13 March 1995 Ministerial Letter 9502888 - INDIANS - INDIAN TAX EXEMPTION

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.

DM'S OFFICE (2) YS # 95-0049817
ADM'S OFFICE (2)
RETURN TO RULINGS,
AUTHOR
SUBJECT OR CORPORATE FILE
SECTION CHIEF

March 13, 1995

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable David Anderson, Minister of National Revenue, has asked me to reply to your letter of December 22, 1994, concerning the taxation of Indians. A copy of your letter addressed to the Right Honourable Jean Chrétien was forwarded to this department by the Prime Minister's Office on January 9, 1995. I apologize for the delay in responding.

Paragraph 81(1)(a) of the Income Tax Act and section 87 of the Indian Act establish the Indian exemption from taxation. Section 87 of the Indian Act exempts from taxation the personal property of an Indian situated on a reserve. In determining whether the income earned by an Indian is situated on a reserve, and thus exempt from taxation, the approach taken by the Supreme Court of Canada, in the case of Williams v. The Queen must be followed. This approach requires the examination of all factors connecting income to a reserve to determine if the income is located on the reserve. In Williams, the Supreme Court ruled that the proper approach to determining the situs of intangible personal property is to evaluate the various connecting factors which tie the property to one location or another. The Court also indicated that the ultimate question is to determine to what extent each connecting factor is relevant in determining whether taxing the particular kind of property in a particular manner would erode the entitlement of an Indian to personal property situated on a reserve.

The Right Honourable Jean Chrétien, while Leader of the Opposition, expressed concerns, in a letter dated June 30, 1993, about the previous Government's interpretation of the Supreme Court of Canada's decision in the Williams case and the lack of consultations with Aboriginal organizations in formulating guidelines based on the decision.

Over the course of the summer (after the June 30 letter), departmental officials did undertake an extensive series of meetings with Aboriginal political organizations and tribal councils, consultants and contractors, tax practitioners and other affected individuals. In addition, they received over 250 written submissions.

After a thorough analysis of the Williams case and based on the representations received from interested Indian groups and individuals, the Department identified a number of connecting factors that can be used to determine whether employment income is situated on a reserve. To assist the Indian community, the Department developed guidelines, incorporating the various relevant connecting factors, that describe the employment situations covered by section 87 of the Indian Act. The Guidelines apply the Williams decision in a fair and liberal manner consistent with the Supreme Court decision. I am enclosing a copy of the Guidelines, which were released in June 1994, for your information.

I trust that I have explained the Department's position and thank you for your comments.

Yours sincerely,

						Denis Lefebvre
						Interim Assistant Deputy Minister
						Policy and Legislation Branch

Attachment

C. Chouinard
957-2098
February 27, 1995
4-950288