Vol. 138, No. 8 — April 21, 2004

Registration
SOR/2004-66 30 March, 2004

INDIAN ACT

Regulations Amending the Property Assessment and Taxation (Railway Right-of-Way) Regulations

P.C. 2004-338 30 March, 2004

Whereas the taxation of property interests within reserves is an important element of self-government;

Whereas, to facilitate the implementation of property taxation on reserve land, the First Nations set out in the annexed Regulations wish to provide railway companies occupying reserve land with levels of property taxation that are predictable and comparable to levels of property taxation under provincial laws, and have requested that the Governor in Council make those Regulations;

And whereas the Indian Taxation Advisory Board was established by Canada to, among other things, advise and assist the Minister of Indian Affairs and Northern Development on policy issues related to section 83 of the Indian Act, to foster harmony between taxation by First Nations and taxation by other authorities and to ensure compliance with the principles of equity, natural justice and fairness;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Indian Affairs and Northern Development, pursuant to subsection 83(5) (see footnote a) of the Indian Act, hereby makes the annexed Regulations Amending the Property Assessment and Taxation (Railway Right-of-Way) Regulations.

REGULATIONS AMENDING THE PROPERTY
ASSESSMENT AND TAXATION (RAILWAY
RIGHT-OF-WAY) REGULATIONS

AMENDMENTS

1. Paragraph 5(4)(a) of the Property Assessment and Taxation (Railway Right-of-Way) Regulations (see footnote 1) is replaced by the following:

(a) in respect of the Adams Lake Indian Band, Boothroyd Indian Band, Cook's Ferry Indian Band, Chawathil Indian Band, Kanaka Bar Indian Band, Leq'a:mel First Nation, Little Shuswap Lake Indian Band, Matsqui Indian Band, Neskonlith Indian Band, Nicomen Indian Band, Siska Indian Band and Skuppah Indian Band, the adjustment factors that apply to property in incorporated areas; and

2. Schedule 1 to the Regulations is amended by adding the following before item 1, which item is renumbered as item 1.01:

Item	Column 1 First Nation	Column 2 Description of Right-of-way Area
1.	Adams Lake Indian Band	In the Province of British Columbia In Kamloops Division of Yale District Firstly: All of those lands within Stequmwhulpa Indian Reserve No. 5 shown as the Canadian Pacific Railway Right of Way on Plan RR1399 recorded in the Canada Lands Surveys Records in Ottawa. Said lands containing about 9.11 hectares (22.50 acres). Secondly: All of those lands within Stequmwhulpa Indian Reserve No. 5 shown as Lot 11 on Plan 88122 recorded in the Canada Lands Surveys Records in Ottawa. Said lands containing about 1.13 hectares (2.79 acres). Thirdly: All that part of Switsemalph Indian Reserve No. 6 shown as the Canadian Pacific Railway on Plan RR1242 recorded in the Canada Lands Surveys Records in Ottawa. Said part containing about 9.56 hectares (23.63 acres). Fourthly: All that part of Switsemalph Indian Reserve No. 7 shown as the Canadian Pacific Railway on Plan RR1242 recorded in the Canada Lands Surveys Records in Ottawa. Said part containing about 4.49 hectares (11.10 acres).

3. Schedule 1 to the Regulations is amended by adding the following after item 2.1:

Item	Column 1 First Nation	Column 2 Description of Right-of-way Area
2.11	Leq'a:mel First Nation	(a) In the Province of British Columbia In New Westminster District All of those lands within Lakahahmen Indian Reserve No. 11 shown as Lots 18, 19 and 20 on Plan RSBC 3690R recorded in the Canada Lands Surveys Records in Ottawa. Said lands containing about 2.66 hectares (6.59 acres).
		(b) In the Province of British Columbia In New Westminster District All those lands within Holachten Indian Reserve No. 8 shown as the Canadian Pacific Railway Main Line Right of Way on Plans RR2009 and RR1473A recorded in the Canada Lands Surveys Records in Ottawa. Copies of the said plans are deposited in the New Westminster Land Title Office under numbers 908 and 2887. Said lands containing about 8.40 hectares (20.76 acres).

4. Schedule 1 to the Regulations is amended by adding the following after item 3:

Item	Column 1 First Nation	Column 2 Description of Right-of-way Area
3.01	Neskonlith Indian Band	In the Province of British Columbia In Kamloops Division of Yale District Firstly: All those lands within Neskonlith Indian Reserve No. 2 shown as the Canadian Pacific Railway on Plan RR590 recorded in the Canada Lands Surveys Records in Ottawa. Said lands containing about 17.89 hectares (44.21 acres). Secondly: All those lands within Switsemalph Indian Reserve No. 3 shown as part of the Canadian Pacific Railway Right of Way on Plan RR1242 recorded in the Canada Lands Surveys Records in Ottawa. Said lands containing about 6.57 hectares (16.23 acres).

5. Schedule 1 to the Regulations is amended by adding the following after item 4:

Item	Column 1 First Nation	Column 2 Description of Right-of-way Area
4.1	Siska Indian Band	In the Province of British Columbia In Kamloops Division of Yale District Firstly: All those lands within Zacht Indian Reserve No. 5 shown as the Canadian Pacific Railway on Plan RR2006 recorded in the Canada Lands Surveys Records in Ottawa. A copy of the said plan is deposited in the Land Title Office at Kamloops under number M287. Said lands containing about 0.032 hectares (0.08 acres). Secondly: All those lands within Nahamanak Indian Reserve No. 7 shown as part of the Canadian Pacific Railway Right of Way on Plan RR1153 recorded in the Canada Lands Surveys Records in Ottawa. Said lands containing about 36.22 hectares (89.51 acres). Thirdly: All those lands within Siska Flat Indian Reserve No. 5A shown as part of the Canadian Pacific Railway Right of Way on Plan RSBC 3699R in the Canada Lands Surveys Records in Ottawa. Said lands containing about 1.65 hectares (4.08 acres).

6. Schedule 2 to the Regulations is amended by adding the following before item 1, which item is renumbered as item 1.1:

Item	Column 1 First Nation	Column 2 Tax Base for Adjacent Area
1.	Adams Lake Indian Band	(i) Basic School
		(ii) District of Salmon Arm General Municipal Purpose
		(iii) Columbia Shuswap Regional District (as to District of Salmon Arm)
		(iv) Regional Hospital (as to District of Salmon Arm)
		(v) Regional Library (as to District of Salmon Arm)
		(vi) B.C. Assessment
		(vii) Municipal Finance Authority

7. Schedule 2 to the Regulations is amended by adding the following after item 2.1:

Item	Column 1 First Nation	Column 2 Tax Base for Adjacent Area
2.11	Leq'a:mel First Nation	(i) Basic School
		(ii) Provincial Rural
		(iii) Fraser Valley Hospital
		(iv) Area "G" Fraser Valley Regional District
		(v) B.C. Assessment
		(vi) Municipal Finance Authority
		(vii) North Fraser Fire Protection

8. Schedule 2 to the Regulations is amended by adding the following after item 3:

Item	Column 1 First Nation	Column 2 Tax Base for Adjacent Area
3.01	Neskonlith Indian Band	(i) Basic School
		(ii) Provincial Rural
		(iii) Area "L" Thompson-Nicola Regional District
		(iv) Thompson Hospital
		(v) Thompson-Nicola Hospital
		(vi) B.C. Assessment
		(vii) Municipal Finance Authority

9. Schedule 2 to the Regulations is amended by adding the following after item 4:

Item	Column 1 First Nation	Column 2 Tax Base for Adjacent Area
4.1	Siska Indian Band	(i) Basic School
		(ii) Provincial Rural
		(iii) Thompson Hospital
		(iv) Thompson-Nicola Hospital
		(v) Area "I" Thompson-Nicola Regional District
		(vi) TV Rebroadcast
		(vii) B.C. Assessment
		(viii) Municipal Finance Authority

COMING INTO FORCE

10. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

Purpose

The Canadian Pacific Railway (CPR) and the Adams Lake, Leq'a:mel, Neskonlith and Siska First Nations (the four First Nations) have negotiated an agreement in principle (AIP) aimed at resolving 14 outstanding court actions before the Federal Court of Canada regarding the taxation of railway rights-of-way on reserve in the Fraser and Thompson River Valleys of British Columbia (B.C.). The AIP addresses the concerns raised by CPR and the four First Nations and opens the way to uncontested First Nation property taxation of CPR railway right-of-way interests.

The foundation of the negotiated settlement of the CPR/four First Nation dispute is the recognition that the subject rights-of-way are an interest in land in the reserves and subject to the four First Nations' property taxation jurisdiction. Settlement provisions must also provide certainty with respect to the determination of assessed values for right-of-way interests held by CPR and utility licensees and the setting of initial and future tax rates by the four First Nations on real property interests in the right-of-way areas. These conditions are in accordance with the settlement agreements entered into in May of 2001 by CPR, Canada, and the Matsqui, Seabird Island, Boothroyd, Cook's Ferry and Skuppah First Nations. The Property Assessment and Taxation (Railway Right-of-Way) Regulations (under subsection 83(5) of the Indian Act) were made in November 2001 to provide the necessary framework to implement the 2001 settlement agreement and bring closure to the dispute. These Regulations were amended on November 19, 2003 to include the Chawathil, Kanaka Bar, Little Shuswap and Nicomen First Nations following the ratification of their settlement agreement with CPR. The only means available to support the current settlement is to amend the Property Assessment and Taxation (Railway Right-of-Way) Regulations once again, in order to extend their application to the current four First Nations.

Background

CPR and the four First Nations are presently in litigation before the Federal Court of Canada. Proceedings are now in abeyance as the Court has granted extensions of time in the proceedings to allow the parties to negotiate a settlement. The nature of the present dispute between CPR and the four First Nations is essentially identical to past litigation between CPR and B.C. First Nations. That litigation was resolved through settlement agreements reached in May 2001 and June 2003 and with the making of the Property Assessment and Taxation (Railway Right-of-Way) Regulations (November 2001) and their amendment (November 2003) to include additional First Nations. CPR and the four First Nations are now attempting to repeat this success. The implementation of the settlement agreement is contingent upon the passing of the subject Regulations Amending the Property Assessment and Taxation (Railway Right-of-Way) Regulations (2004). Should the regulatory amendment not come to fruition, the settlement agreement will not be implemented and the four First Nations and CPR will continue legal proceedings.

The Litigation

CPR and First Nations in British Columbia have been in litigation regarding the taxation of railway rights-of-way in the Fraser and Thompson River Valleys since 1995. The lands and rights-of-way involved were former reserve lands expropriated by the railway and conveyed to CPR under the Indian Act and the Canadian Pacific Railway Act by the federal government. The rail line is the CPR main line through the Fraser and Thompson River Valleys.

Under section 83 of the Indian Act, a Band Council may, with the approval of the Minister, make by-laws for the taxation for local purposes of land, or interests in land, in a reserve. First Nations in B.C. first enacted by-laws pursuant to section 83 of the Indian Act, to levy property taxes on non-member interests on reserve, including those held by CPR, in 1991.

In 1995, CPR challenged, in the Federal Court, the validity of First Nation property tax assessment notices. The Court was asked to rule on whether the lands comprising the rights-of-way were "in the reserve" within the meaning of section 83 of the Indian Act and if so, whether the tax exemption accorded Band members in those by-laws constituted unauthorized discrimination rendering the taxation by-laws invalid.

CPR's legal position has been that the rights-of-way did not fall within the taxing authority of the Bands because the lands were no longer reserve lands but were owned by the railways in fee simple. The legal position of B.C. First Nations has been that the railways held the land under a limited easement and as a result, the lands remained in the reserve and were subject to their taxation authority.

In July 1996, the Federal Court Trial Division found that the rights-of-way were not reserve lands and were not subject to Band taxation by-laws. However, the Court also found the reserve lands were granted specifically for railway purposes and for all intents and purposes, that the rights-of-way would revert to Canada when the railway ceased to use them for railway purposes. The Matsqui, Seabird Island, Boothroyd, Cook's Ferry and Skuppah First Nations (the Appellant First Nations), appealed the trial decision to the Federal Court of Appeal (FCA).

In the June 1999 FCA decision, two Justices upheld the Trial Court decision, although for different reasons. The third Justice found for the Appellants First Nations and would have allowed the appeal.

Mr. Justice Marceau concluded that the appeal should be dismissed. He argued that CPR had been granted fee simple title to the railway rights-of-way, free of any First Nation interest. As a result, he held that the First Nations did not have a power of taxation over these lands. Mr. Justice Desjardins concluded that lands comprising the rights-of-way were reserve lands and were subject to the First Nations' taxation by-laws. Nonetheless, Justice Desjardins dismissed the appeal because he found the taxation by-laws to be discriminatory. Mr. Justice Robertson, in a dissenting opinion, concluded that the rights-of-way in question were in the reserve and, therefore, subject to First Nation taxation by-laws. He found that CPR had less than a fee simple interest in the rights-of-way. Justice Robertson concluded that CPR's interest was more akin to a statutory easement or licence with respect to the rights-of-way.

In the wake of the mixed and confusing decision of the FCA, CPR and the Appellant First Nations engaged in discussions with a view to avoiding further litigation and reaching an agreement that would define the rights-of-way concerned as being an interest in land in the reserve and subject to the First Nations' property taxation jurisdiction, while CPR would gain a defined interest in the rights-of-way for its exclusive use. It is this negotiated solution that CPR and the present four First Nations are now attempting to replicate.

The Agreement-in-Principle

Although not a party to the CPR and B.C. First Nation legal disputes, Canada is a necessary party for the implementation of any settlement. On June 6, 2003, a negotiated agreement-in-principle (AIP) was reached among Canada, CPR and the four First Nations. The Department of Indian Affairs and Northern Development is involved in the negotiations because of its responsibilities for the management of the reserve interests under the Indian Act.

The AIP and a supporting information package detailing its background, content and implications was posted in each First Nation on September 24, 2003. A series of information meetings with all First Nations were held between October 22 and November 3, 2003. Each First Nation community held a vote on November 7, 2003 to ratify the settlement agreement and designate the land for a right-of-way for CPR. This vote required a majority plus one of all eligible electors of each First Nation to secure the ratification of the settlement agreement. A majority of all eligible electors for the Adams Lake, Leq'a:mel, Neskonlith and Siska First Nations (the four First Nations) were not present to vote. Although more than 80% of the electors that did vote, did so in favour of ratification, the four First Nations did not have the voter turnout necessary to successfully ratify the settlement agreement. As such, the Minister, pursuant to subsections 39(2) and 39(4) of the Indian Act and sections 3.1 and 3.2 of the Indian Referendum Regulations ordered a second vote. This vote, requiring a simple majority of votes cast, was held on March 11, 2004. The electorate of each of the four First Nations voted in favour of ratification and the designation of lands for a right-of-way for CPR.

The terms of the settlement agreements require that:

•  CPR convey all its rights, title and interest in the right-of-way areas to Canada;

•  Canada establish taxation regulations setting out the provisions to be adopted by the four First Nations for the valuation of CPR property rights and the determination of annual tax rates (achieved through the amendment of the established Property Assessment and Taxation (Railway Right-of-Way) Regulations;

•  Canada issue an easement back to CPR under subsection 16(2) of the Federal Real Property Act (FRPA).

These provisions, along with the certainty afforded by the making of the subject regulations will bring an end to the CPR - First Nation litigation.

The settlement agreements also set out provisions for the payment of settlement funds from CPR to the four First Nations. Accordingly, a cash settlement by CPR will be made to each of the four First Nations, all of which will also benefit from revenue from any new CPR utility licensee, such as fibre optic companies. The four First Nations will not seek back taxes from the affected municipality nor seek any form of redress from Canada. At the same time, CPR is not seeking from Canada any costs or compensation.

The specific provisions of the settlement agreements are only applicable to the current parties and will have no direct application to other First Nation/railway taxation issues or practice within British Columbia or any other provincial jurisdiction.

Amendment of the Property Assessment and Taxation (Railway Right-of-Way) Regulations

The Property Assessment and Taxation (Railway Right-of-Way) Regulations made under subsection 83(5) of the Indian Act in 2001 govern the determination of assessed values, initial tax rates and future tax rates on the assessed value of real property interests held by CPR and utility licensees in the First Nation right-of-way areas. The tax rates to be established by First Nations under these Regulations are harmonized with those applying to CPR off-reserve under provincial regulations.

The amendment of the Property Assessment and Taxation (Railway Right-of-Way) Regulations is limited to ensuring that their provisions can apply to the four First Nations.

The amended regulations will provide CPR with the certainty and predictability required to operate in the competitive environment of today's transportation sector.

