Indigenous Settlement Trusts: Recharacterizing the Nature of Taxation
This article examines how Indigenous Settlement Trusts (“Settlement Trusts”), established for the benefit of First Nations, are affected by the Income Tax Act (“Tax Act”). I argue that Settlement Trusts should be taxed differently than other personal trusts under the Tax Act. Currently, a Settlement Trust is taxed just as any other trust—as an individual pursuant to section 104(2) of the Tax Act—regardless of whether distinguished circumstances exist, as in the case of Indian Act-recognized Bands. This means that revenues are taxed at the top personal marginal tax rate. As such, the Settlement Trust relies upon the application of section 75(2) of the Tax Act to attribute revenues that remain in the Trust to the Band. The revenues are then tax exempt, pursuant to section 149(1)(c) of the Tax Act, because the Canada Revenue Agency’s administrative position is that Bands are public bodies performing a function of government in Canada. Ultimately, Bands face unnecessary administrative processes and costs from having Settlement Trusts taxed in this manner. I conclude that the Federal government should amend the Tax Act to exempt Settlement Trust revenues from being taxed under the general trust tax provisions so that administrative costs and processes for Bands will be eliminated or at least minimized. Bands could then claim Settlement Trust revenues directly in the same manner that they claim all other Band revenues.
The opinions expressed in APPEAL are those of the authors and do not necessarily represent those of the Editors or the Faculty of Law. APPEAL is a refereed review. While every effort is made by the Publisher and the Editorial Board to ensure that APPEAL contains no inaccurate or misleading data, opinion or statement, the information and opinions contained within are the sole responsibility of the authors. Accordingly, the Publisher, the Editorial Board, the Editors and their respective employees and volunteers accept no responsibility or liability for the consequences of any inaccurate or misleading information, opinion or statement.
Copyright © (2018) Appeal Publishing Society.
All rights reserved. Requests for permission to reproduce or republish any material from anyedition of Appeal should be sent to Appeal Publishing Society.