Reynold and Leslie Dickie: Helping an Aboriginal Business Use the Section 87 Tax Exemption

Canadians who are “Indians” under the Indian Act are protected from federal, provincial and municipal taxes on their on-reserve property. This is one of the key promises the governments have made to Indians and it helps to ensure the small parts of their traditional territories reserved for their use continue to provide benefits. Over the years, Parliament and the courts have been whittling away at this protection and, after a long and costly legal battle, Reynold and Leslie Dickie successfully pushed back.


Reynold Dickie, a member of the Fort Nelson First Nation in Northeastern British Columbia, and his wife Leslie Dickie, a member of the Kwakiutl Indian Band run Deer River Holdings, which does clearing work for oil and gas exploration companies in the Fort Nelson area. They had built their small business up over the course of a decade when the Canadian Revenue Agency challenged their right to use the Indian Act tax exemption. This was no small matter for the Dickies as they had been very successful in growing their small business into a major enterprise with over 200 employees and revenues in the vicinity of $3,400,000 in 2003. If CRA successfully challenged their tax exemption, the Dickies faced a tax bill in excess of $1,000,000 with interest and penalties.

Deer River Holding was a sole proprietorship. That is, Reynold chose not to set up a corporation and instead operated the business personally without partners and without the protection of a corporation. Working from his office on the reserve, Reynold took all the responsibilities and risks of running the business personally. Each year he would ensure the company was qualified to bid on contracts, seek out and obtain new business, find a workforce (some of whom came from as far away as Newfoundland), train his employees and then dispatch them out into the field to work. While the workers were in the field, Reynold would work with Leslie to ensure that the workers were managed properly, housed and provisioned so they could carry out their duties. Companies would send payment either directly to Deer River Holdings’ bank or send a cheque to the Fort Nelson Reserve. Leslie, the bookkeeper, kept proper records and ensured they were ready for CRA.

Reynold and Leslie were baffled as to why CRA could challenge what they were doing. On the advice of a relative, Reynold had carefully made sure that all of his work was done on the Fort Nelson First Nation reserve. He and Leslie lived on the reserve and carried out all of their work from offices in their home. They trained and dispatched workers from their home office and stored their equipment there. They dealt with customers by phone, fax, and email from their reserve-based office and kept all of the company’s books and records on reserve. Deer River Holdings growth and success was because of these on-reserve efforts and, were it not for these efforts each and every day, the company would have been smaller and less profitable. For Reynold and Leslie it seemed obvious that the profit they were earning came from their on-reserve efforts and they were fully entitled to enjoy the benefit of the tax exemption.

CRA had a radically different view of Deer River Holdings From CRA’s perspective Deer River Holdings made its revenue off-reserve: its clients were off-reserve oil and gas companies, the vast majority of the cutting and brushing it did (99%) was done off-reserve, most of its workforce was not from the Fort Nelson First Nation and its bank was off-reserve. CRA viewed Reynold and Leslie’s business development, training and management work as merely incidental to what was an off-reserve business and therefore said that Mr. Dickie’s income should have been declared and taxed. Because Deer River Holdings had not declared any income and so had not kept track of management expenses, CRA was not even willing to recognize a fair salary expense for Leslie’s work as an on-reserve bookkeeper.

Working with colleagues at Dwyer Tax Law and Miller Thomson LLP, Robert Janes helped argue that Reynold and Leslie could not be treated as though they earned their revenue by personally going out on to the land to clear trees and brush.   The legal team argued that Deer River Holdings’ profit was not simply revenue from cutting and brushing but earnings from a carefully run and successful business that operated on the Fort Nelson First Nation reserve. CRA maintained its position that the Dickies were subject to tax on their income.

Reynold Dickie challenged CRA’s position in Court. With Robert’s help, Reynold appealed the CRA decision to the Tax Court (as special federal court set up just to hear federal tax cases). The matter went to a three day trial where the court considered just one of the years in question. Justice Pizzitelli completely accepted the main arguments being put forward by the Dickies. He accepted that the real value in the business came from the Reynold and Leslie’s management and business work in finding business and workers to keep Deer River Holdings going and that this work was done completely on reserve. As a result Justice Pizzitelli held that Mr. Dickie was not taxable. Further he held that the case was so important to the Dickies and others, and that the CRA’s position was so untenable, that he awarded increased costs to Reynold, such that he recovered most of his legal costs. About a year later the Federal Court of Appeal dismissed CRA’s appeal.

Robert Janes and JFK Law Corporation (aided by Sarah Hansen at Miller Thompson LLP) are pleased to have had the opportunity to help Reynold to favourably resolve his dispute with CRA. More importantly this case advances the right of First Nations entrepreneurs and employees to take advantage of the tax exemption. CRA’s approach before this decision discounted the Dickies’ contributions (and those of other aboriginal business people) in managing, developing and maintaining their business and thereby creating jobs and wealth not only for themselves but others.