Principal Issues: Is the First Nation a public body performing a function of government as contemplated by 149(1)(c)?
Position: Yes.
Reasons: The First Nation is governed by an elected chief and council and performs many functions of government.
XXXXXXXXXX 2010-037261 XXXXXXXXXX XXXXXXXXXX 2011
Dear XXXXXXXXXX :
Re: Advance Income Tax Ruling - XXXXXXXXXX (the "First Nation")
This is in reply to your letter of XXXXXXXXXX , in which you requested an advance income tax ruling on behalf of the above-named taxpayer. We acknowledge your additional submissions of XXXXXXXXXX , as well as various telephone conversations (XXXXXXXXXX ).
We understand that, to the best of your knowledge and that of the taxpayer, none of the issues involved in the ruling request are:
(i) in an earlier return of the taxpayer or a related person,
(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a related person,
(iii) under objection by the taxpayer or a related person,
(iv) before the courts, or
(v) the subject of a ruling previously issued by the Directorate to the taxpayer or a related person.
Unless otherwise stated, all references to a statute are to the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.), as amended to the date of this letter, (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.
DEFINITIONS:
In this letter, the following terms have the following meanings:
(a) "Indian Act" means the Indian Act, R.S.C. 1985, c.I-5, as amended, and the regulations pursuant to the Indian Act;
(b) "Member" means an individual whose name appears on the membership list of the First Nation, as maintained by the First Nation in accordance with section 10 of the Indian Act;
(c) "Reserves" means the First Nation's reserves as described in paragraph 3 of this letter, which are "reserves" as defined in subsection 2(1) of the Indian Act.
Our understanding of the facts, proposed transactions and the purpose of the proposed transaction is as follows:
FACTS:
1. The First Nation is a "band" as defined in subsection 2(1) of the Indian Act.
2. The mailing address for the First Nation XXXXXXXXXX The First Nation is served by the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Tax Centre. The First Nation's business identification number is XXXXXXXXXX
3. The First Nation has XXXXXXXXXX reserves located XXXXXXXXXX , the XXXXXXXXXX . The reserves cover an area of XXXXXXXXXX .
4. The First Nation has approximately XXXXXXXXXX Members, of whom approximately XXXXXXXXXX reside on the Reserves.
5. The First Nation is governed by a band council, comprised of a chief and a council (the "Band Council"). The Band Council is elected pursuant to the Indian Act, and the term of office is XXXXXXXXXX years. The Band Council exercises control over the administration and development of the Reserves, represents the Members in dealing with third parties, including the provincial and federal governments, and has the power to make by-laws in accordance with sections 81 and 83 of the Indian Act.
6. The First Nation maintains an administration office. The administrative staff consists of the chief, a band manager, a finance manager and several program managers. XXXXXXXXXX
7. The First Nation, with the agreement of the Government of Canada, is responsible for the delivery and administration of the following programs for the Members:
(a) community and public health;
(b) education;
(c) housing;
(d) social development;
(e) economic development;
(f) capital infrastructure; and
(g) employment and training.
The First Nation employs approximately XXXXXXXXXX Members to provide the above programs and services. Funding for these programs is received from the Government of Canada and, in some cases, the Government of XXXXXXXXXX .
8. The First Nation operates and maintains a community health centre, located on the Reserves, and administers various health programs. The services provided include:
(a) administering non-insured health benefits;
(b) transportation services for Members to attend health care appointments and treatments off the Reserves;
(c) personal home care for the elders in the community;
(d) community outreach programs in respect of mental health issues;
(e) foot care and diabetes clinics; and
(f) counselling programs for those with addiction or abuse issues as well as a methadone clinic.
XXXXXXXXXX
9. Education programs and services delivered by the First Nation include:
(a) operating the XXXXXXXXXX (the "Centre"), which is located on the Reserves and provides schooling for Members XXXXXXXXXX ;
(b) employing a teaching staff to operate the CentreXXXXXXXXXX
(c) providing transportation to Members attending the Centre and to Members attending high school in XXXXXXXXXX
(d) providing upgrading programs on the Reserves for Members wishing to obtain their high school equivalency diploma; and
(e) creating and administering a program to provide assistance to Members attending college or university off the Reserves. The First Nation reviews each Member's proposed course of study and that Member's needs, and determines the amount of funding received from the Government of Canada that is to be allocated to that particular Member.
10. The First Nation provides social housing on the Reserves and maintains and renovates existing homes on the Reserves.
11. The First Nation provides social development programs such as:
(a) the delivery of social programs in the areas of elder care and home care;
(b) administering certain aspects of the XXXXXXXXXX program in accordance with the requirements of the Province of XXXXXXXXXX ;
(c) maintaining recreational facilities XXXXXXXXXX
(d) XXXXXXXXXX
(e) making child and family services available through an agreement with XXXXXXXXXX
XXXXXXXXXX
12. The First Nation is currently developing a long term economic development strategy to enhance its participation in the local and provincial economy.
13. The First Nation has a public works department which operates and maintains, either directly or through agreements with local and external contractors, the following community infrastructure on the Reserves:
XXXXXXXXXX
XXXXXXXXXX
14. The First Nation helps Members find employment opportunities through its economic development program, which
(a) undertakes grant applications;
(b) employs summer students;
(c) hires and monitors contract employees;
(d) creates jobs and undertakes short-term and long-term work projects;
(e) creates training and education opportunities; and
(f) monitors employment rates within the community.
15. The First Nation provides child advocacy programs and First Nation representation in proceedings regarding Members.
16. XXXXXXXXXX .
17. The First Nation is a member nation of XXXXXXXXXX , which provides XXXXXXXXXX on the Reserves and on other reserves within XXXXXXXXXX .
18. XXXXXXXXXX
PROPOSED TRANSACTION:
The First Nation will purchase, with cash, a $XXXXXXXXXX guaranteed investment certificate (the "GIC"), bearing interest at XXXXXXXXXX % per annum from the XXXXXXXXXX through a branch located in XXXXXXXXXX .
PURPOSE OF THE PROPOSED TRANSACTION:
The purpose of the proposed transaction is to earn income for the First Nation to fund the general activities of the First Nation and the programs and services provided by the First Nation to its Members.
RULING GIVEN:
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purposes of the proposed transactions, we rule as follows:
Because 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 therefore exempt from tax under Part I of the Act, no tax will be payable under Part I of the Act by the First Nation on any interest from the GIC included in its income as a result of the proposed transaction described above.
The above advance income tax ruling, which is based on the Act and Regulations in their 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, "Advance Income Tax Rulings", dated May 17, 2002, and is binding on the Canada Revenue Agency provided that the proposed transaction is completed by XXXXXXXXXX
This letter is based solely on the facts and proposed transactions described above. The documentation submitted with your request does not form part of the facts and proposed transactions and any references thereto are provided solely for the convenience of the reader.
Yours truly,
XXXXXXXXXX
For Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch