19 June 1995 Ministerial Letter 9512798 - INDIANS - EMPLOYMENT INCOME, GUIDELINE 4

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.

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 (2) ADM #941757
RETURN TO 15TH FLOOR, ALBION TOWER
PENDING COPY
June 19, 1995

XXXXXXXXXX

Dear XXXXXXXXXX:

I am replying to your letter of April 21, 1995, wherein you inquire whether, in light of the additional information you provide, the employees of the

XXXXXXXXXX would be exempt from taxation under Guideline 4 of the Indian Act Exemption for Employment Income Guidelines. You are of the view that XXXXXXXXXX satisfies all of the requirements of Guideline 4. However, I have reviewed the documents you provided and am unable to agree with your assessment of XXXXXXXXXX situation for the following reasons.

In your opinion, XXXXXXXXXX is an employer resident on the XXXXXXXXXX reserve, since it is an organization controlled by one or more bands and tribal councils and it is dedicated to the social, cultural, educational or economic development of Indians who for the most part live on reserves. As indicated in my January 5, 1995 letter, an employer is resident on a reserve if the reserve is the place where the central management and control over the employer organization is actually located. Although the management and control of XXXXXXXXXX appears to be exercised by the board of directors, the facts you provided do not establish that the board exercises management and control of XXXXXXXXXX from a location on reserve. Furthermore, given that the Executive Director of XXXXXXXXXX works out of the off reserve office and that the principal administrative office of XXXXXXXXXX is located off reserve, in XXXXXXXXXX, a review of the facts will be necessary to establish that management and control of XXXXXXXXXX are not also exercised off reserve.

As regards the requirement that the Indian organization be controlled by one or more Indian bands which have reserves or tribal councils representing one or more such bands, you indicate that only representatives of Indian bands or tribal councils can be appointed to the board of directors. However, this is not evident from your organization's XXXXXXXXXX amended by-laws. The limitation contained in the by-laws regarding the composition of the board of directors relates to geographic representation. Accordingly, it is not clear to me, from your organization's by-laws, who controls XXXXXXXXXX

To meet Guideline 4, XXXXXXXXXX must be dedicated exclusively to the social, cultural, educational or economic development of Indians who for the most part live on reserves. As XXXXXXXXXX objectives are set out in the documents of incorporation, these documents would need to be reviewed in order to comment further on whether XXXXXXXXXX meets the above-mentioned requirement.

The employment duties of each particular Indian employee must be considered to determine if they were in connection with the employer's non-commercial activities carried on exclusively for the benefit of Indians who for the most part live on reserves. While I note that your organization has a not-for-profit mandate, this does not necessarily mean that all your activities are non-commercial.

I would be pleased to address any further general concerns that you may have. However, in order to have the issue conclusively resolved, it is likely that an audit will have to be conducted. Therefore, I suggest you contact Mr. Harvey Beaulac, Acting Director of the Ottawa Tax Services office, to arrange for the submission and review of documentation. He can be reached at 598-2100 or by writing to the following address:

Ottawa Tax Services Office
360 Lisgar Street
Ottawa, Ontario
K1A 0L9

I trust that these comments will be of assistance.

				Yours sincerely,

		Denis Lefebvre
		Interim Assistant Deputy Minister
		Policy and Legislation Branch

C.C. Mr. Harvey Beaulac

Acting Director
Ottawa Tax Services Office

C. Chouinard
957-2131
June 13, 1995