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First Nations Fiscal Management Act (FMA)

The FMA is First Nation-led legislation that affirms First Nation jurisdiction for an array of fiscal powers; these include:

  • Property taxation on First Nations lands, including
    • Assessment of property, the requisition of information to assess a property and the inspection of property.
    • Setting tax rates to be applied to the assessed value of property;
    • Collection of taxes for the provision of services to property;
    • Taxation of business activities;
    • Imposing development cost charges; and
    • Property Transfer tax.
  • Authorizing the expenditure of local revenues;
  • Establishing procedures by which the interests of taxpayers may be represented to Council;
  • Authorizing the borrowing of money from the First Nations Finance Authority;
  • Providing for the enforcement of laws in respect of outstanding taxes or charges, and
  • Delegation of law-making power.

First Nations tend to establish real property taxes first, and then consider building on that established framework with additional local revenue laws such as a development cost charges law, a property transfer tax law and a business activity tax law.

First Nation tax authorities levy and collect real property taxes in the same manner as local governments throughout Canada. First Nation real property tax systems base taxation on a property assessment, use market value assessment methods, use professional assessors, and set rates based on a budget. Procedures for assessment appeals and tax enforcement in First Nation tax systems are also similar to local government approaches.

Under the framework of the FMA, a First Nation creates its real property taxation system by making two laws: a First Nation Property Taxation Law and a First Nation Property Assessment Law. A First Nation must have both of these laws in place before it can levy and collect property taxes.

The property assessment law establishes the property assessment system. It provides for the appointment of an assessor, creates the timelines for conducting assessments, sets out the rules for determining assessed values of properties, establishes property classes for assessment purposes, and provides for an independent assessment review board to consider and determine assessment appeals. The property taxation law establishes how taxes are levied and what property interests are taxable, sets out the duties of the tax administrator, establishes the timelines and requirements for creating the tax roll and sending tax notices, sets out any exemptions from taxation, provides for the imposition of penalties and interest on unpaid taxes, and outlines the enforcement and collection mechanisms available to the First Nation.

Taxation laws enacted under the FMA must comply with all statutory requirements, any regulations made under the FMA and any standards established by the FNTC. Sample property taxation laws, consistent with the Act, regulations, and FNTC standards are found below.

The Act and Schedule

The First Nations Fiscal Management Act (FMA) came into force on April 1, 2006. It is optional legislation that was designed to support the governance and economic development of participating First Nations. The FMA provides strong legal authority and an administrative framework for First Nations to collect real property taxes, as well as other related revenues. Participating First Nations can access fiscal tools to promote economic growth and capitalize on solid business relationships.

Notice Requirements

When a First Nation opts into the FMA , effective communication ensures that members, residents and taxpayers are aware of the system, its economic and service opportunities, and the responsibilities of the First Nation. A fundamental aspect of all tax systems is giving fair and adequate notice to those whose interests are at stake. At every critical step in the First Nation tax system there are notice provisions aimed at different stakeholders. Below are the standards and guidelines related to providing notice.

Property Assessment and Taxation Laws

Establishing Property Taxation Powers

Property assessment and taxation laws are part of a group of laws called “local revenue laws” that a First Nation can pass under the FMA. These laws not only establish the legal authority to collect real property tax, but they also establish the administrative framework for a First Nation’s taxation system. First Nations tend to establish real property taxes first, and then consider building on that established framework with additional local revenue laws such as a development cost charges law, a property transfer tax law and a business activity tax law.

The FNTC has established Standards for the Form and Content of First Nation Property Assessment Laws, and Standards for the Form and Content of First Nation Property Taxation Laws. Sample laws have been developed for each region in order to enable harmonization with provincial approaches where appropriate. The Standards, regulations, sample laws, sample notices, and other documentation are available below.

Annual Expenditure Laws

First Nations taxing under the FMA are required to make an expenditure law in each year, which provides the First Nation with the authority to expend the revenues collected under their local revenue law. The expenditure law sets how the First Nation intends to spend the local revenues it will collect by attaching a detailed budget indicating all revenues and expenditures for that budget year. The annual expenditure law also authorizes any grants that will be given from local revenues, and establishes local revenue reserve funds that the First Nation wishes to create. Under the FMA, the expenditure of local revenues can only be made in accordance with an expenditure law or in accordance with section 13.1 of the FMA (which enables emergency and early-year expenditures subject to certain conditions).

A First Nation typically makes its annual expenditure law concurrently with its annual tax rates law. The First Nation must make its annual expenditure law no later than July 31 in the taxation year. This date is set by the FNTC Standards for the Timing of First Nation Annual Rates and Expenditure Laws. As well, First Nations must publish their annual expenditure law in the First Nations Gazette or on their website prior to submitting the law to the FNTC.

The FNTC has established Standards for the Form and Content of First Nation Expenditure Laws. The Standards and sample laws are available below.

Annual Tax Rates Laws

First Nations taxing under the FMA are required to make an annual tax rates law setting out the tax rate to be applied to the assessed value of each class of property for the current year. The annual tax rates law also sets any minimum tax that will apply in that year. The tax rates set by the First Nation are typically determined by the budgetary requirements of the First Nations with consideration of the tax rates used by an adjacent local government identified for the purpose of comparing the First Nation’s tax rates (called the “reference jurisdiction”).

The Annual Tax Rates Law sets out the tax rate for each property class (which are established in the assessment law). The annual tax rates law and the annual expenditure law are prepared concurrently, in order to enable the First Nation to consider its budgetary requirements when setting its tax rates.

A First Nation must make its annual tax rates law by the date set out in the First Nation’s property taxation law, which date must also not be later than July 31 in the taxation year. The July 31 date is set by the FNTC Standards for the Timing of First Nation Annual Rates and Expenditure Laws. As well, First Nations must publish their annual tax rates law in the First Nations Gazette or their website prior to submitting the law to the FNTC. The FNTC has established Standards for the Form and Content of First Nation Annual Rates Laws. The Standards and sample law are available below.

Borrowing Laws

As with other jurisdictions collecting property tax, First Nations now have the ability to use their tax revenues to access long term debt financing for capital infrastructure projects or to refinance existing capital projects. Under the FMA, First Nation governments can participate in the debenture financing system, and borrow money based on the certainty of collecting property tax each year. Local revenue debt financing principally involves the FNTC, the First Nations Financial Management Board (FNFMB) and the First Nations Finance Authority (FNFA). Under the system, participating First Nations pool their financing requirements and the FNFA sells the collective debt in the form of an investment grade fixed income security (i.e., a debenture or bond). First Nations repay their loans over a long period (usually between 15 and 25 years) by using a portion of their annual property tax revenues.

In order to participate in this system, First Nations must be certified by FNFMB and borrowing members of the FNFA, and make a borrowing agreement law. Each loan from the FNFA must be authorized through a borrowing law made by the First Nation.

The FNTC has established Standards for the Form and Content of First Nation Borrowing Laws and Standards Establishing Criteria for Approval of Borrowing Laws. The Standards, sample laws, sample notices, and other documentation are available below.

Business Activity Tax Laws

First Nations have the authority to make business activity tax (BAT) laws under the FMA. This authority enables First Nations to tax a variety of business activities conducted on their reserve lands. The FNTC has developed sample laws for four BATs: a business occupancy tax law for the taxation of business occupancies on First Nation lands in Manitoba, a well drilling tax law for the taxation of oil and gas well-drilling activity on reserve lands in Alberta, a quarry tax law for the taxation of quarry activity in British Columbia, and an accommodation operator tax law for the taxation of accommodation operators.

The FNTC has established Standards for the Form and Content of First Nation Business Activity Tax Laws. The Standards, sample laws, sample notices, and other documentation are available below.

Delegation Laws

First Nations have the authority to make delegation laws under the FMA in order to delegate to any person or body any of the council’s powers to make local revenue laws under the FMA. This means that a First Nation could transfer its law-making powers to a third party to, for example, enable taxation on jointly-held reserves, with each community delegating to one body their law-making powers to be jointly legislated and administered. A delegation could enable efficiency by smaller communities who could delegate their law-making powers and administration to a community with more staff resources. It could also support Nation-building, by enabling communities within a Nation to delegate to a Tribal Council so that taxation is implemented at the Nation level.

The FNTC has established Standards for the Form and Content of First Nation Delegation Laws. The standards and sample laws are available below.

Development Cost Charges (DCC) Laws

Development cost charges (DCCs) are one-time fees that are collected from developers of reserve land to offset some of the infrastructure costs required to service the needs of the development. DCCs are generally payable by the developer at the time of the subdivision approval or, where subdivision approval is not required, are payable at the time of the building permit approval. DCCs can only be collected for capital costs that are required in order to service, directly or indirectly, the development for which the charge is being imposed.

DCCs can only be used to help pay the capital costs associated with one or more of the following:

  • providing, constructing, altering or expanding sewage, water, stormwater and transportation facilities, and
  • providing and improving park and recreation land

As part of a First Nation’s development of a DCC law, the First Nation must undertake a number of planning steps to determine the types of services that will be required, the scope of the projects, and the DCC charge for each service, as this information will inform the law development process. The capital costs used to determine the DCC’s to be levied must be supported by a long-term capital plan, regional growth strategy, official community plan, or other regional development plan.

The FNTC has established Standards for the Form and Content of First Nation Development Cost Charges Laws. The Standards, sample law, sample notices, and other documentation are available below.

Property Transfer Tax Laws

Property transfer taxes (PTT) is generally paid by the purchaser, and is based on the fair market value of the property being transferred.

The PTT law sets out when and how the tax will be levied, the rate of tax, any exemptions from the tax, and includes provisions respecting the rights of appeal, the application of penalties and interest to unpaid taxes, and enforcement and collection mechanisms available to First Nations.

The FNTC has developed standards for PTT laws based on best practices, while allowing for local variation where appropriate and supporting harmonization with provincial jurisdictions where appropriate. First Nations have discretion in setting their rate of PTT; however, their rate cannot exceed the adjacent provincial rate for PTT. If there is no PTT in their adjacent province, First Nations may choose any other province to follow for rates and exemptions.

The FNTC has established Standards for the Form and Content of First Nation Property Transfer Tax Laws The Standards, sample laws, sample notices, and other documentation are available below.

Service Tax Laws
Unlike property taxes- which provide local revenues that may be expended in a number of areas, service taxes are collected to fund a specific service being provided by or on behalf of the First Nation. All of the revenues collected from a service tax must be spent only on the specific service for which they are collected.

Service taxes are often levied to fund a specific capital improvement, and are levied for a fixed number of years to pay for the cost of the improvement. Capital improvement projects that may be funded by a service tax include transportation infrastructure, sewer and water systems, and park acquisitions and improvements. The cost of the work undertaken as a provision of services is usually paid up front by the First Nation then recovered from property owners through the service tax. Service taxes may apply to the entire reserve, or only to a defined area.

The FNTC has established Standards for the Form and Content of First Nation Service Tax Laws. The Standards, sample law, sample notices, and other documentation are available below.

Fee Laws

First Nations have the authority to make laws respecting the charging of fees for the provision of services or the use of facilities on reserve lands, or for a regulatory process, permit, licence or other authorization.  These fees can be levied in relation to water, sewer, waste management, animal control, recreation and transportation, as well as any similar service.  Unlike the property taxation powers, service fees are collected to directly fund the costs of providing a specific service to residents or users of the reserve.  Fee revenues are local revenues that must be placed in the First Nation’s local revenue account and expended under the authority of the First Nation’s annual expenditure law.  All fee revenues collected for a service must be spent only on the specific service for which they are collected.

The FNTC has developed Standards for First Nation fee Laws based on best practices, while ensuring First Nations have the flexibility to develop fees that will meet the needs of their communities.  First Nation fee laws must include certain key elements, including a description of the services for which fees are to be levied, the basis on which the fee will be levied, how the fees will be levied and collected, where payments must be made, any exemptions from the fees, when refunds will be given, any penalties and interest that will be applied to unpaid fees, and what enforcement measures a First Nation may use to collect unpaid fees.  First Nations must prepare and make available to the public a report respecting how fees levied under the fee law were determined that includes the projected cost of the service, how the cost was determined, and the proportion of the total cost that the First Nation will recover through the fees.

The FNTC has established Standards for First Nation Fee Laws, 2017. The Standards and sample law, sample notices, and other documentation are available below.

Taxpayer Representation to Council Laws

Taxpayer representation to council (TRC) laws are intended to build and maintain strong taxpayer relationships by establishing procedures respecting the administration of the tax system. A TRC law can establish key processes and opportunities for taxpayer and First Nation engagement so that taxpayers and the First Nation can communicate and articulate their concerns in a more coherent and effective manner. The procedures in a TRC law can assist the First Nation in preventing disputes, and can support the efficient resolution of disputes that arise.

The Standards for TRC laws establish minimum notice periods for proposed tax rates and draft budgets, require provisions for taxpayer access to specific tax-related documents, require descriptions of methods that will be used to ensure on-going communication with taxpayers, and require local dispute relations procedures for taxpayers and First Nation representatives.

The FNTC has established Standards for the Form and Content of First Nation Taxpayer Representation to Council Laws. The Standards, sample law, sample notices, and other documentation are available below.

 

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