2016-0656851E5 Indian Tax Exemption and the Daniels Decision

Principal Issues: Are Metis and non-status Indians exempt from tax as a result of the SCC decision in Daniels?

Position: No.

Reasons: The SCC decision in Daniels declared that Metis and non-status Indians are considered Indians for the purpose of s. 91(24) of the Constitution Act, 1867. The tax exemption applies to individuals who are defined as Indians in the Indian Act.

Author: Townsend, Ann
Section: 81(1)(a)

XXXXXXXXXX                                                                                                                            2016-065685
                                                                                                                                                    Ann Townsend
August 30, 2016

Dear XXXXXXXXXX,

Re:  Indian Income Tax Exemption and the Daniels Decision

This is in response to your email enquiry of June 6, 2016 to the Honourable Diane Lebouthillier, Minister of National Revenue, asking whether the Supreme Court of Canada (SCC) decision in Daniels v. Canada, 2016 SCC 12 affects the tax status of Métis and non-Status Indians.

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R76, Advance Income Tax Rulings and Technical Interpretations. Although we cannot comment on your specific situation, we are able to provide the following general comments that may be of assistance.

Indigenous Canadians pay taxes under the same tax laws as all Canadians. However, the tax exemption provided under section 87 of the Indian Act may apply. Section 87 of the Indian Act exempts from tax the personal property of an “Indian” that is situated on a “reserve”, as those terms are defined in section 2 of that Act. The courts have decided that personal property includes income.

Indigenous and Northern Affairs Canada is responsible for administering the Indian Act. Consequently, the Canada Revenue Agency requires proof of registration as an Indian from Indigenous and Northern Affairs Canada, such as a Certificate of Indian Status, to allow an individual to claim the exemption.

The recent Supreme Court of Canada decision in Daniels v. Canada, 2016 SCC 12, declared that Métis and non-Status Indians are “Indians” for the purpose of federal Parliament’s law-making jurisdiction under subsection 91(24) of the Constitution Act, 1867. However, the tax exemption available under the Indian Act only applies to an individual who is an Indian as defined in the Indian Act.  Therefore, it is the view of the Canada Revenue Agency that the Daniels decision does not change the group of individuals who are currently eligible for the tax exemption.

The Canada Revenue Agency will continue to apply and administer the Indian Act tax exemption in the same way as prior to the Daniels decision.

We trust our comments will be of assistance to you.

Yours truly,

Roger Filion, CPA, CA
Manager
For Director
Non-Profit Organizations and Aboriginal Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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