ABORIGINAL PRACTICE POINTS
First Nations real property taxation
These materials were prepared and updated by John Olynyk of Lawson Lundell LLP and originally
appeared in the British Columbia Real Property Assessment Manual (CLEBC, 1990; also available at
www.cle.bc.ca).
2
Key points
•
Since 1985, bands have had the power under the Indian Act, R.S.C. 1985, c. I-5, to levy their
own property taxes. This power is more significant since 1988 amendments were made,
allowing such taxes on "conditionally surrendered" land—land from the reserve that had been
leased by the Crown to non-Indian users. The Indian Self-Government Enabling Act sets out how
the province vacates its taxes to make room for the new Indian band taxes.
•
In the 1990s, most bands with non-Indian development on BC reserves created their own
assessment and taxation regimes.
•
Band taxation on reserves is made possible by federal legislation and is therefore not controlled
by BC assessment and tax laws. Each Indian Act taxation bylaw is potentially unique; however,
consistency has emerged in practice, and many bands use model bylaws that draw significantly
from BC's assessment and tax statutes.
•
The general property taxation structure on reserves is:
o
Indians or bands are exempt from taxes unless there is a relevant band bylaw making
them liable;
o
a band bylaw (properly approved by the Minister) may tax Indians and non-Indians
alike on the reserve;
o
non-Indians occupying land on a reserve that is not subject to an Indian taxation bylaw
remain subject to provincial assessment and taxation; and
o
provincial assessment and taxation of non-Indians may continue to exist alongside an
Indian taxation bylaw, subject to provincial legislation.
•
Assessment law that has developed for BC cannot be assumed to apply to a band assessment.
Since the bylaw takes the place of the Assessment Act and property tax statutes, the bylaw,
together with s. 83 of the Indian Act and any regulations under s. 83, must be examined with
respect to all questions related to an Indian property tax.
•
It appears to be the law that a litigant must exhaust its rights of appeal under a band tax bylaw
before applying to the Federal Court for judicial review.
•
A corporation, even one with status Indians holding all of its shares, is a non-Indian and liable
to taxation in respect of reserve land it occupies.
•
The Indian Self Government Enabling Act allows partial or complete exemption from provincial
taxation where tax is imposed by a band bylaw under the Indian Act. Bands can select various
options:
o
concurrent taxation, which allows the continuation of local government and other
provincial taxes along with an Indian levy;
o
independent band taxation, which displaces all provincially-authorized property taxes
when the non-provincial tax regime comes into effect;
o
Indian district enabling provisions, which allow a band to incorporate its members into
a legal entity with the capacity of a natural person and powers similar to those of a
municipality;
o
home owner grants to residential band members that mirror the provincial system and
are paid out of that portion of the tax that replaces the provincial school tax.
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CONTENTS
I.
Introduction
A.
Scope of paper
B.
British Columbia assessment law not applicable
II.
Federal jurisdiction
A.
Constitutional basis
B.
Indian Act
C.
Indian Act amendments
D.
Band bylaws
E.
The First Nations Fiscal and Statistical Management Act
III.
Provincial jurisdiction
A.
Authority to tax non-Indians
B.
Indian Self Government Enabling Act
IV.
Joint arrangements—The Sechelt Indian Band
A.
Federal legislation
B.
Provincial legislation
V.
Treaty arrangements—The Nisga’a Final Agreement
VI.
The Westbank First Nation Self-Government Agreement
I.
A.
Introduction
Scope of paper
This paper describes the present statutory regimes in British Columbia dealing with property
taxation on reserves. Although indigenous people are commonly referred to as “First Nations”
people, in this paper the statutory language of “Indian” and “band”, as these terms are defined in
the Indian Act, is generally used. It is helpful to recognize that “bands”, “reserves”, and “bylaws” are
all creatures of a federal statute, the Indian Act, R.S.C. 1985, c. I-5, and have no necessary
correspondence with traditional Native governments, which may exist in parallel with the federal
structure.
Since 1985, bands have had the power under the Indian Act to levy their own property taxes. This
power, initially too restricted to be of much interest, became significant in 1988 when amendments
were made that extended the reach of such taxes to what had been known as “conditionally
surrendered” land—land from the reserve that had been leased by the Crown to non-Indian users.
The province had also been levying taxes on such properties, either directly or through its
municipalities. It was at that point faced with having to vacate its taxes to make room for the new
Indian band taxes. The statutory vehicle it used to achieve this in 1990 was the Indian Self Government
Enabling Act, now R.S.B.C. 1996, c. 219. This paper describes how these provincial and federal tax
regimes have operated in theory and practice.
In the first few years of the 1990s, essentially all bands with a significant amount of non-Indian
development on their reserves established their own assessment and taxation regimes. In recent
years, there have been legislative initiatives (discussed in “The First Nations Fiscal
4
and Statistical Management Act”, below) to provide for greater flexibility and independence for
First Nations in the field of property taxation. As well, many First Nations are engaged in treaty
negotiations involving taxation discussions that may produce a variety of tax arrangements around
the province. Those topics, however, are outside the scope of this paper.
This paper includes a discussion of the taxation regime under the Nisga’a Final Agreement and the
Westbank First Nation Self Government Agreement.
B.
British Columbia assessment law not applicable
Band taxation on reserves is made possible by federal legislation, and is therefore neither controlled
by nor part of British Columbia assessment and tax law. It is nevertheless a growing feature of the
British Columbia property tax landscape. Where Indian Act taxation bylaws are being implemented,
they are likely to have the effect of displacing provincially authorized property taxation on the affected
reserves. They can constitute a ground of exemption from provincial taxes (see “Exemptions from
other taxation”, below).
