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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
1. Whether an Indian band can be considered to be a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c)?
2. Is the Indian band a "municipality" for purposes of subparagraph 110.1(a)(iv) and paragraph (d) of the definition of "total charitable gifts" contained in subsection 118.1(1)
Position:
1. Yes.
2. No.
Reasons:
1. The band is and performs the functions of a local government.
2. XXXXXXXXXX - see Statement of Principal Issues
XXXXXXXXXX 2003-000046
XXXXXXXXXX, 2003
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling Request
XXXXXXXXXX (the "First Nation") (XXXXXXXXXX)
This is in reply to your letter dated XXXXXXXXXX wherein you requested an Advance Income Tax Ruling on behalf of the above named taxpayer. We also acknowledge the information provided during our various telephone conversations in connection with your request (XXXXXXXXXX).
We understand that, to the best of your knowledge and the knowledge of the First Nation, none of the issues in this request for an advance income tax ruling is:
(i) in an earlier return of the First Nation or of a person related to the First Nation;
(ii) being considered by a tax services office or tax centre in connection with a previously-filed return of the First Nation or of a person related to the First Nation;
(iii) under objection by the First Nation or by a person related to the First Nation;
(iv) before the courts; nor
(v) the subject of a ruling previously issued by the Income Tax Rulings Directorate to the First Nation.
Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended, (the "Act") and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.
The facts, proposed transactions and the purpose of the proposed transactions, as we understand them, are as follows:
Facts
1. The First Nation is also known as the XXXXXXXXXX and is an Indian Band as defined under section 2 of the Indian Act.
2. The First Nation has XXXXXXXXXX reserves, known as XXXXXXXXXX (hereinafter collectively referred to as the "Reserves"). The residences of most of the First Nation's members and the First Nation facilities, including the Council office, the school and education centers, the health station, the utilities, and the residential subdivision are located within XXXXXXXXXX The address of the First Nation is XXXXXXXXXX. Since the reserve does not have mail service, the mailing address is XXXXXXXXXX.
The First Nation's Reserves are located within the area serviced by the XXXXXXXXXX Tax Services Office located in XXXXXXXXXX, and it files its returns with the XXXXXXXXXX Taxation Centre.
3. As at XXXXXXXXXX , the First Nation had a total registered population of XXXXXXXXXX members with XXXXXXXXXX members being resident on one of XXXXXXXXXX reserves. The First Nation has a democratically elected Chief and XXXXXXXXXX Council members, who govern the First Nation.
4. The First Nation is currently in the process of negotiating a treaty agreement and a comprehensive land claim settlement with the Government of Canada and the Government of XXXXXXXXXX. You have attached a copy of the First Nation's Treaty Negotiation Support Agreement with your request. Canada, XXXXXXXXXX and the First Nation agree that the agreement in principle related to this land claim will be completed by XXXXXXXXXX .
5. The First Nation has a comprehensive funding arrangement in place with the Department of Indian Affairs and Northern Development. The First Nation provides and/or administers an extensive list of public works, social services and infrastructure programs including but not limited to:
(a) treaty land claims
(b) economic development
(c) education services
(d) communications services
(e) forestry services
(f) family support services
(g) youth services
(h) community services
(j) social and education counseling
(j) library
(k) literacy enhancement
(1) road and public work maintenance
(m) child development services
(n) health services
(o) housing
(p) animal control
(q) social assistance.
6. Facilities maintained by the First Nation include:
(a) Band offices
(b) Primary school
(c) Secondary school
(d) Adult education centre
(e) Child development center
(f) Computer lab
(g) Gymnasium
(h) Library
(i) Health station
(j) Water pump house
(k) Sewage lift station and lagoons
(l) Garbage transfer station
(m) Playground.
7. The First Nation owns and operates a XXXXXXXXXX square foot School and Education Centre for its residents. Within this building, the First Nation operates and provides for the benefit of all of its members: primary school classes; secondary school classes; a library; a computer and internet lab; an adult education center; and a child development center. Certain elementary school children and secondary school children are bussed to the school on a daily basis, with the First Nation being responsible to provide the bus services. The First Nation also provides a number of educational programs and services to its residential members, such as computer training, academic skills upgrading, wellness and life skills programs and professional development. Adjacent to the school is a children's playground constructed and maintained by the First Nation for its residents.
8. The First Nation has passed by-laws pursuant to section 81 of the Indian Act. The section 81 by-laws have specific enforcement procedures set out in the by-laws and pertain to:
(a) Disorderly conduct and nuisance - ministerial approval received.
(b) Animal control - ministerial approval received.
(c) Trespass - ministerial approval received.
(d) Residency - ministerial approval received.
9. The First Nation has passed and received ministerial approval for a Financial
Administration by-law pursuant to section 83 of the Indian Act.
10. The First Nation has enacted a Property Assessment and Taxation by-law pursuant to section 83 of the Indian Act, and is currently awaiting ministerial approval of this by-law.
11. The First Nation is developing a Community Plan which regulates land use and activities within the Reserves. All lands within the Reserves are held in a traditional manner and are owned in common by the membership. The First Nation has agreements with individual First Nation members and businesses for their use of the reserve lands and any improvements thereon. Development within the Reserves will be guided by the First Nation's Community Plan. Most of the Reserve's housing units have been built by the First Nation for its resident members. Resident members may construct their own houses so long as the location and plans are approved by Council. No other approvals are required for construction on Reserve.
12. The First Nation undertook capital planning in XXXXXXXXXX as part of the development of the Community Plan. As a result, locations have been mapped out for a new subdivision and an ice rink.
13. The First Nation has begun negotiating a Health Services Transfer Agreement with Health Canada.
14. The First Nation supplies all of its homes with underground spring intake systems, complete with water filtration units. Secure lagoons are used to handle sewage waste from all residential and commercial buildings within the community. The First Nation has constructed water pumping facilities to provide water to residences.
15. The First Nation provides garbage collection services to its members on Reserve.
16. All areas of the Reserves are serviced with electricity supplied by XXXXXXXXXX Hydro. The First Nation monitors this service on behalf of its members to ensure an appropriate level of service. When service issues arise, the First Nation resolves these issues with XXXXXXXXXX Hydro on behalf of its members.
17. On behalf of its members, the First Nation has recently had installed a communications system on the Reserves which provides for constant telephone and Internet access.
18. The First Nation employs an administrator who, under the direction of Council, is responsible for administrative management of the First Nation.
Proposed Transactions
19. The First Nation will commence commercial activities in the forest industry from which it will earn income.
20. The First Nation is also entering into certain silviculture contracts through a wholly-owned subsidiary. The First Nation will receive dividends from its wholly-owned subsidiary.
Purpose of the Proposed Transactions
21. The purpose of the proposed transactions is to enable the First Nation to create employment for its members and to generate income to support the needs of the First Nation.
Ruling Given
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and provided further that the proposed transactions are carried out as described above, we rule as follows:
A. The First Nation is a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c) of the Act and, accordingly, no tax will be payable under Part I of the Act by the First Nation on the income described in 19 and on the dividends described in 20 above and the First Nation is a person within the meaning assigned by subsection 248(1) of the Act.
The above ruling, which is based on the Act in its present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and is binding on the Canada Customs and Revenue Agency provided that the proposed transactions are completed prior to XXXXXXXXXX.
Yours truly,
XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
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