8 January 2002 External T.I. 2001-0115775 - FIRST NATIONS-ISSUING CHARITABLE DONATIONS

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 sections 110.1 and 118.1 of the Income Tax Act.

Position: General comments provided. Insufficient information provided to make a definite determination.

Reasons: The Agency's administrative position is to consider a band to be a municipality for purposes of section 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 Act.

		2001-011577
XXXXXXXXXX 	Karen Power, CA
(613) 957-8953
January 8, 2002

Dear XXXXXXXXXX:

Re: First Nation - Issuance of Charitable Donation Receipts

This is in reply to your letter of December 5, 2001, which was forwarded to us by Diana Favel, requesting our views on whether the XXXXXXXXXX (the "First Nation") is entitled to issue charitable donation receipts for purposes of sections 110.1 and 118.1 of the Income Tax Act (the "Act").

As suggested in an earlier telephone conversation (Favel/XXXXXXXXXX), we are unable to provide you with a definite determination of whether the First Nation is a municipal authority for purposes of paragraph 149(1)(c) of the Act. However, we are prepared to provide the following general comments, which may be of assistance in making your own assessment regarding the application of paragraph 149(1)(c) of the Act.

Sections 110.1 and 118.1 of the Act are the relevant sections in the Act that describe the tax consequences of a person making charitable gifts. Section 118.1 entitles donors who are individuals to claim a tax credit, while section 110.1 enables donors that are corporations to make a deduction in calculating their income. Where a gift is made to a Canadian municipality, the municipality may issue an official receipt containing prescribed information as described in Part XXXV of the Income Tax Regulations. Such a receipt must be issued to the donor in order for the donor to obtain a tax credit or deduction, as the case may be.

An Indian band will be able to issue receipts for purposes of sections 110.1 and 118.1 of the Act if the band qualifies as a Canadian municipality. The Tax Court of Canada in the 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 Canada Customs and Revenue Agency (the "CCRA") 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 Canadian municipalities for purposes only of issuing receipts under sections 110.1 and 118.1 of the Act. This administrative concession does not extend to the application of paragraph 149(1)(d.5) of the Act.

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. We consider 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. The CCRA 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.

Bands that do not meet these requirements may qualify where the band performs a function of government. The following are situations, which the CCRA would consider to be functions of Government:

1. Health Services Transfer Agreements, between Her Majesty the Queen in Right of Canada and the Indian band. These agreements provide for the transfer of control of health programs and services and associated resources, from the Minister of Health to the Indian band.

2. The Indian band is providing elementary and secondary education in band-operated schools.

3. The band has been involved in the negotiation of a settlement agreement with Canada and will continue to be involved in the administration and implementation of the settlement agreement.

4. The band has entered into an arrangement with Canada to assume responsibility for the delivery of programs and services such as land management, social and economic development programs and capital infrastructure.

We trust our comments will be of assistance to you. These comments are provided in accordance with the practice outlined in paragraph 22 of Information Circular 70-6R4 titled Advanced Income Tax Rulings, dated January 29, 2001 and may be obtained on the Internet at http://www.ccra-adrc.gc.ca/menu/EmenuKKB.html.

Yours truly,

Mickey Sarazin, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

Cc Diana Favel
Audit Directorate
Compliance Progams Branch

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