Each Indian Act assessment and taxation bylaw package is potentially unique, different from the
provincial legislation and different from the bylaws of other bands. A fair degree of consistency has
emerged in practice. Bands have generally made use of model bylaws, which in turn have drawn
significantly on the province’s Assessment Act and Taxation (Rural Area) Act. Nevertheless, there are
often important differences, and each bylaw should be examined individually to determine its
meaning and legality.
II.
A.
Federal jurisdiction
Constitutional basis
The Constitution Act, 1867 of Canada in s. 91(24) confers on the federal Parliament exclusive
legislative jurisdiction to make laws in respect of “Indians and lands reserved for the Indians”.
British Columbia joined confederation under the Terms of Union, 1871, which provided in s. 13 that
the Dominion government would assume responsibility for British Columbia Indians and the
management of British Columbia reserves, and that the province would convey tracts of land for
that purpose to the Dominion. Pursuant to this agreement, most present British Columbia reserves
were transferred by the province to the federal Crown by Order in Council 1036 of 1938.
The constitutional basis for Indian band taxation under s. 83 of the Indian Act is s. 91(3) of the
Constitution Act, 1867 (“the raising of money by any mode or system of taxation”). In Westbank First
Nation v. B.C. Hydro and Power Authority (1999), 67 B.C.L.R. (3d) 1 (S.C.C.), the Supreme Court of
Canada found that the primary purpose of the taxation bylaws of the Westbank First Nation was in
pith and substance taxation. The bylaws were not connected to a regulatory scheme, nor were they
a user fee for services directly rendered. Because the bylaws were taxation bylaws in pith and
substance, the court found they were enacted pursuant to s. 91(3) rather than s. 91(24) of the
Constitution Act, 1867. The court found that Westbank’s tax bylaws could not apply to B.C. Hydro, a
provincial Crown agent, since s. 125 of the Constitution Act, 1867 prevents intergovernmental
taxation.
B.
Indian Act
1.
General
Under its constitutional power, Parliament passed the Indian Act. The Act creates “bands” of
Indians, and “reserves” of land, the legal title to which is vested in the federal Crown, but which are
set apart by Her Majesty for the use and benefit of the bands. Reserves are defined in s. 2(1) of the
Indian Act as follows:
5
“reserve”
(a)
means a tract of land, the legal title to which is vested in Her Majesty, that has
been set apart by Her Majesty for the use and benefit of a band, and
(b)
except in subsection 18(2), section 20 to 25, 28, 36 to 38, 42, 44, 46, 48 to 51, 58 to
60 and the regulations made under any of those provisions, includes designated lands …
There is also a provision for “special reserves” in s. 36 that does not require that the land title be
vested in the Crown. It would seem that band tax bylaws should also apply on s. 36 lands.
A band does not have the power to unilaterally set aside lands for the use and benefit of the band
within the meaning of s. 36; action by the federal Crown is required (Musqueam Holdings Ltd. v.
Assessor of Area 9—Vancouver, [1998] B.C.J. No. 2623 (QL), affirmed 2000 BCCA 299, leave to
appeal denied [2000] S.C.C.A. No. 354 (QL)). The legal requirements for creation of a reserve in
British Columbia are an intention by the Crown to set apart federal Crown land as a reserve,
combined with practical steps taken to implement that intent (Wewaykum Indian Band v. Canada,
2003 SCC 45). In Wewaykum, the Supreme Court suggested that reserve creation could not have
occurred in many parts of British Columbia until provincial Crown land was transferred to Canada
by Order in Council 1036 of 1938.
The Act also defines how land in the reserves is to be used, and how it can be surrendered or
designated for non-band use. It provides for the election of chiefs and band councils, and delegates
to those councils the power to pass bylaws for certain listed purposes affecting their reserves.
The taxation authority that band governments may exercise under s. 83 of the Indian Act is limited
to property interests on reserves and can extend to all occupants (Native and non-Native) of such
property. A status Indian who occupies and uses reserve land with some colour of right is subject
to assessment and taxation by band bylaws under the Indian Act: Beattie v. Squamish Indian Band, 2005
FC 314.
From a taxation perspective, ss. 83 and 87 of the Indian Act are of most interest; see “Money
bylaws” and “Exemptions from other taxation”, below.
2.
Money bylaws
Section 83 enables a band council, subject to the approval of the Minister of Indian Affairs and
Northern Development, to pass taxation bylaws:
83. (1) Without prejudice to the powers conferred by s. 81, the council of a band may,
subject to the approval of the Minister, make bylaws for any or all of the following
purposes, namely,
(a)
subject to ss. (2) and (3), taxation for local purposes of land, or interests in
land, in the reserve, including rights to occupy, possess or use land in the
reserve …
(2)
An expenditure made out of moneys raised pursuant to ss. (1) must be so made
under the authority of a bylaw of the council of the band.
(3)
A bylaw made under paragraph (1)(a) must provide an appeal procedure in respect
of assessments made for the purposes of taxation under that paragraph.
(4)
The Minister may approve the whole or a part only of a bylaw made under ss. (1).
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(5)
The Governor In Council may make regulations not inconsistent with this section
respecting the exercise of the bylaw making powers of bands under this section.
(6)
A bylaw made under this section remains in force only to the extent that it is
consistent with the regulations made under ss. (5).
[re-en. 1988, c. 23, s. 10(3)]
Subsection 83(1)(a) is the fundamental authority under which bands are embarking on property
taxation. As explained in “Constitutional Basis”, above, the Supreme Court of Canada has
determined that the band authority to tax under s. 83 derives from s. 91(3) of the Constitution Act,
1867 (Westbank First Nation v. B.C. Hydro and Power Authority (1999), 67 B.C.L.R. (3d) 1 (S.C.C.)).
3.
Exemptions from other taxation
Section 87 is also important. It provides that, unless there is a taxation bylaw under s. 83 that
applies to Indians residing on reserve, certain property and interests of Indians and bands are
exempt from taxation:
87. (1) Notwithstanding any other Act of Parliament or any Act of the legislature of a
province, but subject to s. 83, the following property is exempt from taxation, namely,
(a)
and
the interest of an Indian or a band in reserve lands or surrendered lands;
(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 ….
