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 (3) ADM 920582 RETURN TO RULINGS, ROOM 303, MET. BLDG. AUTHOR SUBJECT OR CORPORATE FILE
March 10, 1993
XXXXXXXXXX
Dear XXXXXXXXXX
I am writing in response to your letter of January 13, 1993 requesting clarification of my letter dated December 29, 1992 concerning the impact of the Glenn Williams decision ( 92 DTC 6320).
A key purpose of the letter was to inform the Indian community that unemployment insurance benefits received in respect of employment income exempt from taxation (personal property of an Indian on a reserve) were also exempt from taxation.
Of course, in order to reach that decision the Court had to conclude that the situs of the debtor (being on a reserve) is not the sole factor to be considered in exempting income from taxation since unemployment insurance benefits are not paid from a reserve. Rather the Court indicated that it is more appropriate to weigh all the factors which link the income of an Indian with a reserve with a view to meeting the purpose of section 87 of the Indian Act which is to "preserve the entitlements of Indians to their reserve lands and to ensure that the use of their property on their reserve land was not eroded by the ability of governments to tax, or creditors to seize".
With a view to fairness, tax paid or payable on such unemployment insurance benefits received in taxation year 1985 or later will be refunded.
The Department must now identify the connecting factors which will determine whether the income of an Indian is exempt from taxation. We have every intention of adopting a fair and liberal interpretation that will respect the purpose of section 87 of the Indian Act. This is a difficult task for we may not be aware of all the factors.
With a view to assisting the Indian community, the
Department will issue guidelines that will describe the
situations where the exemption applies. For instance it has
already been determined that the exemption will apply to:
- employment income for duties performed entirely on
a reserve;- employment income for duties performed entirely
off a reserve where the employer resides on a
reserve and the Indian lives on the reserve;- employment income for duties, a substantial amount
of which are performed on a reserve and either the
employer is located on the reserve, or the Indian
lives on the reserve; and,- unemployment, pension and retiring benefits
received in respect of exempt employment income.Of course the Department remains of the view that it is appropriate to prorate the exemption in cases where duties are performed both on and off a reserve.
We appreciate however, that there may be other situations where the income is linked to a reserve in a manner that warrants a tax exemption. In developing the guidelines, the Department will anticipate as many of those situations as possible and your assistance would be greatly appreciated, for your officials may be aware of other connecting factors. The guidelines will be published as soon as possible and situations not covered by the guidelines will have to be dealt with on a case by case basis.
As you know a remission order will be passed to ensure that no one will be adversely affected by the Williams decision prior to 1994.
In concluding, I would like to reiterate that it would be most useful to have your input in the development of the guidelines and it would be appreciated if you could provide us with your views regarding any factors that we should consider.
Yours sincerely,
Denis Lefebvre
Assistant Deputy Minister
Legislative and Intergovernmental
Affairs BranchW.P. Guglich (975-2102) 930252