Alternatives

The establishment of the Property Assessment and Taxation (Railway Right-of-Way) Regulations offers no available alternative. The amendment to the Regulations is a necessary component to the implementation of the settlement of the CPR/B.C. First Nations dispute and will be limited in their application to the property taxation provisions to be adopted by the four First Nations.

The amended Regulations are seen by CPR as necessary to ensure that First Nation tax practices adhere to established B.C. property tax practices and, thereby, provide CPR with an acceptable level of predictability and certainty. The amended regulations also ensure that property taxes are paid to the First Nation and not to the province or neighbouring municipality, as is the current practice.

The four First Nations and CPR strongly believe that Canada has an obligation under these circumstances to exercise the legislative powers it has at its disposal to facilitate this settlement agreement. CPR has confirmed that there will be no agreement without the regulated tax provisions applying to the four First Nations.

Benefits and Costs

First Nations

The application of the Property Assessment and Taxation (Railway Right-of-Way) Regulations is supported by the four First Nations in an attempt to resolve this bitter and long-standing property tax dispute. The regulations will extend the current implementation of property taxation of CPR interests on B.C. First Nation lands.

The exercise of First Nation property taxation jurisdiction over all property interests on reserve is an important element of self-government. The annual property taxation revenue generated (approximately $125,227 to all four First Nations) represents much needed investment in local infrastructure development and better local economic development opportunities.

Canadian Pacific Railway (CPR)

Under the terms of settlement agreements, as ensured through the amended regulations, CPR will be provided with levels of property taxation that are predictable and comparable to existing levels of property taxation under provincial laws. This will provide CPR with tax fairness and equity relative to its competitors, and assist in maintaining its competitive position relative to other railways and forms of transportation as well as its ongoing economic viability.

This initiative is cost neutral to CPR. Following the implementation of the settlement agreement and enactment of the amended regulations, CPR will, in effect, be paying its property taxes to the four First Nations rather than to the province and the District of Salmon Arm.

The Province and District of Salmon Arm

Currently, the province of B.C. and the District of Salmon Arm (Adams Lake) tax CPR, on an annual basis, in the approximate amount of $125,227. Of these amounts, the District of Salmon Arm collects approximately $25,000, while the balance (approximately $100,227) is remitted to the province. No services are provided to CPR by the province or the District.

The province and the District will forego future annual tax revenue with the implementation of property taxation of CPR by the four First Nations.

It is important to note that the parties view this as a "go forward" initiative in that CPR will not claim back taxes from the province or the District of Salmon Arm, nor will the four First Nations demand payment from CPR for the foregone taxes since the approval of their taxation by-laws.

Indian Taxation Advisory Board (ITAB)

The amended Regulations applied to the taxable interests of railway companies on the eight reserves held by the four First Nations will resolve the long-standing CPR - First Nation dispute and will bring a decidedly positive impact on ITAB policy objectives.

The settlement supported by the amended Regulations will expand First Nation revenue jurisdiction by ensuring that First Nation property taxation jurisdiction is recognized. As such, the four First Nations will raise revenue where none was available before. This will encourage local economic development in that the costs associated with First Nation tax revenue from railway interests are limited, as few services, if any, are required. These lower service costs will free tax revenue and maximize the potential for First Nation investments (applied in accordance with expenditure policy) in local economic development initiatives.

This initiative will also promote efficiencies in the four First Nation property tax systems as the application of the regulations are an administratively efficient approach to property valuation and rate setting that will provide administrative certainty and end potential challenges through the courts. Similarly, the Regulations will protect the integrity of First Nation property tax systems by ensuring that First Nation property taxation operates at the same standard as other governments thereby, balancing the interests of the tax authority with those of the tax payer and promoting consistency, fairness and equity.

No incremental administrative cost pressures will result from the implementation of the settlement agreement and the accompanying regulations.

Canada (Indian and Northern Affairs Canada) (INAC)

The benefits of the taxation regulations to Indian and Northern Affairs Canada (INAC) are consistent with the policy objectives of ITAB. The taxation regulations harmonize the railway tax regime on reserve with that applying to their neighbours. INAC has facilitated the out-of-court settlement between the four First Nations and CPR by its participation and this, in turn, strengthens Canada's partnership relationship with the First Nations. The settlement also serves INAC's objectives of strengthening the First Nations' governance capacity by extending their taxation jurisdiction to these railways traversing their reserves. If the agreement and taxation regulations were to fail, the parties are certain to be back before the courts and Canada would be required to consider its position regarding intervention in the action, or being brought into the action as a defendant. This, in turn, would lead to future uncertain cost implications for INAC, both in the conduct of the litigation and any damages awarded against Canada.

The taxation regulations are cost neutral to INAC. The INAC capital or band support funding to these four First Nations will not be augmented as a result of the creation of a taxable interest by the easement to be issued to CPR, since no services will be provided to CPR by the First Nations. The previous tax recipient, the province and the District of Salmon Arm, also provided no services. There may be minimal costs associated with administration by INAC of the right-of-way agreement to CPR. CPR will also not be seeking from Canada any costs or compensation.

Canadian Society

The resolution of this dispute will appeal to the fair-mindedness of average Canadians in seeing it as right and proper that this railway corridor, originally expropriated from the First Nations and running through their reserves, now is confirmed as reserve once more, and as a taxable interest that provides much needed revenue to the community. The resolution, to the degree that it is a win-win negotiated settlement for all parties, shows these and other First Nations that the negotiation of long-standing disputes is practical and achievable in a spirit of compromise and goodwill, and supported by the federal government, as opposed to pursuing litigation or other courses that First Nations may choose. Canada, as a whole, benefits because CPR, as a rail company of national importance to the country, achieves commercial certainty through this settlement and tax regulations. The right-of-way is part of CPR's main rail corridor via the Fraser and Thompson River valleys and its continued commercial viability is significant to B.C.'s and Canada's economic health derived from the efficient movement of goods by rail through the Rockies.

Environmental Impact

As a condition of settlement, CPR will undertake an environmental site assessment of the right-of-way, to the satisfaction of Canada. The site assessment will identify the existing condition of the land, any environmental concerns, contamination, and the environmental mitigation and protection measures to be implemented by CPR at present or in future, in accordance with general railway industry practice. The standards for acceptable site conditions to be used in the environmental site assessment and in determining the appropriate environmental mitigation and protection measures will be those of the Canadian Council of the Ministers of the Environment, when applicable. In other cases, the applicable federal or provincial standards will be used.

When the right-of-way ceases to be used for railway purposes, the land should be restored to be suitable for commercial or industrial use, utilizing the guidelines of the Canadian Council of the Ministers of the Environment for contaminated sites, or such standards, guidelines or regulations or statutes in effect at that time and applicable to the restoration of abandoned railway rights-of-way.

There is no requirement for an environmental assessment for the granting of the right-of-way, under the Canadian Environmental Assessment Act (CEAA). Subsection 74(4) of the CEAA provides for grandfathering of any works initiated before June 22, 1984; as a result the CEAA does not apply with respect to any licensing, permission or approval under provision of the Act. CPR will continue to use the right-of-way corridor for railway purposes.

Under the terms of settlement, the right-of-way will be used for fibre optic cable networks and other utilities (which are defined in the agreement to include pipeline, cable, power, water, sewer and gas). The right-of-way will continue for as long as it is used for CPR business (which includes railway purposes, fibre optic cable networks and other utilities).

Regulatory Burden

The regulations are straightforward in their application and impose minimal requirements on First Nation property tax authorities. The regulations are limited in their application to the concerned First Nations. The property tax provisions established in the regulations are identical to well established provincial practice and thus no regulatory conflict can arise.

Consultation

The purpose of the consultation process with respect to the province of B.C. and the District of Salmon Arm was to formally advise them of the settlement provisions and of the intention to proceed with First Nation taxation of the CPR rights-of-way.

In accordance with B.C.'s Bill 64, the Indian Self Government Enabling Act, when the Minister of INAC approves a First Nation property taxation by-law, all municipal and provincial property taxation on reserve ceases. As well, each First Nation is issued a certificate which gives notice of their intention to collect property tax. The notice is sent to each municipality affected and is published in the provincial Gazette. This procedure was followed by each of the four First Nations as they initiated their property taxation regimes. As a federal condition to finalizing a settlement, the four First Nations and CPR (facilitated by ITAB) met with the province and the District of Salmon Arm and advised them of the settlement agreements and CPR's change in status as a property tax payer.

The proposed amending regulations fulfill the same purpose and affect the same parties representing the same stakeholder groups as the original Property Assessment and Taxation (Railway Right-of-Way) Regulations. These Regulations were highly anticipated and given the certainty and stability afforded by them to all affected parties, were very well received. No comments were received on these Regulations throughout the consultation and pre-publication period required during their passage in November 2001. Similarly, the proposed amending regulations are also anxiously awaited and enjoy the same level of support as evidenced by the positive comments received during information and consultation meetings held for the benefit of all concerned parties.

Compliance and Enforcement

Indian Taxation Advisory Board (ITAB)

ITAB has a mandate to examine tax rate by-laws drafted by First Nations under section 83 of the Indian Act. ITAB recommends tax by-laws for approval by the Minister of INAC. ITAB may also examine opportunities to introduce regulations relating to matters set out in section 83 of the Indian Act.

In order to ensure compliance with the regulations, the assessment and rates by-laws of First Nations party to the settlement agreement must conform with the property assessment, valuation and tax rate provisions set out in the Regulations.

The revenue that can be generated from property taxation depends directly on the two main components of a property tax: the tax base (assessed value of real property interests on reserve) and the tax rate. The rate of taxation is applied to the assessed value of real property to arrive at the amount of tax levied.

The authority for First Nation governments to collect monies from taxpayers is through an approved rates by-law. The rates by-law determines the rate at which each class of property on reserve is to be taxed. In order for a First Nation property taxation regime to be valid, enforceable and recognized by the courts, a rates by-law must be enacted annually and approved by the Minister.

ITAB policy with respect to the establishment of rates is based on the need to recognize a balance between First Nations' and tax-payers' rights. The challenge facing ITAB is to ensure that tax-payers are treated with fairness, justice and equity, while First Nation governments, as taxing authorities, are free to assert their jurisdiction. All rates by-laws are reviewed to ensure that they:

•  comply with all provisions of the Indian Act;

•  conform to the Charter of Rights and Freedoms; and

•  support the principles of natural justice.

To ensure the smooth transition to First Nation taxation, ITAB has always sought to embrace the principle of tax harmonization with surrounding jurisdictions and has encouraged and supported provincial enabling legislation to do so (Indian Self Government Enabling Act in B.C. and An Act to establish an administrative review procedure for real estate assessment and to amend other legislative provisions in Quebec).

The ITAB rates policy evaluation criteria respect the principle of tax harmonization as an expression of fairness, justice and equity. First Nation rates by-laws establishing tax rates to be applied to railway interests will therefore be reviewed to reflect these principles.

First Nation assessment by-laws set out the types of taxable properties that are to be assessed and the general manner in which the assessments are to be carried out.

ITAB reviews the initial First Nation assessment by-law and subsequent amendments and makes recommendations on their approval to the Minister. Therefore, as with tax rate by-laws, First Nation assessment by-law provisions for the valuation of railway interests will be reviewed against current B.C. assessment practice.

ITAB's review and recommendation for ministerial approval of amended assessment by-laws and annual rates by-laws will be based on the governing provisions established in the regulations. ITAB will not recommend for ministerial approval any First Nation assessment or annual rates by-law that attempts to introduce any provision beyond that allowed in the regulations. Without a duly approved rates by-law, First Nations cannot legally impose a property tax.

The regulations will support the Minister's decision-making powers in approving First Nation by-laws to ensure that property tax revenues from CPR are paid to First Nations and not to the province or a neighbouring municipal jurisdiction.

This regulatory initiative is a tangible demonstration of the policy intent of subsection 83(5) respecting the exercise of the by-law making powers of First Nations.

Contacts

Brent Moreau
Director of Intergovernmental Affairs
Indian Taxation Advisory Board
90 Elgin Street, 2nd Floor
Ottawa, Ontario
K1A 0H4
Telephone: (613) 954-6764

Rick Simison
Major Initiatives
Major Initiatives Branch
Lands and Trust Services
Indian and Northern Affairs Canada
10 Wellington Street
Gatineau, Quebec
K1A 0H4
Telephone: (819) 994-3333

Footnote a

R.S., c. 17 (4th Supp.), s. 10(3)

Footnote 1

SOR/2001-493

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