R.S., c. I-6, s. 87; 1980-81-82-83, c. 47, s. 25.
The exemption is granted to any status Indian, and not merely to members of the band that
occupies the reserve (Mission (District) v. Assessor of Area 13—Dewdney-Alouette, [1992] B.C.J. No. 1542
(S.C.). It may also be available to a corporation that is a bare trustee and agent of the band (Kyah Forest
Products Ltd. v. Assessor of Area 25—Northwest, 2001 BCSC 549, reversed on other grounds 2002
BCCA 344).
The Federal Court Trial Division has said that, because of the words “subject to s. 83”, the s. 87
exemption only applies to taxes levied by other governments. It does not exempt Indians from
property taxes payable under their own band bylaws. The Trial Division held that a bylaw that
attempts to exempt Indians and to tax only non-Indians may be discriminatory and void (Canadian
Pacific Ltd. v. Matsqui Indian Band (1996), 134 D.L.R. (4th) 555 (F.C.T.D.)). While the Federal Court
of Appeal did not decide this issue in an appeal brought by the Canadian National Railway
Company ((1998), 162 D.L.R. (4th) 649), the majority of the Federal Court of Appeal held that the
bylaw taxing non-Indians only was not discriminatory ((1999), 176 D.L.R. (4th) 35 at para. 25).
4.
Summary
The general property taxation structure on reserves is as follows:
(1)
Indians and bands are exempt from property taxes on reserve unless there is a relevant
band bylaw making them liable;
(2)
a band bylaw (properly approved by the Minister) may tax Indians and non-Indians alike
on the reserve;
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(3)
non-Indians occupying land on a reserve that is not subject to an Indian taxation bylaw
remain subject to provincial assessment and taxation, discussed under “Provincial jurisdiction”,
below; and
(4)
provincial assessment and taxation of non-Indians may continue to exist along with an
Indian taxation bylaw, subject to provincial legislation discussed under “Provincial jurisdiction”,
below.
C.
Indian Act amendments
Under the Indian Act, development of reserve lands by non-Indians had been permitted by a
process of “surrender”, under which the band released its interest to the federal Crown, either
absolutely or conditionally (for example, for a term of years) (Indian Act, ss. 37–40). The Crown
could then dispose of absolutely surrendered land, or it could lease conditionally surrendered land,
holding the lease payments for the benefit of the band.
Prior to 1988, the definition of “reserve” made it doubtful that conditionally surrendered land
remained part of the reserve for band taxation purposes. It was therefore unlikely that a band
taxation bylaw could apply to the non-Indian developments on such land.
The Indian Act was amended in 1988 by the federal government. “Conditionally surrendered” lands
are now called “designated” lands. The definition of “reserve” was altered so that designated lands,
for most band bylaw purposes, remain within the reserve, and s. 83 broadened the bands’ powers to
tax by bylaw so that they could clearly tax non-Indians as well as their own members. These
changes made it practical under federal law for bands to consider property tax bylaws; the first such
bylaws came into force in 1991.
“Absolute” and “conditional” are not mutually exclusive terms. A surrender for sale was treated as
“absolute” (removing land from the reserve for property tax purposes), although there was a
provision that the land would revert to the band if it ceased to be used for the purpose for which it
was surrendered (St. Mary’s Indian Band v. Cranbrook (City), [1997] 2 S.C.R. 657). In Osoyoos Indian
Band v. Oliver (Town), 2001 SCC 85, a majority of the Supreme Court of Canada found that an
expropriation of land in a reserve under s. 35 of the Indian Act, pursuant to powers conferred by the
Water Act, did not expropriate fee simple title and therefore did not remove the lands from the
reserve. The lands thus remained subject to the Osoyoos Indian Band’s property taxation
jurisdiction.
In Assessor for Seabird Island Indian Band v. BC Tel, 2002 FCA 288, the Federal Court of Appeal
applied Osoyoos in holding that a portion of the Lougheed Highway that traversed the Seabird Island
Indian Reserve was located “in the reserve”. As a result, BC Tel’s fibre optic cable system located
within the highway corridor was subject to property taxation by the Seabird Island Indian Band.
D.
Band bylaws
1.
Approval process
An Indian band considering levying its own property taxes must pass bylaws covering the
assessment and assessment appeal processes as well as the tax levy and collection processes.
Pursuant to s. 83(1) of the Indian Act, the bylaws do not take effect until approved by the Minister
of Indian and Northern Affairs Canada (the “Minister”).
To assist the Minister, the Indian Taxation Advisory Board (the “Board”) has been appointed to
review all Indian taxation bylaws in Canada and recommend their approval or rejection. The Board
is provided with administrative, technical, and policy support staff.
Since bylaws must ultimately be approved by the Minister, Indian and Northern Affairs Canada
(“INAC”) staff also review the bylaws for technical and legal sufficiency.
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2.
Content of bylaws
Although bands have the option of designing bylaws that closely match the provincial assessment
and taxation legislation, in practice the first bylaws to be enacted have displayed some notable
differences. It is therefore important to note that Indian property assessment and taxation regimes
can be as different from the provincial system as that of one province is from another, and that the
bylaws of each band are unique. To understand a particular case, the relevant bylaw should be
obtained from the band or INAC. Some band bylaws are now published in the First Nations Gazette
established under s. 34 of the First Nations Fiscal and Statistical Management Act, S.C. 2005, c. 9 (the
“FSMA”) (see “The First Nations Fiscal and Statistical Management Act”, below). The FSMA will
require all property taxation laws approved by the First Nations Tax Commission established under
s. 17 to be published in the First Nations Gazette.
A significant departure from provincial practice is appearing in the assessment appeal provisions of
Indian bylaws. The Matsqui Band bylaw, for example, dictates a first-level appeal to a Board of
Review, which is analogous to the provincial Assessment Appeal Board, and on which one member
may be a band member. Further appeals on questions of law are directed to the Federal Court.
After some doubt, it is now established that the Federal Court does have jurisdiction to hear
appeals as set out in band assessment bylaws (Canadian Pacific Ltd. v. Matsqui Indian Band, [1995] 1
S.C.R. 3). The Federal Court continues to have jurisdiction to hear appeals from band assessment
bylaws where such is provided in a band bylaw, despite the repeal of subsection 24(1) of the Federal
Courts Act: Beattie v. Squamish Indian Band, 2005 FC 314.
3.
Legal issues
Since the bylaw takes the place occupied elsewhere by both the Assessment Act and all statutes
imposing property tax, the bylaw, together with s. 83 of the Indian Act and any regulations under
s. 83, must be examined for all questions related to an Indian property tax. A bylaw must, for
example, include the tax rate for the year and property class in question. Every aspect of the bylaw
must have received federal ministerial approval; there is no provision allowing a band to make
amendments, no matter how inconsequential. There is no assurance that band assessment bylaws
will adopt the same classification descriptions or assessment principles used by and under the
Assessment Act. Thus, assessment law that has developed for British Columbia cannot be assumed to
apply to a band assessment.
Band bylaws are federal statutory instruments under the Statutory Instruments Act (R. v. Bear (1981),
35 N.B.R. (2d) 181 (Q.B.)). The bylaws have force and effect only within the geographical areas of
the reserve and apply only to reserve lands (R. v. Nikal, [1996] 1 S.C.R. 1013). They do not apply to
lands held outside the reserve by bands or, in most cases, to absolutely surrendered lands.
Band bylaws do not apply to fee simple railway lines crossing reserves. The definition of “reserve”
in the Indian Act requires that reserve land be vested in the Crown, and therefore does not allow the
taxation of lands that are vested in another owner such as a railway. In Canadian Pacific Ltd. v.
Matsqui Indian Band (1996), 134 D.L.R. (4th) 555 (F.C.T.D.), various bands had attempted to tax the
railway lines of both the Canadian National Railway and Canadian Pacific Ltd. The bands’ argument
was that the railways’ interest in the rights of way was less than absolute, because they only held the
land as long as it was needed for railway purposes; thus, the railway lands should still be part of the
reserves through which they passed.
The trial judge held, however, that the railways’ interest in the land was a determinable fee interest,
and thus the land was not in the reserve. On an appeal involving only Canadian National and the
Matsqui and Kamloops bands, the Federal Court of Appeal agreed with the result, but on
somewhat different reasoning (Canadian Pacific Ltd. v. Matsqui Indian Band (1998), 162 D.L.R. (4th)
649 (Fed. C.A.)). The Federal Court of Appeal preferred to rely on
9
the “true intention” of the surrender as disclosed by the circumstances of each case. It then found
that the two bands each knew and accepted that they would no longer have the “use and benefit”
of the lands surrendered or taken, and that they would no longer be able to exercise local
government powers over those lands. Thus, the court agreed that the lands were not in the reserves,
and could not be subject to Indian band taxes.
The Canadian Pacific case has a long history. It was taken to the Supreme Court of Canada on the
preliminary procedural questions of whether the assessment review board established by the band
bylaw was the proper forum to consider the jurisdictional question of whether land was in the
reserve (the issues were apprehension of bias and whether the bylaws could provide for an appeal
to the Federal Court Trial Division from the band appeal tribunal). The railways argued successfully
that the assessment review board was not the proper forum, and established the right to have the
assessor’s decision reviewed directly by the Federal Court on judicial review (Canadian Pacific Ltd. v.
Matsqui Indian Band, [1995] 1 S.C.R. 3). It should be noted that the reasons of the various judges of
the Supreme Court of Canada differ, and on this particular point it appears still to be the law that a
litigant will have to exhaust its rights of appeal under a band tax bylaw before applying to the
Federal Court for judicial review. The railways were able to move directly to judicial review in this
case because of problems in the design and operation of the particular bylaws in issue. These bands
have subsequently amended their bylaws in an attempt to correct these problems.
Following the Supreme Court of Canada’s decision on the procedural questions, the Federal Court
Trial Division issued the above-cited decision on the merits in favour of the railways in April 1996
(134 D.L.R. (4th) 555). That decision was in turn appealed by various parties. In May 1998, the
Canadian National Railway Company’s issues were argued before a panel of the Federal Court of
Appeal, which gave its decision on July 2, 1998 (referred to above, 162 D.L.R. (4th) 649). The
application of the Matsqui Indian Band for leave to appeal to the Supreme Court of Canada was
denied on March 25, 1999 ([1999] 2 C.N.L.R. iv (note) (S.C.C.)). Canadian Pacific’s issues were
argued before a separate panel in January 1999, and the Federal Court of Appeal majority dismissed
the band’s appeals on June 25, 1999 (134 D.L.R. (4th) 555).
The Federal Court of Appeal decision in the cases dealing with Canadian Pacific contains three sets
of reasons. Two judges held that the bylaws’ taxation of non-Indian property interests only was not
discriminatory. Two judges found the Canadian Pacific rights of way were lands within the reserve,
while one judge found that the Canadian Pacific rights of way were held in fee simple absolute and
were not lands within the reserve.
The Federal Court of Appeal decision was not appealed to the Supreme Court of Canada. Canadian
Pacific and the five bands involved in the appeal, the Boothroyd, Cook’s Ferry, Matsqui, Seabird
Island, and Skuppah Indian Bands, concluded agreements that recogized the bands’ property
taxation jurisdiction and provided for the passage of a federal regulation under s. 83(5) of the Indian
Act. The Property Taxation and Assessment (Railway Rights of Way) Regulations, SOR/2001-493,
provide for property assessments and tax rates that are consistent with those under the provincial
regime. Under s. 83(6) of the Indian Act, property taxation bylaws made by the five bands must be
consistent with the regulation.
