Guideline 4 of CRA’s Employment Income Guidelines respecting the s. 87 Indian Act exemption, provides that employment income of a First Nations individual generally will be exempt where the employer is resident on a reserve and is a First Nation band which has a reserve, or a tribal council representing one or more such bands (or a related band organization as described in the Guideline) and where the duties of employment are in connection with the employer's non-commercial activities carried on exclusively for the benefit of First Nations individuals who for the most part live on reserves. After noting that “on July 22, 2022, the Minister of Crown-Indigenous Relations announced that the section 87 tax exemption would be available for continuation on modern treaty governments’ former reserves and other First Nations reserves in Canada for prospective and existing modern treaty government beneficiaries who are registered or entitled to be registered under the Indian Act”, CRA stated:
[W]e agree with updating the Guidelines to allow modern treaty governments or organizations controlled by modern treaty governments to be eligible employers under Guideline 4. In the interim, the CRA will consider a modern treaty government that was formerly a band as defined under the Indian Act or was created to represent one or more such bands, to be an eligible employer for purposes of Guideline 4. This administrative position will be applied to a modern treaty government from the effective date that its modern treaty reinstates or continues the application of section 87 of the Indian Act on its former reserve lands.
CRA also indicated that:
[N]o amendments to Guidelines 1, 2, and 3 are required to apply them to the employment situations of First Nations individuals who are modern treaty government beneficiaries.