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.
961823
XXXXXXXXXX J.D. Brooks
Attention: XXXXXXXXXX
June 19, 1997
Dear Sirs:
This is in reply to your letter of May 21, 1996 in which you requested confirmation that XXXXXXXXXX is able to issue receipts for donations as described in subsections 110.1(2) and 118.1(2) of the Income Tax Act (the "Act"). You pointed out that some donations would be received in respect of band organizations. We apologize for the delay in replying to you.
In order to be able to issue receipts for purposes of sections 110.1 and 118.1 of the Act, an Indian band would have to qualify as a Canadian municipality. The Tax Court of Canada in the case of Otineka Development Corporation Limited and 72902 Manitoba Limited v. Her Majesty the Queen (94 DTC 1234; (1994) 1 CTC 2424) determined that in certain circumstances an Indian band could qualify as a Canadian municipality. However, since 1977, the Department has administratively considered those bands that qualify for exemption under paragraph 149(1)(c) of the Act on the basis of being public bodies performing a function of government in Canada, to be Canadian municipalities for purposes only of issuing receipts under sections 110.1 and 118.1.
It is a question of fact as to whether an Indian band may be considered to be a public body performing a function of government in Canada and thereby qualify for exemption from Part I tax pursuant to paragraph 149(1)(c) of the Act. The Department considers that an Indian band that has passed by-laws under both sections 81 and 83 of the Indian Act is a public body performing a function of government. Those bands that had reached an advanced stage of development as was formerly required by section 83 of the Indian Act are treated similarly.
Your written request was submitted following a telephone conversation (XXXXXXXXXX/Brooks) on May 13, 1996 at which time we advised you of the two circumstances noted above under which we accept that a band is a public body performing a function of government in Canada. You addressed this in your letter by pointing out that XXXXXXXXXX has passed numerous by-laws although it has not passed by-laws under both sections 81 and 83 of the Indian Act. Your letter also indicates that XXXXXXXXXX has never been declared by the Department of Indian Affairs and Northern Development to have reached an advanced stage of development.
You stated that you did not think that anyone would doubt that XXXXXXXXXX is an advanced band. While the band may be more developed than many other bands, you have not provided any evidence indicating that the band is a public body that performs a function of government in Canada. Thus we are not able to confirm that the band can issue receipts for purposes of sections 110.1 and 118.1 of the Act. If you have other material or points you wish us to consider, such as a band profile and community involvement or comments on functions of government performed, such as involvement in a treaty land entitlement settlement, we would be pleased to do so.
You had also noted in your letter that the XXXXXXXXXX band may receive donations for qualifying band organizations. If, at some future time, it is determined that the XXXXXXXXXX band is eligible to issue receipts for purposes of section 110.1 and 118.1 of the Act, we would like to bring to your attention Interpretation Bulletin IT-110R2 (Deductible Gifts and Official Donation Receipts), particularly paragraph 16 thereof which discusses non-qualifying contributions. A municipality must have an unfettered right to use funds donated to it, although it is the Department's practice to permit a general direction by the donor for the funds to be used for a specific program operated by the municipality. Donations to a municipality with a direction that the donations be directed to an organization which does not operate under the authority of the municipality would not qualify as gifts to a Canadian municipality for purposes of sections 110.1 and 118.1 of the Act.
We trust that these comments will be of assistance to you.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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