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.
Principal Issues: Whether funding for education/training paid out of funds received by an Indian band pursuant to a Canada/First Nations Funding Agreement would be taxable to the recipient.
Position: General comments provided
Reasons: Insufficient information provided.
March 20, 2001
Ms. Betty Reid HEADQUARTERS Northern B.C. & Yukon Tax Services Cornelis Rystenbil, CGA (613) 941-6547
2000-006188
Canada/First Nations Funding Agreement and XXXXXXXXXX
This is in reply to your memorandum of December 13, 2000 in which you ask for our views on whether funding for education/training paid out of funds received by an Indian band pursuant to a Canada/First Nations Funding Agreement (the "Agreement") would be taxable to the recipient in light of the Greyeyes case (78 DTC 6043). It is our understanding that the Agreement represents a type of joint funding arrangement designed to bring all federal funding to the First Nation through one mechanism.
Our Comments
Section 87 of the Indian Act provides that the personal property of an Indian situated on a reserve is exempt from taxation. Paragraph 90(1)(b) of the Indian Act provides that, for purposes of section 87 of that Act, personal property that was given to Indians under a treaty or agreement between a band and Her Majesty shall be deemed always to be situated on a reserve.
When dealing with section 90 of the Indian Act in relation to scholarships received by Indians, we take guidance from the Federal Court - Trial Division's decision in Greyeyes. Deanna Greyeyes was a status Indian enrolled as a student at the University of Calgary, who, while attending the University of Calgary, received the sum of $2,339.50 from the Department of Indian Affairs and Northern Development to assist her in her post-secondary education. At all relevant times, she was neither living on nor attending classes on a reserve. However, the scholarship was received by Deanna Greyeyes pursuant to an agreement and treaty between her Band and Her Majesty specifically pursuant to an agreement to assist band members in their education in compliance with the obligations of the Federal Government under Treaty No. 6. The court held that the scholarship, by virtue of subsection 90(1) of the Indian Act, was the personal property of an Indian situated on a reserve within the meaning of section 87 of the Indian Act.
Our position has consistently been that agreements referred to in paragraph 90(1)(b) of the Indian Act must flow from a treaty, i.e., the agreement must implement the treaty. Our position stems from the decision on June 21, 1990, in Mitchell v. Peguis Indian Band ((1990) 2 SCR 85), wherein the majority in the Supreme Court of Canada held that the terms "treaty" and "agreement" in paragraph 90(1)(b) of the Indian Act take colour from one another and that the use of the term "given" can be taken as a distinct and pointed reference to the process of cession of Indian lands.
In Everett Kakfwi (99 DTC 5639), the Federal Court of Appeal referred with favour to the Supreme Court's interpretation of the terms "treaty" and "agreement" in Mitchell v. Peguis Indian Band. In this regard, the Federal Court of Appeal stated the following (at 5642):
"Thus, LaForest, J.'s analysis (in Mitchell) makes clear that an application of the basic rules of legislative interpretation which require that the terms 'treaty' and 'agreement' in paragraph 90(1)(b) be linked together so as to limit the extent of the word 'agreement' to that of 'ancillary agreement'-- that is to say an agreement in the nature of a treaty or attached to a treaty -- is wholly supported by the history of the protective tax regime adopted by Parliament in furtherance of the duties of the Crown toward Indians."
As a result, it is our view that the Kakfwi decision further supports our current position. Thus, it remains our view that an agreement referred to in paragraph 90(1)(b) of the Indian Act must flow from a treaty. In the above situation, we were not provided with sufficient information in order to determine whether the above funding flows from a treaty. In particular, based on the information provided, it is unclear as to what the source of the funding is (i.e. is there an obligation to provide this funding under a treaty).
For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Canada Customs and Revenue Agency's mainframe computer. 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 LAD version, or they may request a copy severed using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (613) 994-2898. A copy will be sent to you for delivery to the client.
Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate