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:
Follow-up to our letters in files 7-964086 & 5-970419. In light of additional information submitted, is the employment income of a particular Indian employee of XXXXXXXXXX exempt from taxation by virtue of Guideline 4?
Position:
It appears that all of the requirements of Guideline 4 have been met. But we still are not able to make a conclusive decision.
Reasons:
We cannot conclusively establish whether XXXXXXXXXX is resident on a reserve, as such a determination requires a review of all of the facts surrounding a situation including the minutes of Board of Directors meetings and resolutions or By-laws passed thereat. This question of fact is best resolved by a Tax Services Office. Nevertheless, if, as indicated by the taxpayer, the Board of Directors of XXXXXXXXXX meet on reserve and, at such meetings, decisions are made which direct the operations of XXXXXXXXXX, we would agree that XXXXXXXXXX is resident on reserve.
We cannot conclusively establish whether XXXXXXXXXX provides services, and XXXXXXXXXX duties are in connection, to Indians who for the most part live on reserve. Such a determination, would require a review of all Indians serviced by XXXXXXXXXX, to determine the percentage of its clientele living off reserve. This is a question of fact which is best resolved by a Tax Services Office. Nevertheless, in our view, if as indicated, XXXXXXXXXX only rarely provides any agency services to Indians living off Reserve and then by special arrangements with the agency of jurisdiction, and XXXXXXXXXX clients are "almost entirely Indians who live on reserve", it would appear that these elements of Guideline 4 are met with respect to XXXXXXXXXX.
All other requirements of Guideline 4 appear to be met.
5-972701
XXXXXXXXXX Karen Power, C.A.
Attention: XXXXXXXXXX
March 10, 1998
Dear Sir:
Re: Status Indian Employee - XXXXXXXXXX
We are writing in reply to your letter of September 17, 1997, wherein you requested that, in light of additional information, we review our decision of September 4, 1997 (our file 5-970419) regarding the tax status of the employment income of XXXXXXXXXX, an Indian employee of XXXXXXXXXX. In your view, XXXXXXXXXX employment income from XXXXXXXXXX qualifies for exemption under Guideline 4 of the Indian Act Exemption for Employment Income Guidelines (the "Guidelines").
The following is our understanding of the facts as revised by your September 17, 1997 letter:
1. XXXXXXXXXX was incorporated under the XXXXXXXXXX Each of these XXXXXXXXXX bands has a reserve as defined for purposes of the Indian Act.
2. You indicate that the head office of XXXXXXXXXX is situated on the XXXXXXXXXX reserve. XXXXXXXXXX is a reserve as defined for purposes of the Indian Act. XXXXXXXXXX
3. You indicate that the principal office and place of administration of XXXXXXXXXX is located on the XXXXXXXXXX reserve, and that day-to-day management of XXXXXXXXXX is provided by the Executive Director and senior supervisory staff at this office. The Executive Committee of Officers also meet at this on-reserve office. You indicate that the Board of Directors meetings are always held at the on-reserve office, except for certain "rare" occasions when XXXXXXXXXX has orientation/planning retreats for special purposes.
XXXXXXXXXX
8. XXXXXXXXXX lives and is employed at XXXXXXXXXX located off reserve. We understand that substantially all of XXXXXXXXXX employment duties are performed at the off-reserve location, while a minimal amount (less than 10%) of her duties are performed on reserve.
9. XXXXXXXXXX.
As previously indicated, 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.
The following summarizes our comments on each of the specific requirements of Guideline 4:
XXXXXXXXXX must be resident on a reserve.
Our letter of September 4, 1997, indicated that we cannot conclusively establish whether XXXXXXXXXX is resident on a reserve, as such a determination requires a review of all of the facts surrounding a situation including the minutes of Board of Directors meetings and resolutions or By-laws passed thereat. As previously indicated, this question of fact is best resolved by a Tax Services Office. Nevertheless, in our view, if, as indicated above, the Board of Directors of XXXXXXXXXX meet on reserve and, at such meetings, decisions are made which direct the operations of XXXXXXXXXX, we would agree that XXXXXXXXXX is resident on reserve.
