Indigenous Settlement Trusts: Recharacterizing the Nature of Taxation

• Author: Frankie Young
• Position: Lawyer and doctoral candidate at the University of Ottawa
• Pages: 1-15

APPEAL VOLUME 24

n

3

ARTICLE

INDIGENOUS SETTLEMENT TRUSTS:

RECHARACTERIZING THE NATURE

OFTAXATION

Frankie Young *

CITED: (2019) 24 Appeal 3

ABSTRACT

is art icle examine s how Indigenous Sett lement Trusts (“Settleme nt Trusts”), est ablished

for the benet of First Nations, are ae cted by the Income Tax Act (“Tax A ct ”). I argue that

Settlement Trusts should be taxe d dierently than other personal t rusts under the Ta x Act.

Currently, a Settlement Trust is taxed just as a ny other trust—as an individua l pursuant

to section 104(2) of the Tax Ac t —regardless of whether distingu ished circu mstanc es

exist, as in t he case of Indian Act-recognize d Bands. is mea ns that revenues are taxed

at the top personal marginal tax rate . As such, the Sett lement Trust relies upon the

application of section 75(2) of the Tax Act to attribute revenues that remain in the Trust

to the Band. e revenues are t hen tax exempt, pursua nt to section 149(1)(c) of the Tax

Act, because the Ca nada Revenue Agency ’s administrative position is that Bands are

public bodies performing a f unction of government in Cana da. Ultimately, Bands fac e

unnecessar y administrative processes and costs from having Set tlement Trusts taxed in

this manner. I conclude that t he Federal government should amend the Ta x Ac t to exe mpt

Settlement Trust revenues from being ta xed under the general trust ta x provisions so that

administrative costs and proces ses for Bands wil l be eliminated or at lea st minimiz ed.

Bands could then cla im Settlement Trust revenues directly in the sa me manner that they

claim all ot her Band revenues.

INTRODUCTION

Historically, Indigenous people’s participation in economic a nd commercial activitie s

was an integra l part of traditiona l Indigenous governance practices. us, participation

in economic activities is not a new c oncept for Indigenous peoples. In fact, activities t hat

yielded economic benets owed from Indig enous self-determination and self-governanc e.

Participation in contemporary c ommercial activities means that Indigenous people may

hold property in various modern form s.

is article d iscusses how Bands, throu gh participation in the main stream economy, may

acquire and hold property t hrough the use of investment structu res related to Settlement

Trusts. When Bands rec eive compensation funds from Settlement Agreements, a mea ns

* Frankie Young is a lawyer and docto ral candidate at the University of O ttawa. She obtained her

Juris Doctor from the Un iversity of Saskatchewan and the n went on to complete her master’s

degree on the eect s of the Income Tax Act on Indigenous Set tlement Trusts. Her doctoral

research explores whe ther Indigenous Settlement Trust ass ets may be used as viable forms of

collateral in secured prop erty transactions on Fi rst Nation lands as a means to provide econ omic

development opportunities.