This letter from CRA discusses whether a particular First Nation band is a public body performing a function of government? 

DOCNUM 2009-0311171R3
SUBJECT Paragraph 149(1)(c) determination
SECTION 149(1)(c)

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: Is the First Nation a public body performing a function of government?
REASONS:  The members of the First Nation are governed by an elected chief and council.  The First Nation has passed by-laws under section 81 of the Indian Act and performs several functions of government. 

XXXXXXXXXX     2009-031117



Re:  Advance Income Tax Ruling Request – XXXXXXXXXX (the “Band”)

This is in reply to your letter of XXXXXXXXXX , in which you requested an advance income tax ruling on behalf of the above-named taxpayer.  We acknowledge your additional submissions of XXXXXXXXXX .  We also acknowledge our various related telephone conversations (XXXXXXXXXX ). 

We understand that, to the best of your knowledge and that of the taxpayer, none of the issues involved in the ruling request is:

(i)  in an earlier return of the taxpayer or a related person,
(ii)  being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a related person,
(iii) under objection by the taxpayer or a related person,
(iv)  before the courts, or
(v)  the subject of a ruling previously issued by the Directorate to the taxpayer or a related person.

Unless otherwise stated, all references to a statute are to the Income Tax Act (Canada), R.S.C.  1985, c.1 (5th Supp.), as amended to the date of this letter, (the “Act”), and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.


In this letter, the following terms have the following meanings:

(b)  “Corporation” means XXXXXXXXXX ;
(c)  “Indian Act” means the Indian Act, R.S.C. 1985, c.I-5, as amended;
(d)  “Member” means an individual whose name appears on the “Band List” of the Band, as defined in the Indian Act and maintained by the Band in accordance with section 10 of the Indian Act;
(e)  XXXXXXXXXX ; and
(f)  “Reserve” means the Band’s reserves as described in paragraph 4 of this ruling and which are “reserves” as defined in subsection 2(1) of the Indian Act.

Our understanding of the facts, proposed transaction and the purpose of the proposed transaction is as follows:


1.  The Band is a “band” as defined in subsection 2(1) of the Indian Act.

2.  The mailing address for the Band is XXXXXXXXXX .  The Band is serviced by the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Tax Centre. 

3.  The Band is comprised of approximately XXXXXXXXXX Members, approximately half of whom reside on the Reserve along with their spouses and children.

4.  The Reserve is located in and around the XXXXXXXXXX , with a total of approximately XXXXXXXXXX acres (XXXXXXXXXX hectares) contained in reserves XXXXXXXXXX

5.  The Band is governed by a band council (the “Band Council”), comprised of a chief and XXXXXXXXXX council members.  The chief and council were elected pursuant to the Indian Act following the Indian Band Council Procedure Regulations.  The Band Council is responsible for the governance of the Band and has the power to make by-laws in accordance with the Indian Act.  XXXXXXXXXX

6.  The Band controls its own membership pursuant to section 10 of the Indian Act.

7.  The Band is the sole shareholder of the Corporation.  The Corporation XXXXXXXXXX

8.  The Band has passed by-laws pursuant to section 81 of the Indian Act pertaining to:

      i. fencing, noxious weeds, policing, XXXXXXXXXX ;
      ii.    residency;
      iii.    enforcement of by-laws;
      iv. XXXXXXXXXX ; and
      v. XXXXXXXXXX .

9.  The Band does not have any by-laws pursuant to section 83 of the Indian Act or section 5 of the Financial Statistical Management Act as the Band Council has not found it necessary to raise additional revenue through taxation.



12.  The Band receives funding from Indian and Northern Affairs Canada (“INAC”) through the XXXXXXXXXX .  INAC provides funding to the XXXXXXXXXX pursuant to the XXXXXXXXXX (the “Funding Agreement”), currently in effect until XXXXXXXXXX .  The funding is provided to the XXXXXXXXXX to enable the XXXXXXXXXX to provide certain services and programs to the Member First Nations including:

i.  advisory services in the areas of financial management, band government, economic development, community planning and technical services;
ii.  access to primary and secondary level education programs and services;
iii.  assistance in the management and operations of education services;
iv.  financial assistance for post-secondary education;
v.  assisted living;
vi.  preservation of public health and safety and the environment and protection of capital projects under care and control of the XXXXXXXXXX ; and
vii.  a multi-year community based housing plan.

13.  Paragraph XXXXXXXXXX of the Funding Agreement permits the XXXXXXXXXX to delegate any of its non-statutory obligations under the agreement to duly authorized agents, including the Band.

14.  The Band has entered into a XXXXXXXXXX (“the Agreement”) with the XXXXXXXXXX , currently in effect until XXXXXXXXXX .  Pursuant to paragraph XXXXXXXXXX of the Agreement, the XXXXXXXXXX transfers a portion of the funding that it receives pursuant to its Funding Agreement with INAC directly to the Band and the Band undertakes responsibility for the provision and delivery of certain services and programs, including:

i.  membership administration;
ii.  Band administration and support;
iii.  Indian management development;
iv.  economic development;
v.  land management including administration of land transfers;
vi.  employee pension plan funding;
vii.  adult and institutional care and child welfare; and housing projects; and
ix.  operation and maintenance of community infrastructure.