In late 2003, agreements were concluded with the Chawathil, Kanaka Bar, Little Shuswap Lake, and
Nicomen Indian Bands. In 2004, agreements were concluded with the Adams Lake, Leq’a:mel,
Neskonlith, and Siska Indian Bands. The Property Taxation and Assessment (Railway Right-of-Way)
Regulations have been amended to extend their application to these eight bands: SOR/2003-373,
November 19, 2003; SOR/2004-66, March 30, 2004.
Unlike railway rights of way, the transmission lines and rights of way of B.C. Hydro cannot be the
subject of band taxation bylaws where they cross reserves. The reasoning is different from the
railway cases, because B.C. Hydro does not in general hold such lands in fee. Its rights of way are
generally on land in the reserves, often held under s. 28 Indian Act permits
10
and easements. However, B.C. Hydro is an agent of the provincial Crown, and therefore benefits
from the immunity from intergovernmental taxation provided by s. 125 of the Constitution Act, 1867
(Westbank First Nation v. British Columbia Hydro and Power Authority (1996), 138 D.L.R. (4th) 362
(B.C.S.C.), affirmed (1997), 154 D.L.R. (4th) 93 (B.C.C.A.), affirmed [1999] 9 W.W.R. 517 (S.C.C.)).
Non-Indian occupiers of reserve land generally do not have the ability to vote in band council
elections. However, property taxes imposed by band councils on non-Indian occupiers of reserve land
do not offend the principle of “no taxation without representation”, as the Indian Act itself was
enacted by Parliament: Derrickson v. Kennedy, 2006 BCCA 356.
In Derrickson v. Kennedy, the British Columbia Court of Appeal also confirmed that failure to pay
property taxes lawfully levied under bylaws made under the Indian Act was grounds for cancellation
of a leasehold interest held by the occupier of lands subject to the bylaws.
E.
The First Nations Fiscal and Statistical Management Act
On March 23, 2005, the First Nations Fiscal and Statistical Management Act, S.C. 2005, c. 9 (the
“FSMA”), was given Royal Assent. The FSMA will provide for an alternate property taxation
regime for First Nations (defined under the FSMA to be the same as an Indian band under the
Indian Act) to the existing Indian Act regime, and will provide for greater direct First Nation control
over property assessments and taxation. The FSMA also provides for enhanced First Nation
powers, and reduced federal government powers, in areas related to First Nation fiscal management
and borrowing. While Royal Assent has been given, the Act has not yet come into force.
Under the FSMA, First Nations will have the power to pass “local revenue laws”, including
property taxation laws. The scope of First Nations’ property taxation law-making power under the
FSMA is comparable to that set out in s. 83(1) of the Indian Act. Unlike property taxation bylaws
made under the Indian Act, local revenue laws made under the FSMA will not require the approval
of the Minister of Indian Affairs and Northern Development. Rather, the local revenue laws will be
reviewed and approved by a new First Nations Tax Commission, which will be composed of 10
commissioners including First Nation and taxpayer representatives. In addition to its role in
approving local revenue laws related to property assessment and taxation, the First Nations Tax
Commission will assume the advisory role played by the Indian Taxation Advisory Board (ITAB)
under the Indian Act.
A First Nation’s local revenue laws will apply only to lands within its reserve or reserves, as defined
under the Indian Act. Local revenue laws must comply with the substantive and procedural
requirements of the FSMA and the regulations that will be made under the FSMA. Local revenue
laws will not come into force until they have been approved by the First Nations Tax Commission.
Each First Nation’s local revenue laws will be published by the First Nations Tax Commission in
the First Nations Gazette.
As the FSMA is an optional fiscal regime for First Nations, it will apply only to those First Nations
that elect to opt out of the Indian Act regime and opt in to the FSMA regime. The transition will be
effected by way of federal Order in Council. The First Nations that opt in to the FSMA regime will
be listed in a schedule to the FSMA. Other First Nations will continue to be subject to the Indian
Act regime discussed above, with the exception of those British Columbia First Nations that are
subject to the special arrangements discussed below (the Sechelt Indian Band, the Nisga’a Nation,
and the Westbank First Nation). It is anticipated that several British Columbia First Nations will
move to the FSMA regime when it comes into effect. Existing property assessment and taxation
bylaws made under the Indian Act by First Nations that move to the FSMA regime will continue to
apply until they are amended or replaced in accordance with the FSMA.
The Government of Canada and ITAB are currently developing regulations that must be in place
prior to the FSMA coming into effect. These regulations are intended to provide greater
11
detail about specific areas of First Nation property tax jurisdiction under the FSMA. To date, the
following draft regulations have been developed and have been the subject of consultation meetings
with identified stakeholders:
•
First Nations Assessment Appeal Regulations;
•
First Nations Assessment Inspection Regulations;
•
First Nations Rates and Expenditure Laws Timing Regulations;
•
First Nations Taxation Enforcement Regulations; and
•
First Nations Tax Commissions Review Procedures Regulations.
At the time of writing this paper, these regulations had not been passed, and so the date on which
the FSMA will come into force remains uncertain.
III.
A.
Provincial jurisdiction
Authority to tax non-Indians
As discussed elsewhere in this manual, provincial property assessment and taxation laws apply to
taxable persons in respect of otherwise exempt property that they use or occupy. This includes nonIndian occupiers of Indian land. Specific references are:
(1)
Assessment Act, s. 26(4);
(2)
Community Charter, s. 228(6); and
(3)
Taxation (Rural Area) Act, s. 18(4).
The province may not tax the reserve land itself; it is prohibited by the Indian Act, s. 87, from taxing
the interest of an Indian or band in reserve or surrendered land or the personal property of an
Indian or band situated on a reserve. However, the provincial tax on a non-Indian in respect of
occupied reserve land is a personal liability of the non-Indian taxpayer, and hence a valid provincial
tax (Smith v. Vermilion Hills (Rural Municipality) (1914), 49 S.C.R. 563, affirmed [1916] 2 A.C. 569
(P.C.); Vancouver (City) v. Chow Chee (1941), 57 B.C.R. 104 (C.A.); Sammartino v. British Columbia
(Attorney General) (1971), 22 D.L.R. (3d) 194 (B.C.C.A.)).
A corporation, even though all its shareholders may be status Indians as defined under the Indian
Act, is itself a non-Indian and presumptively liable to taxation in respect of reserve land it occupies
(Assessor of Area 25—Northwest Prince Rupert v. N. & V. Johnson Services Ltd. (1990), 49 B.C.L.R. (2d)
173 (C.A.); Westbank Property Management v. Assessor of Area 19—Kelowna, [1993] 1 C.N.L.R. 176
(B.C.S.C.)).
A company that is a bare trustee and agent for an Indian band may be exempt from taxation (Kyah
Forest Products Ltd. v. Assessor of Area 25—Northwest, 2001 BCSC 549, reversed on other grounds 2002
BCCA 344). To date, however, the case law tends to the opposite conclusion.
In Takaya Holdings Ltd. v. Assessor of Area 8—North Shore-Squamish Valley (1998), PAAB Appeal No.
1998-08-00001, Decision No. 32467, band members incorporated a company (Takaya). By
declarations of trust, the members declared that they held their shares in Takaya as trustees for the
band. In 1993, all of Takaya’s shares were transferred to the T’sleil First Nation Trust. In 1996, the
property was leased to Takaya for 99 years. The Property Assessment Appeal Board held that
Takaya’s interest in the land could not be ignored such that the property could be said to be
occupied by status Indians. There was a valid assessment against Takaya, for which the company
was taxable.
12
The province cannot legislate with respect to Indians under the Constitution. Therefore,
exemptions relating to Indians in provincial taxing statutes are treated as taxing to the boundary of
the federal exemption, rather than altering its extent (Westbank Indian Band Development Co. Ltd. v.
Assessor of Area 19—Kelowna, [1991] B.C.J. No. 2501 (B.C.S.C.)).
A provincial law that, although generally valid, nevertheless affects an “integral part” of the federal
jurisdiction over Indians or Indian land will be read as inapplicable to those topics. Provincial laws
may not affect the “capacity” of Indians, or their “Indianness”. However, it was said in Sammartino
that general property tax legislation did not offend this rule. Further, if the province can validly
legislate to impose tax on non-Indians on reserves, then it can also enact legislation that withdraws
such taxes. Thus, the Indian Self Government Enabling Act is intra vires the province (Tsawwassen Indian
Band v. Delta (City) (1997), 40 M.P.L.R. (2d) 44 (B.C.C.A.)), leave to appeal denied [1998] 2 C.N.L.R. iv
(note) (S.C.C.)).
The validity and constitutionality of provincial laws was confirmed in Assessor of Area 5—Port
Alberni v. Tin Wis Resort Ltd. (1997), 45 B.C.L.R. (3d) 241 (S.C.); leave to appeal denied (1998), 54
B.C.L.R. (3d) 210 (C.A.); denial affirmed (1998), 116 B.C.A.C. 150 (C.A.); leave to appeal denied
(1999), 240 N.R. 200 (S.C.C.). In that case, the band received approval for a property tax bylaw in
February 1996, and put it into effect immediately. By that point, the provincially authorized
assessment roll for 1996, which included the same properties, had already been completed. Tin Wis
Resort Ltd. (a company wholly owned by status Indians) appealed against its provincial assessment,
arguing that it was unconstitutional. However, the court, on a reference from the Assessment
Appeal Board, held that the provincial assessment and legislation was valid, relying on the
Tsawwassen and Sammartino cases cited above.
B.
Indian Self Government Enabling Act
It can be seen that, with two parallel assessment and taxation systems in place, non-status persons
occupying reserve land were at risk of being taxed twice in respect of the same occupation. As a
result, the province passed the Indian Self Government Enabling Act, which enables partial or complete
exemptions from provincial taxation on a reserve where a tax is imposed by a band bylaw under the
Indian Act. The Act contains various options to be selected by the band, as described below;
however, in practice, only the “independent taxation” option has been used.
1.
Concurrent taxation
Concurrent taxation permits the continuation of local government and other provincial taxes along
with an Indian levy (see Indian Self Government Enabling Act, Part 1, ss. 2-7). To make “room” for the
Indian levy, the municipal or provincial general purpose levy and the provincial school levy may be
reduced or eliminated entirely. Preconditions are that the band notify the province (through the
Ministry of Finance and Corporate Relations) of its wish to proceed under this Part and its
intention to enact a bylaw (s. 3); and that it enters into an agreement with the province (s. 5) (for
rural bands) or a relevant municipality or regional district (s. 6) under which at least some local
services will be paid for through the Indian Act levy.
If the band’s bylaw conforms completely to the provincial assessment and tax system, it is possible
for the Indian levy to appear as one of several levies on a single tax notice issued by the
municipality or by the surveyor of taxes. It should be noted, however, that the bylaw would have to
adopt the same assessment principles, the same assessment appeal system, and the same tax levy
and collection dates and requirements as apply to the other taxes in the notice.
Although some bands with smaller amounts of leasehold property initially expressed an interest in
exploring the concurrent taxation option, in fact no band has formally taken this route.
13
2.
