Morriseau v. The Queen

Morriseau v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2020-01-15
Neutral citation
2020 TCC 5
File numbers
2017-3076(IT)I, 2017-3077(IT)I
Judges and Taxing Officers
Don R. Sommerfeldt
Subjects
Income Tax Act
Decision Content
Docket: 2017-3076(IT)I
BETWEEN:
CHRISTOPHER MORRISEAU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2017-3077(IT)I
BETWEEN:
MIRANDA SMOKE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals called for hearing on July 12, 2018, and continued on
June 24, 2019, at Winnipeg, Manitoba
By: The Honourable Justice Don R. Sommerfeldt
Appearances:
Counsel for the Appellants:
Kenneth Young
Counsel for the Respondent:
Sandra Hoeppner
JUDGMENT
The Appeals from the reassessments made under the Income Tax Act with respect to the 2012 and 2013 taxation years are dismissed, without costs.
Signed at Edmonton, Alberta, this 15th day of January 2020.
“Don R. Sommerfeldt”
Sommerfeldt J.
Citation: 2020 TCC 5
Date: 20200115
Docket: 2017-3076(IT)I
BETWEEN:
CHRISTOPHER MORRISEAU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2017-3077(IT)I
BETWEEN:
MIRANDA SMOKE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sommerfeldt J.
I. INTRODUCTION
[1] These Reasons pertain to the Appeals of Christopher Morriseau and Miranda Smoke from reassessments made by the Canada Revenue Agency (the “CRA”), on behalf of the Minister of National Revenue (the “Minister”), for the 2012 and 2013 taxation years. For each of those years, Mr. Morriseau and Ms. Smoke, who are registered as Indians [1] for the purposes of the Indian Act, [2] had claimed that their employment income was exempt from income tax by reason of section 87 of the Indian Act and paragraph 81(1)(a) of the Income Tax Act (the “ITA”). [3]
[2] In 2012 and 2013, Mr. Morriseau and Ms. Smoke were employed by Tribal Councils Investment Group of Manitoba Ltd. (“TCIG”) or by one of its subsidiaries, Arctic Beverages Ltd. (“ABL”). [4] The employer of Mr. Morriseau and Ms. Smoke initially provided to them T4 slips for those two years, indicating that their employment income qualified for the tax exemption under section 87 of the Indian Act. On March 31, 2015, apparently after the CRA had had discussions with representatives of TCIG, and two or three years after the taxation years in question, the employer of Mr. Morriseau and Ms. Smoke issued to them amended T4 slips for 2012 and 2013, [5] indicating that the employment income earned in those years did not qualify for the exemption under section 87 of the Indian Act.
II. ISSUE
[3] The fundamental issue in these Appeals is whether the income of Mr. Morriseau and Ms. Smoke, earned by them in 2012 and 2013, was “situated on a reserve.” [6] The resolution of this issue requires an application of the “connecting factors” test enunciated in Williams [7] and reiterated in Bastien. [8] The test requires the Court to undertake a two-step analysis: first, identify the potentially relevant factors that might connect the income of Mr. Morriseau and Ms. Smoke to a location, and second, analyze those factors purposively to determine the weight to be given to them. The analysis is to be conducted within the framework set out in Kelly, [9] which summarized the basic propositions arising from Bastien.
III. FACTS
A. Appellants
[4] Mr. Morriseau is a member of Peguis First Nation. His grandparents left their reserve years ago “to better their family.” [10] Mr. Morriseau was born and raised in Winnipeg. He has not, at any time in his life, lived on a reserve, although he expressed a sincere desire to live on his First Nation reserve. [11] Regrettably, there are no employment opportunities there.
[5] Ms. Smoke is a member of Dakota Tipi First Nation. Until she was three years old, she lived in Portage la Prairie, closer to her First Nation community. [12] In 1983, she moved with her mother to Winnipeg, where she has lived ever since.
B. TCIG
[6] None of the constating documents of TCIG was put into evidence, nor was there any testimony concerning the legal details of TCIG’s creation. According to the 2012 and 2013 Annual Returns of Information filed by TCIG under the Manitoba Corporations Act, [13] TCIG was created by an incorporation or an amalgamation on November 27, 1989 under Canadian federal jurisdiction. [14]
[7] Jonathan Flett, one of the founding directors (and now a former director) of TCIG, explained the purpose, objectives and corporate structure of TCIG. [15] He stated that TCIG has seven shareholders, which are, or represent, all of the Tribal Councils in Manitoba, and which were shown in the 2012 Annual Return of Information as follows:
- Dakota Ojibway Investments Ltd.
