16 December 1999 External T.I. 9924065 - INDIANS

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:

1. Has the 1999 adverse decision by the FCTD in the Shilling case resulted in any change to the Indian Act Exemption for Employment Income Guidelines?

2. What is the effect of the Shilling case on the comments made in the Department's letter of December 28, 1994, addressed to the XXXXXXXXXX (file 943147) which dealt with the application of the Guidelines to leased employees?

Position:

1. No changes to the Guidelines.

2. No effect.

Reasons:

1. Since the judgement in Shilling has been appealed by CCRA, no changes will be made to the Guidelines until the issues are resolved by the courts.

2. Since the December 28, 1994 letter dealt with the application of the Guidelines to leased employees and the Shilling case has been appealed, there is no need to change the previous comments.

XXXXXXXXXX 992406
S. Parnanzone
December 16, 1999

Dear XXXXXXXXXX:

Re : Indian Act Exemption - Employee Leasing

We are replying to your letter of August 11, 1999, to the Sudbury Tax Services Office, concerning the 1999 decision of the Federal Court, Trial Division in the Shilling case and its effects on the Indian Act Exemption for Employment Income Guidelines and the comments we made in our letter of December 28, 1994, addressed to the XXXXXXXXXX, a copy of which you enclosed with your letter. Our letter dealt with the application of the Guidelines to leased employees.

As you may be aware, the Guidelines were developed by the Canada Customs and Revenue Agency (the "Agency"), formerly the Department of National Revenue, after the decision of the Supreme Court of Canada in the Williams case (92 DTC 6320), which dealt with the approach to be used in determining whether income is situated on a reserve. The Agency has appealed the judgement in the Shilling case. Consequently, until such time as the matter is resolved by the courts, the Agency will apply the Guidelines as presently written. For the same reason, our previous opinion concerning the application of the Guidelines to leased employees is not affected by the Federal Court, Trial Division's decision in the Shilling case.

We trust that the forgoing comments are of assistance to you.

Yours truly,

Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch

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