XXXXXXXXXX must be an Indian organization controlled by one or more Indian bands which have reserves or tribal councils.
Our letter of September 4, 1997 indicated that based on the information provided regarding the nomination of the voting members and the Board of Directors, it appears that this requirement of Guideline 4 is met with respect to XXXXXXXXXX.
XXXXXXXXXX must be dedicated exclusively to the social, cultural, educational, or economic development of Indians.
Our letter of September 4, 1997 indicates that based on the excerpt from the By-laws and XXXXXXXXXX which were submitted, it appears that XXXXXXXXXX is dedicated exclusively to the social, cultural and educational development of Indians.
XXXXXXXXXX must service Indians who for the most part live on reserve.
Guideline 4 indicates that the organization must be dedicated exclusively to the development of Indians "who for the most part live on reserves." That is, almost all of the Indians in the population served by the organization must live on reserve. Guideline 4 recognizes that there will be situations where an Indian works for an organization which is dedicated exclusively to the development of Indians on reserves, and the work may require the Indian to live away from the reserve. Although the employee's residence would not be a factor which connects the Indian's employment to the reserve, it is appropriate, under the circumstances laid out in Guideline 4, to recognize a connection since the employee is working for the benefit of Indians on reserve. However, if the population served by the organization was not comprised almost entirely of Indians who live on reserve, this latter connection would not exist.
We cannot conclusively establish whether XXXXXXXXXX provides services to Indians who for the most part live on reserve. Such a determination, would require a review of all Indians serviced by XXXXXXXXXX, to determining the percentage of its clientele living off reserve. This is a question of fact which is best resolved by a Tax Services Office. Nevertheless, in our view, if as indicated, XXXXXXXXXX only rarely provides any agency services to Indians living off Reserve and then by special arrangements with the agency of jurisdiction, and XXXXXXXXXX clients are "almost entirely Indians who live on reserve", it would appear that this element of Guideline 4 is met with respect to XXXXXXXXXX.
XXXXXXXXXX duties of employment must be in connection with the employer's non-commercial activities.
As a general rule, a commercial activity entails the provision of services or the creation of a product to be provided to others for compensation. On the other hand, an example of a non-commercial activity would be a governmental or quasi-governmental activity.
Based on XXXXXXXXXX job description which has been submitted, it appears that XXXXXXXXXX duties of employment are all non-commercial activities.
XXXXXXXXXX duties must be carried on exclusively for the benefit of Indians.
XXXXXXXXXX
provides no services to non-Indian families and children.
It appears, that XXXXXXXXXX duties are carried on exclusively for the benefit of Indians.
XXXXXXXXXX duties must be carried on exclusively for the benefit of Indian who for the most part live on reserve.
As discussed above, we cannot conclusively establish whether XXXXXXXXXX duties are carried on for the benefit of Indians who for the most part live on reserve. Such a determination, would require a review of all the Indians serviced by XXXXXXXXXX, to determine the percentage of its clientele living off reserve when not receiving help at XXXXXXXXXX. This is a question of fact which is best resolved by a Tax Services Office. Nevertheless, in our view, if almost all the Indians serviced by XXXXXXXXXX live on reserve, it would appear that this element of Guideline 4 is met with respect to XXXXXXXXXX.
In summary, although we cannot make a conclusive decision, it appears that all of the requirements of Guideline 4 have been met with respect to XXXXXXXXXX employment with XXXXXXXXXX.
We have forwarded copies of our correspondence to the Director of the XXXXXXXXXX Tax Services Office. If you have any further enquiries regarding this matter, please contact the XXXXXXXXXX Tax Services Office.
We trust our comments will be of assistance to you.
Roberta Albert, C.A.
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
- 5 -
.../cont'd
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1998
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1998
Email this Content