Principal Issues: Are the GST/HST credit, Canada Child Tax Benefit and the National Child Benefit Supplement situated on a reserve if they are received by an Indian residing on a reserve?
Position: No.
Reasons: There are insufficient connecting factors to conclude the income is situated on a reserve.
April 17, 2009
Federal and Aboriginal Affairs Division HEADQUARTERS Income Tax Rulings Attention: Derrick Smith Directorate L. Zannese (613) 957-2747
2009-030798
Statutory Benefits Received by a Status Indian
This is in response to your email of January 28, 2009, requesting our views on whether the GST/HST credit, the Nova Scotia Child Benefit, the Canada Child Tax Benefit and the National Child Tax Benefit (collectively, the "Benefits") would be considered to be income situated on a reserve where the payments are made to an Indian residing on a reserve, such that the Benefits would be immune from seizure as provided by section 89 of the Indian Act.
ANAYLSIS
Section 89 of the Indian Act states:
"...the real and personal property of an Indian or band situated on a reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour of or at the instance of any person other than an Indian or band..."
The courts have ruled that when determining whether personal property is situated on a reserve for the purposes of section 89 of the Indian Act, the "connecting factors" test established in Williams v. The Queen, dealing with section 87 of the Indian Act, is applied. The connecting factors test requires identifying the various connecting factors that tie the income to a location either on or off a reserve and weighing the significance of each such factor.
The present issue is similar to that discussed in our documents E 932789A and E9411598, in which we took the position that Old Age Security received by an Indian was not exempt from tax under section 87 of the Indian Act and paragraph 81(1)(a) of the Income Tax Act as Old Age Security is not situated on a reserve. Old Age Security is a program available to all Canadians who qualify. There are insufficient factors connecting this income to a reserve.
The GST/HST Credit, the Canada Child Tax Benefit and National Child Tax Benefit are benefits that are available to all Canadians who qualify. They are not benefits that an individual or family must pay for directly (e.g., an individual pays into the Canada Pension Plan directly out of employment income). Also, they are not benefits paid for with money specifically set aside for Indians. There is no factor connecting either these programs, or the funds that the government uses to pay these benefits, to a reserve. The only factor that connects these payments to a reserve, in the present situation, is the fact that the Indian recipient is resident on a reserve. A similar conclusion can be reached with respect to the Nova Scotia Child Tax Benefit, if this benefit is similar to the Canada Child Tax Benefit and is available generally to residents of Nova Scotia.
CONCLUSION
The Benefits would not be considered to be situated on a reserve as there are insufficient factors connecting this income to a reserve. The Benefits are available to all Canadians who qualify and are paid from general government funds. The fact that the recipient is an Indian residing on a reserve is not sufficient to result in the Benefits being situated on a reserve.
We trust that these comments will be of assistance.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
Eliza Erskine
A/Manager
Non-Profit Organizations and
Aboriginal Issues
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch