Tax Planning For Indigenous Equity In Canadian Projects

As reported in our prior bulletin, " Four Trends in Indigenous Equity Participation in Canada", we have been monitoring reports of Indigenous equity participation in energy and related infrastructure projects. Indigenous equity investments in these projects help advance economic reconciliation with Indigenous Peoples, on whose treaty and traditional territories such projects may be located. Understanding the tax considerations that may apply to Indigenous equity projects is key to decisions on structuring.

While there are numerous taxation rules specific to Indigenous Peoples in Canada, this bulletin focuses on two key tax considerations under the Income Tax Act (Canada) (the "ITA"). First, a municipal or public body performing a function of government ("MPBPFG") in Canada is exempt from paying income tax under the ITA. The Canada Revenue Agency has confirmed that Indian Act Bands qualify as MPBPFGs in Canada for this purpose. Other First Nations entities may