Independent band taxation
If a band selects independent band taxation, the effect will be to displace all provincially-authorized
property taxes in the year that taxes are first levied under an Indian Act bylaw. A new non-provincial
tax regime is then wholly in effect (see Indian Self Government Enabling Act, Part 2, ss. 8-14).
To achieve this, a band notifies the Ministry of Finance and Corporate Relations that it intends to
enact a bylaw and proceed under this Part, providing the expected date of enactment of its bylaw
and the year in which taxes will first be imposed (s. 9). The Minister of Finance (the “provincial
Minister”) then prepares a certificate that notifies the affected tax jurisdictions of this impending
development (s. 10). As long as the provincial Minister is advised in sufficient time, his or her
certificate together with the enactment of the bylaw operates to exempt from liability, under all
provincial real property taxes, occupiers of the reserve land (s. 11).
The timing is important. If the band enacts its bylaw but fails to get the federal Minister’s approval
in good time, then the provincial Minister will presumably not issue a certificate vacating provincial
taxation for the desired year. The result could be that both provincial and band taxes are in force by
the time taxes become payable. In those circumstances, the provincial assessment (and tax) remains
valid (Assessor of Area 5—Port Alberni v. Tin Wis Resort Ltd. (1997), 45 B.C.L.R. (3d) 241 (S.C.); leave
to appeal denied (1998), 54 B.C.L.R. (3d) 210 (C.A.); review of application for leave affirmed
(1998), 116 B.C.A.C. 150 (C.A.), leave to appeal denied (1999), 240 N.R. 200 (S.C.C.). In practice,
the Indian Taxation Advisory Board requires Indian bands to provide certificates of exemption
under the Indian Self Government Enabling Act before it will recommend approval of the band’s
property tax bylaw to the federal Minister.
The intention is that affected taxing jurisdictions will negotiate with bands to replace their taxes
with suitable service agreements under which the taxing jurisdictions provide services to the reserve
or reserve occupiers (s. 10(1)(c)). In practice, municipalities and regional districts may find it
difficult to negotiate agreements that compensate them at a level equivalent to the previous tax
collections from the reserve, since bands may not wish to pay for public services other than those
specific to the reserve.
In the absence of a suitable service agreement, the service supplier is at liberty to withdraw the
service (subject to Cabinet’s intervention), but this option is only practical for “hard” services such
as water supply or garbage collection. At the band’s request and in the first year of band taxation,
the Lieutenant Governor in Council may require the continuation of services for up to one year at a
price specified in the order (s. 11(2)(b)).
Even if Cabinet does not intervene, the courts may order the continuation of services to reserve
property. In Tsawwassen Indian Band v. Delta (City) (1997), 40 M.P.L.R. (2d) 44 (B.C.C.A.), leave to
appeal denied [1998] 2 C.N.L.R. iv (note) (S.C.C.), the British Columbia Court of Appeal confirmed
that there is a common law duty on the part of a municipality not to withdraw services except on
reasonable notice, the length of which depends on the relationship between the parties. Section 11
of the Indian Self Government Enabling Act does not replace that obligation, but rather provides a
statutory minimum period if the section is engaged by the band.
It should be noted that the right of children resident on the reserve to attend the public schools
does not depend on the existence of a service agreement with the band (s. 12).
3.
Indian district enabling provisions
The third general situation envisaged by the Indian Self Government Enabling Act is that of an Indian
district, created by suitable (federal) legislation, with powers similar to those of a
14
municipality (see Part 3, ss. 15-30). This concept was adopted in creating the Sechelt Indian
Government District, discussed below under “Joint arrangements—The Sechelt Indian Band”.
Where a band, instead of seeking taxation power in its own name, has obtained the incorporation
of its members into a district—“a legal entity with the capacity of a natural person” (s. 17(a))—and
given it jurisdiction over specified Indian land and over taxes on that land (s. 17(b)), then the
provincial Cabinet may, by proclamation, recognize that body as an Indian district, and thereupon
treat it for most purposes as if it were a provincial municipality.
The district can then select either concurrent or independent taxation as discussed above under
“Concurrent taxation” and “Independent taxation”.
A district (as opposed to a band) will then become eligible under suitable conditions to receive
revenue-sharing grants and other benefits extended to provincial municipalities. This is a principal
reason why a band might choose such a route. Before extending those benefits, however, the
province may be expected to request that the district participate adequately in paying the costs of
regional services, and that it provide some mechanism for input by non-Aboriginal leaseholders,
whether or not they are band members. To accomplish the latter objective, the province may,
through consultation with the relevant First Nation, establish by regulation an advisory council to
represent the non-Aboriginal lessees.
4.
Home Owner Grants
Since grants under the Home Owner Grant Act are deductions from provincial taxes, they do not
apply to reduce an Indian tax levy. Federal policy requires that bands use tax rates comparable to
those in surrounding jurisdictions, and bands have therefore chosen to offer their own grants to
residential occupiers, to fully mirror the provincial system. The bands pay these grants out of that
portion of their tax that replaces the provincial school tax.
In spite of the inapplicability of the regular provincial Home Owner Grants, s. 14 of the Indian Self
Government Enabling Act makes analogous grants from the province to the band a possibility, on
terms established by the Minister. The Act does not set out what those terms must be, but the
policy that has been followed is that the province will only make a grant under this provision if the
band implements a Home Owner Grant program identical to the provincial program. Then the
proposed amount of the provincial grant would be the amount by which the band’s Home Owner
Grant payments exceeded the school tax that the province would have collected, had it remained
the taxation authority. This leaves the province in the same financial position it was in before the
band became the taxing authority. The province did in fact begin making such grants to a small
number of bands in 1992 and 1993 and continues to do so.
5.
General enabling provisions
The Indian Self Government Enabling Act also contains certain general enabling provisions permitting a
municipality or the surveyor of taxes to enter into tax levy and collection service agreements with a
band, and permitting BC Assessment to provide its services to a band or district (Part 4, ss. 31-38)
under contract. The intention of the legislation was to provide a sufficient range of options that
some combination might be found to suit most situations. In practice, some service agreement
negotiations have made the transition to independent taxation difficult, but invariably, where
communication has been good, bands and local governments have established effective working
relationships.
15
IV.
A.
Joint arrangements—The Sechelt Indian Band
Federal legislation
The Sechelt Indian Band became self-governing through the federal Sechelt Indian Band Self
Government Act. Under this Act, the band members were incorporated into a district that could
operate outside the normal governance of the Indian Act. The Sechelt Indian Band continues to
exist in parallel with the Sechelt Indian Government District, and the band council is also the
district council.
The council of the district was authorized to make laws in areas of typical municipal jurisdiction,
such as zoning, land-use planning, expropriation and taxation for local purposes, road construction,
business licensing, and public safety. It was also given powers over education and social welfare of
band members, and over the preservation of wildlife and natural resources (s. 14(1)). The lands over
which the district has jurisdiction are the previously-existing band reserves, but can include such
additional lands as both the federal and provincial Cabinets agree to include in the district (ss. 1 and
23).
The Act enables the council to adopt British Columbia laws, within its subject-matter jurisdiction,
as its own laws (s. 14(3)); and it anticipates that the province might delegate to it further powers
(s. 15).
B.
Provincial legislation
The province passed matching legislation, the Sechelt Indian Government District Enabling Act, which
contained the following key provisions:
(1)
recognition by Proclamation of the district council as the governing body of the district
(implemented by OIC 564/88);
(2)
establishment by regulation of an advisory council to represent all the residents of the
district (implemented by B.C. Reg. 247/88);
(3)
deeming that laws of the district, if of a type that a municipality could enact, are enacted
under provincial law;
(4)
entitlement of the district, by regulation, to municipal benefits such as revenue sharing
(implemented by B.C. Reg. 243/88); and
(5)
suspension of general purpose taxation under the Municipal Act and the Taxation (Rural Area)
Act (implemented by B.C. Reg. 126/88).
The Sechelt Indian Band, as a result, has powers analogous to those of a provincial municipality. It
levies its general purpose tax along with other provincial taxes. It is a member municipality in the
Sunshine Coast Regional District, and a member of the Union of B.C. Municipalities. Although
Part 3 of the Indian Self Government Enabling Act was modelled on the Sechelt experiment, there are
as yet no other bands that have followed the Sechelt example.
The Sechelt Indian Government District Enabling Act was continued in force for an additional 20 years
from 2006 by the Sechelt Indian Government District Enabling Act Continuation Regulation, B.C.
Reg. 302/2005. The arrangement may be changed if the Sechelt Indian Band concludes a treaty
with Canada and British Columbia.
V.
Treaty arrangements—The Nisga’a Final Agreement
The Nisga’a Final Agreement (also commonly referred to as the Nisga’a Treaty), concluded
between the Nisga’a Nation, Canada, and British Columbia, came into effect on May 11, 2000,
under the federal Nisga’a Final Agreement Act, S.C. 2000, c. 7, and the B.C. Nisga’a Final Agreement
Act, S.B.C. 1999, c. 2. The Nisga’a Treaty recognizes Nisga’a fee simple ownership
16
of approximately 2,000 square kilometres of land. Under s. 1 of paper 16 (Taxation) of the Nisga’a
Final Agreement, the Nisga’a government has the power to make laws with respect to direct
taxation of Nisga’a citizens on Nisga’a lands, including property taxation of Nisga’a citizens. That
power does not include taxation of non-Nisga’a citizens. As Nisga’a lands are held in fee simple,
and are not reserve lands, provincial property taxation laws would normally apply to all interests in
those lands. However, under s. 13 of paper 16 (Taxation), certain Nisga’a lands held by the Nisga’a
Nation and Nisga’a villages are exempt from real property taxation. These include unimproved
lands, lands on which a Nisga’a citizen has a residence, and lands that are improved for public
purposes. Provincial taxation laws have been amended to reflect these exemptions: see, for
example, s. 2.1 of the Taxation (Rural Area) Act, R.S.B.C. 1996, c. 448. The Nisga’a Treaty provides
for possible delegation to the Nisga’a government of provincial taxation powers over non-Nisga’a
citizens on Nisga’a lands.
VI.
The Westbank First Nation Self-Government Agreement
In 2004, the Westbank First Nation Self-Government Act, S.C. 2004, c. 17, was enacted to implement
the Westbank First Nation self-government agreement between the Government of Canada and the
Westbank First Nation. The self-government agreement sets out a number of self-governing
powers of the Westbank First Nation, many of which extend beyond powers available to Indian
bands under the Indian Act. Under the Westbank self-government agreement, title to Indian
reserves set apart for the Westbank First Nation remains vested in the Government of Canada, but
the Westbank First Nation has the power to grant dispositions in those reserve lands. While the
Westbank self-government agreement confers broader law-making powers on the Westbank First
Nation, it does not affect the First Nation’s property taxation jurisdiction. Under s. 275 of the selfgovernment agreement, the property-taxation-related provisions of the Indian Act will continue to
apply to the Westbank First Nation. As a result, the Westbank First Nation will continue to exercise
Indian Act property tax jurisdiction, and holders of interests in Westbank reserves, whether granted
by Canada or by Westbank, will continue to be subject to the Indian Act property tax regime and
case law discussed above.
In Derrickson v. Kennedy, 2006 BCCA 356, the court confirmed that Westbank First Nation property
taxation bylaws passed under the Indian Act continue to be valid under the new self-government
arrangement. The court also confirmed that failure to pay taxes lawfully levied under those bylaws
was grounds for cancellation of a leasehold interest held by the occupier of lands subject to the
bylaws.