In this case, the BC Court of Appeal addressed the legal status of Indian Act bands and the scope of the exemption from taxation provided under section 87 of the Indian Act.
The New Westminster Indian Band, also known as Qayqayt First Nation, is recognized by Indigenous Services Canada as a “band” within the meaning of the Indian Act though it has no reserves. Currently, Qayqayt asserts two specific claims against the Government of Canada: one for breach of fiduciary duty arising from the relinquishment of its interest in five parcels of land allegedly set apart for Qayqayt as reserves, and a second for breach of fiduciary duty in relation to the taking of a railway right-of-way from Qayqayt’s alleged former reserve land.
To fund the prosecution of these two specific claims before the Specific Claims Tribunal, Qayqayt obtained a loan from CIBC in the amount of about $3 million. Qayqayt purchased insurance policies from a London-based insurer to cover the risk that it would not realize sufficient proceeds from its claims to cover its debt to CIBC. Under the terms of the policies, if, after five years, Qayqayt has not realized proceeds sufficient to cover its debt, the insurer must cover the shortfall. In 2016, the council of Qayqayt passed resolutions approving these arrangements at a meeting held on a Squamish Nation reserve.
At issue in the case was whether Qayqayt is liable to pay tax on premiums paid under its insurance policies pursuant to the BC Insurance Premium Tax Act (the “IPTA”). Qayqayt asserted that the premiums were exempt under paragraph 87(1)(b) of the Indian Act, which provides that “the personal property of an Indian or a band situated on a reserve” is exempt from taxation. The provincial government disagreed and levied the tax. Qayqayt appealed the provincial government’s decision to the BC Supreme Court.
The BC Supreme Court held that Qayqayt was exempt from taxation on the basis that a band is not a “person” within the meaning of the IPTA. The BC Court of Appeal affirmed that decision but on a different basis. The court of appeal held that, while a band is a unique entity, it is a “person” within the meaning of the IPTA. The court indicated that this conclusion does not apply to all statutes; the issue is contextual and depends on the language and purpose of the statute. The court held, however, that the insurance premiums Qayqayt paid were exempt from taxation as “the personal property of an Indian or a band situated on a reserve” within the meaning of paragraph 87(1)(b) of the Indian Act.
Turning to the tax exemption issue, the court of appeal held that the words “personal property situated on a reserve” within para. 87(1)(b) should be understood as being broad enough to include “personal property strongly connected to a reserve” and should apply in this case even though no reserve exists because the purpose of the property at issue (the insurance premiums) is to facilitate a claim for compensation for the relinquishment of reserve land and, in that sense, the connection between the reserve and the property “could hardly be stronger.”
Courts have struggled with the application of paragraph 87(1)(b) of the Indian Act where the property at issue is intangible. In such circumstances, the Supreme Court of Canada has held that courts should consider the “connecting factors” between the property and the reserve. In previous cases, when applying these factors, courts have tended to pay close attention to the geography of the specific reserve in question. In this case, the court of appeal took a more flexible approach to the application of paragraph 87(1)(b) of the Indian Act, holding that the exemption applies despite Qayqayt’s lack of an Indian Act reserve.