13 December 2022 Internal T.I. 2019-0822761I7 - Municipal/public body performing a function of gov

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether certain First Nations organizations are public bodies performing a function of government.

Position: yes.

Reasons: They both meet the criteria to be public bodies and are both performing a function of government in Canada.

								December 13, 2022

Charities Directorate						HEADQUARTERS
Legislative Agenda and Operational Issues			Income Tax Rulings Directorate
								Ann Townsend 

								2019-082276	

Attention: Stephanie Jones

Re: Whether certain First Nations organizations are public bodies performing a function of government in Canada

Unless otherwise stated, all statutory references in this document are to the Income Tax Act (Act).

This is in response to your request for our views on whether the XXXXXXXXXX (XXXXXXXXXX Board of Health) and the XXXXXXXXXX (XXXXXXXXXX Tribal Health) qualify for the exemption from tax under paragraph 149(1)(c) as “a municipal or public body performing a function of government in Canada.”

Facts

The following is our understanding of the facts:

XXXXXXXXXX Board of Health

• The XXXXXXXXXX Board of Health was created under provincial legislation enacted by the XXXXXXXXXX: “the Act respecting health services and social services for XXXXXXXXXX native persons (XXXXXXXXXX)” (Agreement);
• The Agreement gives the XXXXXXXXXX Board of Health the responsibility to be the exclusive provider of health, medical and social services for the XXXXXXXXXX on its XXXXXXXXXX reserves in XXXXXXXXXX;
• The XXXXXXXXXX Board of Health receives government funding to provide the health care services and it is governed by an elected board of directors.
• XXXXXXXXXX Tribal Health
• The XXXXXXXXXX Tribal Health was incorporated under the Canada Not-For-Profit Corporations Act as a corporation without share capital;
• The XXXXXXXXXX Tribal Health was created to administer the health services transfer agreement entered into between the XXXXXXXXXX Tribal Council (Tribal Council) and the government of Canada;
• The XXXXXXXXXX Tribal Health’s membership is comprised of members from each of the XXXXXXXXXX First Nations, which are represented by the Tribal Council. The XXXXXXXXXX Tribal Health board of directors are appointed by elected officials of each of the XXXXXXXXXX First Nations;
• The XXXXXXXXXX Tribal Health receives government funding to provide numerous health programs including environmental health, dental clinics, residential school survivor support, youth suicide prevention, home and community care, nursing, diabetes initiatives and foot care programs;
• The XXXXXXXXXX Tribal Health must provide progress reports and audited financial statements to the Federal government in order to continue to receive funding for its programs.

Our Comments

The XXXXXXXXXX Board of Health and XXXXXXXXXX Tribal Health are both incorporated entities. It is the longstanding view of the Canada Revenue Agency (CRA) that in order for a corporation to be a public body, it must acquire both its existence and its authority from a statute enacted by a legislature with specified duties assigned to the corporation by the statute. In addition, the federal government, a provincial or territorial government, or the “public” that the corporation is serving or representing should have some significant control over the actions and operations of the corporation and the corporation should be accountable to either that government or the public.

The courts recently considered the meaning of the phrase “a municipal or public body performing a function of government in Canada” in Lawyer’s Professional Indemnity Company (footnote 1) (Lawpro). The courts applied the following three-part test for “public authority” to determine if the Law Society of Ontario (LSO) was a public body:

• there must be a duty to the public,
• there must be a significant degree of governmental control; and
• any profit earned must be for the benefit of the public and not for private benefit.

The Tax Court of Canada concluded that the LSO was a public body as it was created by statute, owed a duty to the public, was under significant control by the government of Ontario, and its profit was not for private benefit. (footnote 2)

The XXXXXXXXXX Board of Health was created under a special provincial statute, is governed by a locally elected board of directors, has a duty to the public as it is the main provider of health and social services to the residents of the XXXXXXXXXX Communities in XXXXXXXXXX, and it is under a significant degree of government control as it is funded by and accountable to the provincial government. Therefore, it is our view that the XXXXXXXXXX Board of Health is a public body.

Although the XXXXXXXXXX Tribal Health was not created by a special statute, it was established to administer the health transfer agreement entered into between the Tribal Council and the federal government. Its membership is comprised of members from each of the XXXXXXXXXX First Nations and its board of directors are appointed by elected officials of those First Nations. It has a duty to the public to provide various health care services and any profit earned is for public benefit. It is funded by the government and is required to provide progress reports and audited financial statements to the government; therefore, it is under a significant degree of government control and is accountable to the government. Consequently, it is also our view that XXXXXXXXXX Tribal Health is a public body.

In addition to being a public body, an entity must also perform a function of government in Canada to qualify for the exemption from tax provided under paragraph 149(1)(c). The CRA has accepted that providing municipal-type services, such as water, sewage removal, the pick-up of garbage and the maintenance of infrastructure such as roads, sewers and public buildings is a function of government. Further, providing a key service traditionally offered by the provinces or territories such as social services, overseeing of the environment, health services, and education is generally considered to constitute performing a function of government.

The XXXXXXXXXX Board of Health is the exclusive provider of health, medical and social services on XXXXXXXXXX. reserves XXXXXXXXXX It is funded by the government and is providing services to the public that would otherwise be provided by the province of XXXXXXXXXX. Therefore, it is our view that it is considered to be performing a function of government.

The XXXXXXXXXX Tribal Health provides various health services under a health transfer agreement with the federal government such as: dental care, Indian residential school support, teenage suicide prevention, home and community care, and foot care programs. It is funded by the government and provides services that would otherwise be provided by the government. Therefore, it is our view that it is also considered to be performing a function of government.

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CRA’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure, including information that could reveal the identity of the taxpayer. The taxpayer may ask for a version that has been severed using the Privacy Act criteria, which does not remove taxpayer identity. You can request this by e-mailing us at: ITRACCESSG@cra-arc.gc.ca. A copy will be sent to you for delivery to the taxpayer.

We trust these comments will be of assistance to you.

Yours truly,

Ms. Nerill Thomas-Wilkinson, CPA, CA

Manager
Non-Profit Organizations and Indigenous Issues Section
Specialty Tax Division

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 Lawyers’ Professional Indemnity Company v. H.M.Q, 2018 TCC 194; Lawyers’ Professional Indemnity Company v. Canada 2020 FCA 90, 2018 TCC 194. Leave to appeal to the Supreme Court of Canada dismissed April 1, 2021.

2 Pars 83 to 88, TCC