2016-0663811E5 Métis employment income - Implication of Daniels

Principal Issues: 1. Is a member of a Métis Nation (“Métis member”) considered an “Indian” for purposes of the Indian Act? 2. Is the employment income earned by a Métis member on a reserve considered to be exempt from tax under the Indian Act, given the Supreme Court of Canada’s decision in Daniels v. Canada (Indian Affairs and Northern Development) (“Daniels”), 2016 SCC 12.

Position: 1. No; 2. No

Reasons: 1. Definition of “Indian” in the Indian Act. 2. The tax exemption available under the Indian Act only applies to an individual who is an “Indian” as defined in the Indian Act.

Author: Mahendran, Ananthy
Section: 81(1)(a) of the Income Tax Act and 87(1)(b) of the Indian Act

XXXXXXXXXX                                                                                                                    2016-066381
                                                                                                                                            A. Mahendran
                                                                                                                                            (905) 721-5204
November 29, 2016

Dear XXXXXXXXXX:

Re: Tax Treatment of Employment Income Earned by a Member of a Métis Nation

This is in response to your e-mail dated August 30, 2016, requesting a technical interpretation on the tax treatment of employment income earned by a member of a Métis Nation (hereinafter referred to as “Métis member”). In particular, you have asked us to comment on (i) whether a Métis member is considered an “Indian” for purposes of the Indian Act, and (ii) whether the employment income earned by a Métis member on a reserve is considered to be exempt from tax under the Indian Act, given the Supreme Court of Canada’s decision in Daniels v. Canada (Indian Affairs and Northern Development) (“Daniels”), 2016 SCC 12.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) and related legislation. 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 IC70-6R7, Advance Income Tax Rulings and Technical Interpretations.

Paragraph 87(1)(b) of the Indian Act provides for an exemption from taxation for the “personal property of an Indian or a band situated on a reserve.” Accordingly, the application of this provision is restricted to an “Indian” or a “band” as defined in subsection 2(1) of the Indian Act.

The term “Indian” is defined in subsection 2(1) of the Indian Act to mean “an individual who pursuant to this Act is registered as an Indian or is entitled to be registered as an Indian.”  Accordingly, to qualify as an Indian for purposes of the Indian Act, a person must either be registered as an Indian or be entitled to be registered as an Indian.

The recent Supreme Court of Canada decision in Daniels 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 currently eligible for the tax exemption.

We trust that these comments will be of assistance to you.

Yours truly,

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

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