28 July 1995 Ministerial Letter 9517768 - INDIANS - APPLICATION OF GUIDELINE 4

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.

ADM'S OFFICE (2) ADM #941757
RETURN TO 15TH FLOOR, ALBION TOWER
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SECTION CHIEF COPY

July 28, 1995

XXXXXXXXXX

Dear XXXXXXXXXX:

I am replying to your letter of June 21, 1995, wherein you provide additional information in support of your view that the employees of the XXXXXXXXXX are exempt from taxation under Guideline 4 of the Indian Act Exemption for Employment Income Guidelines.

As regards the issue of control and management of XXXXXXXXXX as a general rule, the central management and control of a corporation is exercised by the board of directors in the course of its meetings. Where an organization asserts that it satisfies the residence requirement because it holds its board of directors meetings on reserve, it will generally be considered to satisfy the residence criteria where management and control over the organization is legitimately exercised during those meetings. In addition, the fact that the board of directors meetings may be held on different reserves would not, in and by itself, cause an organization not to be considered resident on a reserve. In our view, in a situation where the board of directors meets regularly on a reserve, albeit different reserves, and decisions are made at these meetings which direct an organization's operations, such an organization would generally be considered resident on a reserve.

In your letter, you indicate that the members of the board of directors of XXXXXXXXXX collectively exercise management and control over XXXXXXXXXX from a number of on-reserve locations and from offices of Tribal Councils, some of which may be located off-reserve. It is not clear to us from the above statement whether the board of directors holds its meetings on reserves and whether management and control over XXXXXXXXXX is exercised during those meetings. Since it is a question of fact where the central management and control of a corporation is exercised, a review of all of the facts surrounding your situation, including the minutes of board of directors meetings and resolutions or by-laws passed thereat, would be required to conclusively resolve this issue and this would be best resolved by the XXXXXXXXXX Tax Services Office. You should note that neither the residence of individual directors nor the geographic region that directors represent are indicators of the residence of an organization.

You also submit in your letter that by virtue of paragraph 1(b) of your organization's by-laws, you meet the requirement that the organization be controlled by one or more Indian bands which have reserves or tribal councils representing one or more such bands. I have reviewed the above-mentioned provision of your by-laws and fail to agree with your interpretation of its effect. In our view, paragraph 1(b) of the by-laws does not compel

XXXXXXXXXX

to elect a person from among themselves to the board of directors. Therefore, XXXXXXXXXX could conceivably be controlled by non-native individuals or entities.

With respect to XXXXXXXXXX objectives, I have reviewed the objects clause (Part III) of XXXXXXXXXX documents of incorporation and, given the broad mandate of XXXXXXXXXX, I am not convinced that XXXXXXXXXX meets the requirement in Guideline 4 that an Indian organization be dedicated exclusively to the social, cultural, educational or economic development of Indians who for the most part live on reserves. Unlike the examples on pages 7 and 8 of the Guidelines which describe situations where Guideline 4 is met, the connection between your organization's activities and Indians who for the most part live on reserves is not obvious. The XXXXXXXXXX Tax Services Office may also be of assistance in resolving this issue after a review of the actual activities of XXXXXXXXXX.

I trust that these comments will be of assistance.

						Yours sincerely,

						Denis Lefebvre
						Interim Assistant Deputy Minister
						Policy and Legislation Branch

C. Chouinard
957-2098
July 21, 1995