Topics: What's New from the Charities Directorate of CRA, Canadian Charity Law, Applying for Registered Charity Status, Non-Profits that are not registered charities
In July 2016 the Income Tax Rulings Directorate of CRA wrote to the Charities Directorate clarifying the procedure for reviewing whether aboriginal bands should be viewed as qualified donees. Very importantly the CRA ITR Directorate concluded "it is our view that all bands created under the Indian Act meet the criteria to be considered municipal or public bodies performing a function of government in Canada for the purpose of paragraph 149(1)(c) of the Act and are therefore exempt from income tax."
As a result the process for registering such aboriginal bands as Municipal or public bodies performing a function of government in Canada has become much more easy. Here is a list of the Municipal or public bodies performing a function of government in Canada and currently there are 345 groups on the list.
Here is a copy of the redacted CRA letter 2016-064503:
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: Policy on whether all Indian Act Bands qualify as public bodies performing a function of government in Canada for purposes of paragraph 149(1)(c).
Position: Yes they do.
Reasons: See comments.
July 27, 2016
Charities Directorate CRA HEADQUARTERS 7th Floor, Place de Ville, Tower A Income Tax Rulings 320 Queen Street Directorate Ottawa, ON, K1A 0L5 Lori Merrigan (613) 670-9046 Attention: Ann Rénöus Policy, Planning and Legislation Division 2016-064503
Comments on Indian Act Bands as 149(1)(c) Entities
This is to advise you that we have reviewed our policy with respect to the interpretation of paragraph 149(1)(c) of the Income Tax Act (“Act”) as it relates to Indian bands that are created under the Indian Act.
In 1948, the Act was amended to include a tax exemption for “a municipality or a municipal or public body performing a function of government”. It appears likely that municipalities were considered part of the provincial Crown and were added to the list of tax exempt entities to make it explicit that they are not subject to income tax. There is no definition of “a municipal or public body performing a function of government” in the Act. However, it would seem logical, based on the wording, that it would appear to be an entity that is similar in nature to a municipality and governs people in a particular area.
The federal government, through the Indian Act, specifically creates an Indian band. Under the Indian Act, these bands or First Nations may be able to levy property taxes and create by-laws that affect its members. Consequently, the very nature of an Indian band and its council under the Indian Act is that of a local government, similar in nature to a municipality. This means that their reserve lands, monies, other resources and governance structure are managed by the provisions in the Indian Act. (footnote 1) When a band council makes a by-law under this section, it must be explicitly approved by the Minister of Indigenous and Northern Affairs Canada.
In 2014 the Rulings Directorate instituted a service called Public Body Rulings as a pilot project. During this period Rulings has gathered even more extensive experience with determining whether a band qualifies as a municipal or public body performing a function of government in Canada. As a result, it is our view that all bands created under the Indian Act meet the criteria to be considered municipal or public bodies performing a function of government in Canada for the purpose of paragraph 149(1)(c) of the Act and are therefore exempt from income tax.
If you have any questions with respect to this policy please do not hesitate to contact me. We trust that our comments will be of assistance.
Roger Filion, CPA, CMA
Non-Profit Organizations and Aboriginal Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:
1 2 (1) In this Act, band means a body of Indians
(a) for whose use and benefit in common, lands, the legal title to which is vested in Her Majesty, have been set apart before, on or after September 4, 1951,
(b) for whose use and benefit in common, moneys are held by Her Majesty, or
(c) declared by the Governor in Council to be a band for the purposes of this Act;
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.