- Interlake Reserves Tribal Council Inc.
- Island Lake Tribal Council
- Keewatin Tribal Council Inc.
- Southeast Resource Development Council Corp.
- Swampy Creek Tribal Council Inc. [16]
- West Region Investments Limited [17]
[8] Each of the seven shareholders owns 10,000 Class A Common Shares of TCIG. Mr. Flett stated that each Tribal Council represents a number of First Nations. Collectively, the seven Tribal Councils which (or whose nominees) are shareholders of TCIG, represent 55 of the 63 First Nations in Manitoba. [18]
[9] Mr. Flett explained that the seven Tribal Councils decided to organize an entity in order to provide economic opportunities to Indigenous people. The resultant entity was TCIG. Each shareholder contributed $25,000 to form the initial capital of TCIG. The first investment made by TCIG was the purchase of ABL. Since that time, TCIG has acquired numerous other subsidiaries. TCIG and its subsidiaries endeavour to provide employment opportunities to members of First Nations and endeavour to provide products and services to Indigenous people, particularly those in remote areas. Many of the subsidiaries of TCIG have been economically successful. In 2012 and 2013, ABL was one of TCIG’s top-performing subsidiaries and was considered to be the flagship subsidiary. The TCIG group of corporations has become a source of pride for members of First Nations.
[10] Mr. Flett testified that, although growth was slow in the early 1990s, by 2012 and 2013, the subsidiaries of TCIG were generally quite profitable, such that they paid significant annual dividends to TCIG, which distributed those dividends to the seven Tribal Councils (or their nominees). In turn, according to Mr. Flett, the Tribal Councils used the distributions to benefit the First Nations people of Manitoba. [19]
[11] Robert Magnusson, the former chief financial officer of TCIG, stated that TCIG was created for the purpose of facilitating the economic development of the First Nations people in Manitoba. [20] Mr. Magnusson explained that, although TCIG was a non-profit (or perhaps a not-for-profit) entity, its various operating subsidiaries were for-profit corporations. [21] Mr. Magnusson stated that TCIG also has a foundation, which was registered with the CRA as a charity. [22] In addition, TCIG donated money to First Nations to sponsor powwows, hockey tournaments, baseball tournaments and golf tournaments. [23]
C. ABL
[12] The first investment by TCIG was the acquisition of ABL, which was then a bottling company operating in Flin Flon. [24] Apparently, ABL subsequently relocated to Winnipeg. There was little evidence concerning the head office or registered office of ABL, nor the place where its directors held their meetings. Mr. Morriseau stated that, when he was employed by ABL, he worked at a warehouse located on Sherwin Road in Winnipeg, and that subsequently ABL moved to another location next door, which was also on Sherwin Road. Mr. Morriseau stated that on many occasions he went to ABL’s head office, which, according to him, was located at 2190 – 360 Main Street, Winnipeg (near the intersection of Portage and Main). [25] However, based on the totality of the evidence, it was not clear to me whether ABL, as well as TCIG, had an office at 2190 – 360 Main Street, Winnipeg.
[13] In 2012 and 2013, ABL bottled and sold Pepsico soft drinks and juice. It also sold Frito Lay chips, bread, breakfast products, ice cream, cookies, beef jerky and other snacks. [26] ABL sold its products only to First Nations or to First Nations entities. [27] Ms. Smoke indicated that ABL also had a breakfast program, pursuant to which it sent juice and breakfast products to First Nations schools on various reserves in northern Manitoba and parts of Ontario. [28] However, Mr. Magnusson said that the breakfast program was undertaken by TCIG’s charitable foundation. [29]
[14] Mr. Magnusson also stated that ABL made gifts directly to First Nations communities, particularly as instructed or requested by TCIG. [30] There was no evidence as to the amounts, dates, frequency, nature or specific recipients of those gifts.
D. Employer
[15] As indicated above, in 2012 and 2013 the employer of Mr. Morriseau and Ms. Smoke was either TCIG or ABL. The oral testimony and documentary evidence were inconsistent and inconclusive.
