2020-0851781M4 CEWS and First Nation Businesses

Principal Issues: Are First Nations and business's run directly by a First Nation eligible entities for purposes of the CEWS

Position: No, First Nations are public institutions for the purposes of CEWS and are not eligible entities. In addition, an unincorporated business/enterprise directly operated by an Indian band is not an eligible employer as the band itself would be considered the employer.

Reasons: All Indian bands (First Nations) created under the Indian Act meet the criteria to be considered municipal or public bodies performing a function of government in Canada under paragraph 149(1)(c).

Author: Townsend, Ann
Section: 149(1)(c)

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Diane Lebouthillier, Minister of National Revenue, received your correspondence on May 22, 2020, from the office of the Right Honourable Justin Trudeau, Prime Minister of Canada, about Indian band eligibility for the Canada Emergency Wage Subsidy (CEWS). She has asked me to reply on her behalf.

The CEWS is a subsidy available for a period of 12 weeks from March 15, 2020, to June 6, 2020, that will provide a subsidy of 75% of eligible remuneration, paid by an eligible entity, which is an eligible employer that qualifies, to each eligible employee up to a maximum of $847 per week. As announced on May 15, 2020, the government proposes to extend the CEWS by an additional 12 weeks to August 29, 2020.

For the purposes of the CEWS, an eligible employer is:

*    a corporation, other than a public institution, that is not exempt from tax;
*    an individual;
*    a registered charity, other than a public institution;
*    certain non-profit organizations, other than a public institution;
*    a partnership, each member of which is a person or partnership described in this list; or
*    a prescribed organization, including certain Indigenous businesses.

A public institution is a school, school board, hospital, health authority, public university, or college. It also includes an organization described in any of paragraphs 149(1)(a) to (d.6) of the Income Tax Act such as municipalities and local governments and tax‑exempt Crown corporations. All Indian bands created under the Indian Act meet the criteria to be considered municipal or public bodies performing a function of government in Canada under paragraph 149(1)(c) of the Income Tax Act. As a result, Indian bands are public institutions for the purposes of CEWS and are not eligible employers. In addition, an unincorporated business or enterprise directly operated by an Indian band is not an eligible employer because the band itself would be considered the employer.

However, the following Indigenous businesses are prescribed organizations and will be eligible employers for the purposes of the CEWS:

*    a tax-exempt corporation (under paragraph 149(1)(d.5) of the Income Tax Act) carrying on a business that is at least 90% owned by one or more Indigenous governments;
*    a tax-exempt corporation (under paragraph 149(1)(d.6) of the Income Tax Act) carrying on a business that is owned 100% by one or more Indigenous governments or by tax‑exempt corporations described above; and
*    a partnership, each member of which is an eligible employer or an Indigenous government.

For the purposes of the these rules, an Indigenous government means a First Nations, Inuit, or Métis government or similar Indigenous governing body exempt from tax under paragraph 149(1)(c) of the Income Tax Act. 

I appreciate the opportunity to respond to your concerns and trust the information I have provided is helpful.

Sincerely,

Geoff Trueman
Assistant Commissioner
Legislative Policy and Regulatory Affairs Branch
Canada Revenue Agency

Prepared by: 
Ann Townsend
Income Tax Rulings Directorate, LPRAB
2020-085178
905-242-8306

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