110.1 and 118.1 of the Income Tax Act.
Position: Yes.
Reasons:
The Department's administrative position is to consider a band to be a municipality for purposes of sections 110.1 and 118.1 and therefore be able to issue official receipts for gifts if it qualifies for exemption under paragraph 149(1)(c) of the Income Tax Act. Bands that do not meet this requirement can be considered on a case-by-case basis to determine whether the band performs 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. A recently completed Health Services Transfer Agreement between the Minister of Health and the Band is evidence that the band is performing at least one function of government.
October 15, 1999
Sudbury Tax Services HEADQUARTERS
David Shugar
Attention: Pat Cusack 957-2134
7-991200
XXXXXXXXXX
This is in reply to your request for our opinion on whether the XXXXXXXXXX (the "First Nation") meets the prerequisites in order to be able to issue receipts for gifts under sections 110.1 and 118.1 of the Income Tax Act (the "Act").
In order to be able to issue receipts for purposes of sections 110.1 and 118.1 of the Act, an Indian band, i.e., a First Nation, would have to qualify as a Canadian municipality. The Tax Court of Canada in the 1994 case of Otineka Development Corporation Limited and 72902 Manitoba Limited v. Her Majesty the Queen (94 DTC 1234; (1994) 1 CTC 2424) determined that in certain circumstances an Indian band could qualify as a Canadian municipality. Nonetheless, since 1977, the Department has administratively considered those bands that qualify for exemption under paragraph 149(1)(c) of the Act on the basis of being public bodies performing a function of government in Canada, to be regarded as Canadian municipalities for purposes only of issuing receipts under sections 110.1 and 118.1. No registration number is assigned to qualifying Indian bands for the purpose of issuing official receipts since such numbers are assigned only to registered charities.
It is a question of fact as to whether an Indian band may be considered to be a public body performing a function of government in Canada and thereby qualify for exemption from Part I tax pursuant to paragraph 149(1)(c) of the Act. The Department considers that an Indian band that has passed at least one by-law under each of sections 81 and 83 of the Indian Act is a public body performing a function of government. As of the date of this letter, the First Nation has not yet passed by-laws under section 83 of the Indian Act.
The Department also considers bands that had reached an advanced stage of development as was formerly required by section 83 of the Indian Act to be public bodies performing a function of government. You have not indicated whether the First Nation was recognized by the Department of Indian Affairs and Northern Development as having reached such a stage of development.
Bands that do not meet these requirements can be considered on a case-by-case basis to determine whether the band performs a function of government such as negotiating and implementing Treaty Land Entitlements.
XXXXXXXXXX
However, as of that date the First Nation had not yet entered the negotiation process with the Federal Government and therefore cannot be considered to be involved in negotiating and implementing Treaty Land Entitlements.
On August 31, 1999, XXXXXXXXXX provided us with a copy of the Health Services Transfer Agreement, dated XXXXXXXXXX, between Her Majesty the Queen in Right of Canada and the First Nation. This agreement provides for the transfer of control of health programs and services and associated resources, from the Minister of Health to the First Nation, in order to enable the community to:
design health programs, establish health services and allocate funds according to community health priorities;
ensure public health and safety is maintained by providing mandatory health programs; and
strengthen and enhance the accountability of the community to members.
The mandatory health program referred to in the agreement is the Communicable Disease Control Program. The agreement also provides that the Minister of Health will make monthly payments to the First Nation to assist in the funding of these health programs. In our view, this agreement constitutes evidence indicating that the XXXXXXXXXX is a public body that performs a function of government in Canada and, accordingly, XXXXXXXXXX can issue receipts for purposes of sections 110.1 and 118.1 of the Act. Our comments should not be construed as implying that we consider that the XXXXXXXXXX is a Canadian municipality as we have not attempted to make this determination. In addition, we note that the agreement is to terminate on XXXXXXXXXX but that there are intentions to renew.
We would like to bring to your attention Interpretation Bulletin IT-110R2 (Deductible Gifts and Official Donation Receipts). As noted in paragraph 16 thereof, it is the Department's practice to permit a general direction by the donor for the funds to be used for a specific program operated by the municipality. Donations to a municipality with a direction that the donations be directed to an organization which does not operate under the authority of the municipality would not qualify as gifts to a Canadian municipality for purposes of sections 110.1 and 118.1 of the Act. This paragraph also applies to donations to Indian bands which are being treated as municipalities for the purposes of issuing donation receipts.
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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