[16] In their testimony, Mr. Morriseau and Ms. Smoke stated that they worked for ABL. For instance, Mr. Morriseau said, “I was employed by Arctic Beverages who was solely owned by TCIG.” [31] Mr. Morriseau was uncertain as to the entity that actually paid his salary to him, first by cheque and later by direct deposit to his bank account. He initially stated that the employer name on his paycheque stubs was “Southeast Tribal Council,” and not TCIG. [32] He later stated that his paycheques were issued by “one of the Tribal Councils,” [33] and later still stated that, when he received his salary by direct deposit to his bank account (rather than by cheque), the deposits “were from a First Nation entity.” [34] Mr. Morriseau was adamant that the direct deposits were not paid by ABL, but were paid by “an Aboriginal entity,” which might have been TCIG. [35]
[17] Initially, Ms. Smoke stated that she was employed at ABL as the area administrator. [36] Later, Ms. Smoke indicated that she initially worked for ABL and then, just before Christmas of 2011, she began working at TCIG. [37] However, during cross-examination, Ms. Smoke stated that all of her employment duties took place at ABL’s premises on Sherwin Road in Winnipeg and that she had no reason for her employment purposes to go to the offices of TCIG at Portage and Main. [38] This might suggest that, after Ms. Smoke left ABL to work for TCIG, rather than requiring her to relocate to TCIG’s corporate offices at Portage and Main, TCIG made arrangements for her to work at ABL’s premises on Sherwin Road.
[18] It seems as though Mr. Morriseau and Ms. Smoke may have considered TCIG and ABL, in a non-technical sense, to be a blended entity.
[19] When Mr. Magnusson testified, he stated that it was his understanding that the employer of Mr. Morriseau and Ms. Smoke was ABL. [39]
[20] The Notices of Appeal filed by Mr. Morriseau and Ms. Smoke respectively and the Replies filed by the Crown all indicate that Mr. Morriseau and Ms. Smoke were employed by TCIG. The amended T4 slips that were issued to Mr. Morriseau and Ms. Smoke showed their employer as being TCIG.
[21] I raised with counsel the question of whether I need to make a formal finding as to which entity employed Mr. Morriseau and Ms. Smoke. Neither counsel seemed to be concerned with this question. Accordingly, I will decide these Appeals on the basis that the employer of Mr. Morriseau and Ms. Smoke was either TCIG or ABL.
E. Employment Particulars
[22] Mr. Morriseau stated that in 2012 and 2013 he worked at ABL as a shipper. In that capacity, he had responsibility for overseeing ABL’s warehouse in Winnipeg. As well, he was responsible for the numerous deliveries that left the warehouse on a daily basis for ABL’s customers. Mr. Flett said that ABL distributed its products in Manitoba, northern Saskatchewan, parts of Ontario and the Territories. [40]
[23] Ms. Smoke testified that when she worked for ABL, she was an area administrator. As such, her duties entailed preparing sales and volume reports and sending those reports to TCIG. She was also involved in auditing ABL’s system. [41] She performed all of her employment duties at the ABL premises located on Sherwin Road. It was not necessary for her, in the performance of her employment duties, to go to the TCIG office at 2190 – 360 Main Street. [42] Ms. Smoke did not, as part of her employment duties, visit any of the northern communities to which ABL shipped its products, but she did communicate with them by email and telephone. [43]
[24] Both Mr. Morriseau and Ms. Smoke were paid by their employer in Winnipeg. [44]
IV. ANALYSIS
A. Statutory Provisions
[25] The relevant portion of paragraph 81(1)(a) of the ITA reads as follows:
81(1) There shall not be included in computing the income of a taxpayer for a taxation year,
(a) an amount that is declared to be exempt from income tax by any other enactment of Parliament….
The enactment of Parliament that is relevant here is section 87 of the Indian Act, the applicable portion of which, at the relevant time, read as follows:
87(1) Notwithstanding any other Act of Parliament or any Act of the legislature of a province, but subject to section 83 and section 5 of the First Nations Fiscal Management Act [which are not relevant here], the following property is exempt from taxation:
(a) [n/a]; and
(b) the personal property of an Indian or a band situated on a reserve.
(2) No Indian or band is subject to taxation in respect of the ownership, occupation, possession or use of any property mentioned in paragraph (1)(a) or (b) or is otherwise subject to taxation in respect of any such property.
B. Analytical Approach
[26] It is now well established that income constitutes personal property for the purposes of section 87 of the Indian Act and that, even though income is intangible, it is to be ascribed a notional location for the purpose of determining whether the tax exemption in section 87 applies to that income. [45] To determine the location of intangible property, a court must apply the two-step connecting factors approach set out in Williams, described as follows:
The first step is to identify the various connecting factors which are potentially relevant. These factors should then be analyzed to determine what weight they should be given in identifying the location of the property, in light of three considerations: (1) the purpose of the exemption under the Indian Act; (2) the type of property in question; and (3) the nature of the taxation of that property. The question with regard to each connecting factor is therefore what weight should be given to that factor in answering the question whether to tax that form of property in that manner would amount to the erosion of the entitlement of the Indian qua Indian on a reserve. [46]
As restated by the Supreme Court of Canada in Bastien, the two-step test is the following:
At the first step, the court identifies potentially relevant factors connecting the intangible personal property to a location…. [P]otentially relevant connecting factors have different relevance depending on the categories of property and the types of taxation in issue…. To take this into account, as well as to ensure that the analysis serves to identify the location of the property for the purposes of the Indian Act, at the second step, the court analyses these factors purposively in order to assess what weight should be given to them. This analysis considers the purpose of the exemption under the Indian Act; the type of property in question; and the nature of the taxation of that property…. [47]
(1) First Step – Identification of Factors
[27] According to Williams and Bastien, the first step in the two-step approach is to identify the factors that are potentially relevant for the purpose of connecting the income of Mr. Morriseau and Ms. Smoke to a location. In the context of employment income, the following connecting factors were identified, in the Desnomie case, as being potentially relevant in determining whether that income is situated on a reserve:
(a) the residence of the employer;
(b) the residence of the employee;
(c) the location where the work is performed;
(d) the location where the employee is paid; and
(e) the nature of the services performed or the special circumstances in which they are performed. [48]
Other cases have identified the same connecting factors in respect of employment income. [49]
[28] In addition to the five potential connecting factors listed above, there may be a further factor that warrants consideration in respect of these Appeals. In Bastien, Justice Cromwell explained that “the comments in both Mitchell and Williams in relation to the protection of property which Indians hold qua Indians should be read in relation to the need to establish a connection between the property and the reserve such that it may be said that the property is situated there for the purposes of the Indian Act.” [50] Justice Cromwell then observed that “the relationship between the property and life on the reserve may in some cases be a factor tending to strengthen or weaken the connection between the property and the reserve….” [51]
[29] The same point was made by the Federal Court of Appeal in Kelly. [52] During the hearing at first instance of Mr. Kelly’s appeal from his reassessment, his counsel submitted that Mr. Kelly’s “services were entrenched in the traditional, social and cultural integrity of life on reserves and promote[d] the preservation and furtherance of the traditional way of life on reserves and [were] a benefit to the Native communities as a whole, such that section 87 of the [Indian Act] applies.” [53] The trial judge, acknowledging that this was a factor connecting Mr. Kelly’s business to reserves, stated, “the type of counselling Mr. Kelly makes available through his business to reserves and others aligned to the reserves is invaluable and meets the test of preserving the traditional way of life in Indian communities; this connection cannot be overemphasized.” [54] In Robertson, the Federal Court of Appeal noted that “the long history of commercial fishing in lakes near the Reserve by the First Nation and their ancestors, and its continuing importance to the economic, social, and cultural fabrics of the Reserve, [was] relevant to determining whether a sufficiently close connection exist[ed] between the Reserve and the source of the Appellants’ income.” [55] Accordingly, those “considerations serve[d] to strengthen the connection between the Reserve and the Appellants’ fishing business income, and thus tend[ed] towards situating the income on the Reserve.” [56]
[30] Accordingly, in addition to the usual connecting factors relating to employment income, the submissions made by counsel for Mr. Morriseau and Ms. Smoke suggest that an additional factor to be considered in these Appeals is the relationship, if any, between the income of Mr. Morriseau and Ms. Smoke and the preservation of the traditional Indigenous way of life, including the economic, social and cultural fabrics of the reserves. However, as explained by the Federal Court of Appeal in Kelly, the focus must be “on whether there is a ‘connection between the property and the reserve such that it may be said the property is situated there for the purposes of the Indian Act[,]’ and not on whether ‘the property is integral to the life of the reserve or to the preservation of the traditional Indian way of life.’” [57] In other words, the relationship between the particular income and life on a reserve is a strengthening or weakening factor, but not an actual connecting factor, nor is it the focus of the analysis. [58]
[31] I will now consider, based on the facts of these Appeals, the factors that are potentially connective and relevant.
(a) Residence of the Employer
[32] The first connecting factor identified in paragraph 27 above is the residence of the employer. As it is not certain whether Mr. Morriseau and Ms. Smoke were employed by TCIG or ABL, I will consider the residence of both corporations. For the purposes of this analysis, I will apply the same principles (apart from jurisdiction of incorporation) that are used to determine whether a corporation is a resident of Canada or some other country. [59]
(i) TCIG
[33] I will begin by examining the place where the central management and control of TCIG was located, which is typically considered to be the location where the directors of TCIG held their meetings. During his examination-in-chief, Mr. Flett testified that TCIG’s board of directors met quite a few times at Brokenhead First Nation and Buffalo Point First Nation. Otherwise, depending on the territory of the hosting Tribal Council, the directors met at Swampy Cree or at Opaskwayak Cree Nation (colloquially referred to as “OCN”), which was a First Nation community. [60] Mr. Flett was not cross-examined in respect of the location of the directors’ meetings. There was no other evidence concerning the location where the directors of TCIG held their meetings. Therefore, for the purposes of these Appeals, I have concluded that the directors of TCIG held their meetings on various reserves in Manitoba.
[34] In determining the residence of TCIG, the location of its head office might be relevant, although not determinative. [61] The evidence concerning the location of TCIG’s head office is not conclusive. Mr. Magnusson testified that, during the time that he was employed by TCIG, the head office of TCIG was located first at OCN, and then, at a time which he does not remember, it was moved to Brokenhead First Nation. [62] Mr. Flett testified that the head office of TCIG was at OCN and that to the best of his knowledge and recollection, it was always there and was not moved elsewhere. [63] Ms. Smoke stated that, as far as she knew, when she started working in 2011, TCIG’s head office “was on Brokenhead First Nation I believe it was, or Opaskwayak First Nation.” [64]
[35] The only documentary evidence about the location of TCIG’s head office was an extract from TCIG’s annual report issued in September 2004. [65] That document stated that the head office of TCIG was at OCN.
[36] Based on the available evidence, it is my finding that in 2012 and 2013 the head office of TCIG was throughout those two years at OCN, or was initially at OCN and then subsequently at Brokenhead First Nation. It is my understanding that the head office of TCIG was located on lands that constituted reserves for the purposes of the Indian Act. [66]
[37] As well as having a head office at OCN and likely at Brokenhead First Nation subsequently, as noted above, TCIG also had an office in downtown Winnipeg. That office was referred to during the hearing as the main office, the corporate office or the main corporate office. It was located at 2190 – 360 Main Street. Approximately ten employees, including senior management, worked at that office. However, the senior executives who were “dealmakers” would often be out of the office, “on the First Nations” or elsewhere, negotiating contracts. [67] In addition to its head office and its main corporate office, TCIG had a number of other offices, [68] which were not described in detail.
[38] Although not determinative, a corporation’s registered office might be a relevant factor to consider in determining the residence of the corporation. [69] The registered office of TCIG was located at 2190 – 360 Main Street, Winnipeg, being the same location as TCIG’s main corporate office.
[39] Although not determinative, the address of TCIG shown on the amended T4 slips issued to Mr. Morriseau and Ms. Smoke was 2190 – 360 Main Street, Winnipeg (i.e., the address of TCIG’s main corporate office and registered office). [70]
[40] In summary, based on the evidence, it is more likely than not that in 2012 and 2013 TCIG’s central management and control was located on a reserve. It also appears that TCIG’s head office was located on a reserve, while its main corporate office and registered office were located in downtown Winnipeg. Considering and weighing all the evidence as a whole, it is my view that in 2012 and 2013 TCIG was resident on a reserve. However, it is my impression that TCIG was as connected to Winnipeg as it was to the reserves where its directors held their meetings.
(ii) ABL
[41] There was no evidence concerning the identity of the directors of ABL or the place where they held their meetings or otherwise made their decisions in respect of ABL. Similarly, there was very little evidence concerning the location of any of the offices of ABL, other than an indication that ABL had a warehouse and an administrative office on Sherwin Road in Winnipeg and an office at OCN, [71] and might possibly have had an office at 2190 – 360 Main Street, Winnipeg. Given the paucity of evidence, I am unable to make a finding that in 2012 and 2013 ABL had its central management and control on a reserve or was resident on a reserve. However, as ABL might have been structured in a manner similar to TCIG, there is a possibility that ABL may have been resident on a reserve.
[42] To summarize, if Mr. Morriseau and Ms. Smoke were employed by TCIG, their employer was resident on a reserve. If they were employed by ABL, their employer may have been resident on a reserve, but there is no conclusive evidence confirming such residence.
(b) Residence of the Employee
[43] Having been born and raised in Winnipeg, and never having lived on a reserve, for the purpose of applying the connecting factors test, Mr. Morriseau resided in Winnipeg, and not on a reserve.
[44] Similarly, having lived in Portage La Prairie until she was three years old and thereafter, having lived continuously in Winnipeg, for the purposes of the connecting factors test, Ms. Smoke resided in Winnipeg, and not on a reserve. [72]
(c) Place of Work
[45] The evidence is clear that both Mr. Morriseau and Ms. Smoke performed all of the duties of their employment in Winnipeg. They did not travel to any reserve, even for a brief period of time, in the course of their employment activities. There was no evidence as to the distances between Winnipeg and the reserves where TCIG’s directors met, or between Winnipeg and the places to which ABL’s products were shipped. [73]
(d) Place of Payment
[46] Mr. Morriseau stated that his salary was paid to him by “a First Nation entity” [74] or “an Aboriginal entity,” [75] and that the payor may have been Southeast Tribal Council, [76] “one of the Tribal Councils” [77] or perhaps TCIG. [78] For the period when Mr. Morriseau was paid by cheque, there was no evidence as to whether those cheques were drawn on a bank located on a reserve, in Winnipeg or elsewhere. When Mr. Morriseau began to be paid by direct deposit to his bank or credit union account, that account was located at a financial institution in Winnipeg. There was no evidence concerning the place at which Ms. Smoke was paid her salary for 2012 and 2013. However, as noted above, counsel for Mr. Morriseau and Ms. Smoke has acknowledged that they were both paid in Winnipeg. [79]
(e) Nature of the Services or Special Circumstances
[47] In discussing the nature of a taxpayer’s employment and the circumstances surrounding it, for the purpose of determining whether employment income was situated on a reserve, Justice Linden stated:
In my view, when the personal property at issue is employment income, it makes sense to consider the main purpose, duties and functions of the underlying employment; specifically, with a view to determining whether that employment was aimed at providing benefits to Indians on reserves. [80]
In Harry Bell, after quoting the above statement by Justice Linden, Justice Létourneau stated:
I want to emphasize at the outset that the benefit concept relied upon by the appellants is not an independent, free-standing connecting factor, but rather is a standard by which to evaluate the “nature of the employment” factor. [81]
[48] Turning to the nature of Mr. Morriseau’s employment, he oversaw ABL’s warehouse in Winnipeg and was responsible for the delivery of ABL’s products to its customers. Those products were primarily soft drinks, juice, chips, bread, breakfast products, ice cream, cookies, beef jerky and other snacks. Ms. Smoke’s services related to reporting in respect of the sale and distribution of those products. [82] In these Appeals, apart from the breakfast program (which may have been undertaken by TCIG’s charitable foundation), there were not any special circumstances, such as in the Folster case, which involved hospital-based healthcare. [83] Nor did the services provided by Mr. Morriseau and Ms. Smoke bear any similarity to the counselling services provided by Mr. Kelly. [84] However, there may be some parallel between these Appeals and the situation in Robertson, [85] in that Mr. Robertson worked as a commercial fisher, thus being involved in a food-product supply chain. Mr. Morriseau and Ms. Smoke were also involved in a food-product supply chain.
(f) Traditional, Economic, Social and Cultural Considerations
[49] The Notices of Appeal filed by Mr. Morriseau and Ms. Smoke were substantially the same. Each Notice of Appeal referred to TCIG as the employer, but indicated that Mr. Morriseau and Ms. Smoke “worked for [a] company that was owned and controlled by the employer.” The Notices of Appeal listed various factors which, according to Mr. Morriseau and Ms. Smoke, connected their income to a reserve. While it is not precisely clear, it appears that the reserve in question was the reserve referred to as Opaskwayak Cree Nation or OCN. Among the factors listed in each Notice of Appeal were the following:
1. The employer was owned by 7 Tribal Councils which in turn were owned and controlled by First Nations and represented 92,000 First Nations people who for the most part called their First Nation home or were connected to it through family connections….
5. The employer was dedicated to the socio-economic development of its member Tribal Councils and their member First Nations and their membership….
9. The employee was employed to meet the objectives of the employer set out in [paragraph] 5.
[50] In the Closing Submission made by counsel for Mr. Morriseau and Ms. Smoke, the following was stated in respect of the “residence-of-the-employer” connecting factor:
In these appeals, the residence of the employer should be analyzed as a connecting factor from the point of view of establishing the scope of the employers’ [sic] activities on the reserves, in particular whether benefits flowed to the reserves from the employer’s presence there…. TCIG was created to start socio-economic development for First Nations in Manitoba … by seven Tribal Councils to provide socio-economic benefits for member First Nations of the seven Tribal Councils…. It provided financial benefits to the member First Nations…. The employer created employment for First Nations people…. Therefore, there is significant evidence to support the presence of the employer on the reserves and that it provided significant socio-economic benefits….
The evidence of Jonathan Flett … regarding TCIG’s corporate presence as well as those of its’ [sic] subsidiaries underscored the relevance of the employer’s presence on the reserves it represented and who owned it:
“When we stand together, our success becomes your success. Every dollar spent at these companies recycles your dollar through First Nation companies that help strengthen our overall First Nations economy … because in the end, that dollar comes back to you.” [86]
[51] Later in his Closing Submission, while discussing the nature of the services performed and the special circumstances in which they were performed, counsel for Mr. Morriseau and Ms. Smoke stated:
The Appellants worked at a wholly-owned subsidiary of TCIG. The employer, TCIG[,] … consisted of a team which included the Appellants, all of the directing minds of TCIG, all employees of their wholly-owned subsidiaries, including Arctic Beverages Ltd., served to better the socio-economic situation of the First Nations and First Nations people. TCIG was created, owned, and managed by First Nations people. The head office of TCIG was on a reserve. It employed mainly First Nations people, including the Appellants, its Board of Directors were First Nations people who met from time to time on reserves. The employment income of the TCIG employees, including that of the Appellants, was connected to a reserve and thus situated there…. [87] [Bold-faced emphasis in the original, which highlighted most of the above quotation, has not been shown here.]
[52] After counsel for the Crown submitted her Written Submissions, counsel for Mr. Morriseau and Ms. Smoke, in his Rebuttal, made the following statement, emphasizing the importance, in his view, of the economic and social considerations:
In this case, TCIG’s head office was on a reserve, it employed mostly First Nations people, the Chief Executive Officer, the Chief Financial Officer were First nations [sic] people and all of the Board of Directors were First Nations people except one. All of the corporate and economic activity of TCIG confirms its presence on the reserves it was created to serve. The Appellants submit, this connecting factor to the reserves should be given determinative weight with respect to the location of their income. It is reasonable to conclude, given the above facts, all First Nation TCIG employees, regardless of residence or work location, should not be subject to income tax assessment. [88]
[53] The above statement seems to suggest that it is the position of Mr. Morriseau and Ms. Smoke that their income was situated, not on a particular reserve, but rather on all of the reserves that had a connection to TCIG. They also seem to suggest that their position applies not only to themselves but to all Indigenous employees of TCIG.
[54] In each of the Replies filed by the Crown in respect of the two Appeals, the following was stated as one of the assumptions of fact made by the Minister, in the context of this particular factor:
In determining the Appellant’s tax liabilities for the Taxation Years, the Minister made the following assumptions of fact: …
(h) the duties the Appellant performed were not in connection with any non-commercial activities of the Employer that were carried on exclusively for the benefit of Indians who for the most part live on reserves…. [89]
[55] In her Written Submissions, counsel for the Crown made the following statements, in the context of the “nature-of-the-services-performed-or-special-circumstances” connecting factor, although they are also relevant here:
As emphasized in Bastien and other decisions, there must be a connection to a physical location, to a reserve, not simply to First Nations people, as that does not meet the purpose and statutory intent of section 87 of Indian Act….
As repeatedly confirmed in Bastien, Williams and Mitchell v Peguis Indian Band, the purpose of the section 87 exemption is not to confer a general economic benefit, or better the socio-economic situation of Indigenous people generally. The purpose is to protect personal property located on the reserve. [90] [Footnote number and emphasis omitted.]
[56] As noted above, the relationship between a taxpayer’s income and life on a reserve (i.e., various traditional, economic, social and cultural considerations) may in some cases be a factor tending to strengthen or weaken the connection between the income and the reserve. [91] Such relationship and such considerations are not a separate stand-alone connecting factor between employment income and a reserve. Rather, they strengthen or weaken one or more of the recognized connecting factors. [92]
(2) Second Step – Analysis of Factors
[57] Having identified the potentially relevant connecting factors, the next step is to analyze those factors to determine the weight to be given to them in identifying the location of Mr. Morriseau’s and Ms. Smoke’s respective salaries. [93]
(a) Triplet
[58] In analyzing the connecting factors, the Court is to take note of three considerations, referred to in Kelly as a triplet, [94] i.e., the purpose of the exemption under the Indian Act, the type of property and the nature of the taxation of that property. [95] The reason for this approach is that “potentially relevant connecting factors have different relevance depending on the categories of property and the types of taxation in issue.” [96] In determining the weight to be given to each connecting factor, in light of the above three considerations, in Williams Justice Gonthier stated:
The question with regard to each connecting factor is therefore what weight should be given that factor in answering the question whether to tax that form of property in that manner would amount to the erosion of the entitlement of the Indian qua Indian on a reserve. [97]
(i) Purpose of Exemption
[59] My consideration of the purpose of the section 87 exemption is guided by the summary by the Federal Court of Appeal in Kelly of the principles enunciated by the Supreme Court of Canada in Bastien. Rather than reiterating all of the points made in Williams, Bastien and Kelly concerning the purpose of the section 87 exemption, I refer the reader to paragraph 42 of Kelly. As well, I note the concise summary of the purpose of the exemption given by Justice V. Miller in Baldwin:
The purpose of the exemption is to preserve the entitlements of Indians to their reserve lands and to ensure that the use of their property on their reserve lands is not eroded by the ability of governments to tax…. [98]
[60] The following excerpt from Kelly is also helpful, as it assists in understanding the purpose underlying section 87, as restated and, to some extent, reformulated by the Supreme Court in Bastien:
Section 87 “guard[s] against the possibility that one branch of government, through the imposition of taxes, could erode the full measure of the benefits given by that branch of government entrusted with the supervision of Indian affairs.” The Crown must “shield Indians from any efforts by non-natives to dispossess Indians of the property which they hold qua Indians.” Does “the Indian [hold] the property in question as part of the entitlement of an Indian qua Indian on the reserve”? The aim is to “insulate the property interests of Indians in their reserve lands from the intrusions and interference of the larger society so as to ensure that Indians are not dispossessed of their entitlements.” [99]
[61] In considering the meaning of the phrase “the property which they hold qua Indians,” the following comment by the Federal Court of Appeal in Shilling provides additional guidance:
From [1763], the Crown has always acknowledged that it is honour-bound to shield Indians from any efforts by non-natives to dispossess Indians of the property which they hold qua Indians, i.e., their land base and the chattels on that land base. [100] [Square brackets in original.]
[62] I also note that the Federal Court of Appeal indicated in Kelly that section 87 focuses on determining whether the personal property (in this case, employment income) of an Indigenous person is situated on a reserve. [101] The focus is on whether there is a connection between the employment income and the reserve, such that it may be said that the income is situated there, and not on whether the employment income is integral to the life of the reserve or to the preservation of the traditional Indigenous way of life. [102]
[63] I am particularly guided by the underlying principle enunciated in paragraph 47 of Kelly, from which an analogy may be drawn for the purpose of these Appeals:
In Bastien, too much focus on the “commercial” nature of the term deposits led the lower courts into error. They started to concentrate on the income-earning activities o