Pursuant to paragraph XXXXXXXXXX of the Agreement, the Band is entitled to retain unexpended funding and is responsible for expenditures in excess of the funding transferred under the Agreement.  Pursuant to paragraph XXXXXXXXXX of the Agreement, if the Band delegates any of its responsibilities under the Agreement, the Band is liable to the XXXXXXXXXX for “the performance of its obligations under the agreement.”

15.  The Band provides supplemental funding to its Members to reimburse them for expenses that are not covered by provincial medical services or Health Canada’s Non-Insured Health Benefits Program. 

16.  The XXXXXXXXXX allocates pension funding it receives from INAC directly to the Band for Band employees.  The Band supplements the funding it receives through the XXXXXXXXXX with its own funds.  XXXXXXXXXX

17.  The XXXXXXXXXX contracts with local school boards for the provision of educational services to the children of Members.  The Band provides additional funding to Members for post-secondary education as required.

18.  The Band has entered into an agreement with the XXXXXXXXXX for fire protection services.  The XXXXXXXXXX bills the Band, on a fee per incident basis, for the services of its volunteer fire brigade.  The XXXXXXXXXX does not provide funding for fire protection services.

19.  The Band directly provides and administers programs and services for its Members including:

      i. the supply of water and sewage systems;
ii.  maintenance of infrastructure, including roads, water and sewage systems;
iii.  maintenance and modification of existing houses as well as construction of new houses;

      iv.    child care;
      v. funding for recreation programs for Members and their children;
      vi.    garbage disposal services;
      vii.    human resource development;
      viii.maintenance of cultural locations on the Reserve; and
      ix.    financial management and economic development.

These programs and services are provided by the Band directly and not through the XXXXXXXXXX .

20.  The Band uses an off-reserve landfill but provides waste removal services through a contract with the Corporation and also through a contract with a third party.

21.  The Band purchases water and sewer services from the XXXXXXXXXX .  The Band built and maintains the water and sewer infrastructure on the Reserve.  The Band pays for the water and sewer usage and bills out the usage to various users on the Reserve other than Members.  The Band maintains XXXXXXXXXX lift stations on the Reserve which are used to pump sewage into the XXXXXXXXXX sewer system. 

22.  The Band has constructed housing for Members who reside on the Reserve; the Band Council decides who can live in the housing.  The Band provides utilities (water, gas and electricity) for all of the houses located on the Reserve as well as XXXXXXXXXX and other related services.  The Band also provides sewer services for the houses on Reserve that do not have septic fields.  The Members are not required to reimburse the Band for these expenditures.  The Band provides direct supplemental funding to Members where necessary, such as to occasionally assist off-reserve Members with rent and utility bills. 

23.  The Band owns and maintains the following facilities on the Reserve:

i.  an administration building, parts of which are used as a Band office and XXXXXXXXXX ;
      ii.    a public works building which is used by the Band;
      iii.    a playschool (XXXXXXXXXX );
      iv.    housing units and an apartment building; and
      v. a covered arena, playground and a picnic area.

The Band leases the administration building, public works building and the playschool to the Corporation, which subleases them back to the Band, the XXXXXXXXXX and to third parties. 

The XXXXXXXXXX has appointed health officers who inspect the Band’s facilities and who report directly to the Band.

24.  The Band also receives grant funding from “XXXXXXXXXX ” revenue grants, upon application, pursuant to a “XXXXXXXXXX “, effective XXXXXXXXXX .  Grants from this fund are to be used for economic, social and community development projects.  An application for a grant must be submitted by the Band and supported by a Band Council resolution supporting the proposed use of the grant monies.  In XXXXXXXXXX , the Band received approximately $XXXXXXXXXX from this fund which was used for XXXXXXXXXX

25.  In or about XXXXXXXXXX , the Band entered into negotiations with the Government of Canada for the purpose of reaching an agreement on the concepts of self-government.  XXXXXXXXXX


Proposed Transaction

The Band will purchase, with cash, a $XXXXXXXXXX non-redeemable, guaranteed investment certificate (the “GIC”) issued by the XXXXXXXXXX through the branch located at XXXXXXXXXX   The GIC will earn interest at a rate of approximately XXXXXXXXXX % compounded annually.

Purpose of the Proposed Transaction

The purpose of the proposed transaction is to invest the wealth of the Band to ensure that funds are available for the future benefit of the Band. 

Ruling Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purposes of the proposed transactions, we rule as follows:

Because the Band is a public body performing a function of government in Canada within the meaning of paragraph 149(1)(c) of the Act, and therefore exempt from tax under Part I of the Act, no tax will be payable under Part I of the Act by the Band on any interest from the GIC included in its income as a result of the proposed transaction described above.

The above advance income tax ruling, which is based on the Act and Regulations in their present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R5, “Advance Income Tax Rulings”, dated May 17, 2002, and is binding on the Canada Revenue Agency provided that the proposed transaction is completed by XXXXXXXXXX . 

This letter is based solely on the facts and proposed transactions described above.  The documentation submitted with your request does not form part of the facts and proposed transactions and any references thereto are provided solely for the convenience of the reader. 

Yours truly,

Non-Profit Organizations and Aboriginal Issues Section
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch