24 Appeal: Rev. Current L. & L. Reform 3 (2019)

handle is hein.journals/appeal24 and id is 1 raw text is: 
APPEAL VOLUME 24 , 3


ARTICLE


INDIGENOUS SETTLEMENT TRUSTS:

RECHARACTERIZING THE NATURE

OF TAXATION


Frankie Young *

CITED: (2019) 24 Appeal 3



ABSTRACT

This article examines how Indigenous Settlement Trusts (Settlement Trusts), established
for the benefit of First Nations, are affected by the Income TaxAct ( TaxAct). I argue that
Settlement Trusts should be taxed differently than other personal trusts under the TaxAct.
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 TaxAct 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.

INTRODUCTION

Historically, Indigenous people's participation in economic and commercial activities
was an integral part of traditional Indigenous governance practices. Thus, participation
in economic activities is not a new concept for Indigenous peoples. In fact, activities that
yielded economic benefits flowed from Indigenous self-determination and self-governance.
Participation in contemporary commercial activities means that Indigenous people may
hold property in various modern forms.

This article discusses how Bands, through participation in the mainstream economy, may
acquire and hold property through the use of investment structures related to Settlement
Trusts. When Bands receive compensation funds from Settlement Agreements, a means


    Frankie Young is a lawyer and doctoral candidate at the University of Ottawa. She obtained her
    Juris Doctor from the University of Saskatchewan and then went on to complete her master's
    degree on the effects of the Income Tax Act on Indigenous Settlement Trusts. Her doctoral
    research explores whether Indigenous Settlement Trust assets may be used as viable forms of
    collateral in secured property transactions on First Nation lands as a means to provide economic
    development opportunities.

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