ISSUES AND RECOMMENDATIONS
During the consultations, several stakeholders requested
an expansion of existing tax relief programs for non-profit organizations.
Prior to 1998, properties that were occupied by
charities and non-profit organizations were, as a general rule, taxed at the
residential rate and were not subject to business occupancy tax. There were
some exceptions to this general rule; for example, some charitable and
philanthropic organizations were exempt from property taxation under private
legislation or under section 3 of the Assessment Act.
In 1998, when the business occupancy tax was eliminated
and the separate assessment of tenant units was discontinued, the following
mechanisms were put in place to facilitate tax relief for charities and
non-profit organizations that would be similar to their pre-reform
- Residential Class: Under O. Reg.
282/98, property that is owned and occupied by one of the following entities is
included in the residential property class:
- non-profit organization which operates a child
- religious organization;
- non-profit service organization (which is defined
in the regulation as "an organization whose primary function is to provide
services to promote the welfare of the community and not only to benefit its
- non-profit cultural organization (which is
defined in the regulation as "an organization that is established and
maintained for cultural activities for Canadians of a specific ethnic origin,
including First nations peoples");
- non-profit private club;
- non-profit recreational sports club.
- Rebates to Charities: Under section
442.1 of the Municipal Act, charitable organizations that have a
registration number issued by the Canada Customs and Revenue Agency and that
occupy commercial or industrial property (whether they are the property owner
or the tenant) are entitled to receive an annual rebate of 40% of their
- Upper-tier and single-tier municipalities have
the discretion to expand this rebate program. They can require that rebates
greater than 40% be paid to charities, and they have the option of directing
that rebates (in any amount) be paid to charities located in residential or
- Rebates to Non-Profit Organizations:
Under section 442.1(4) of the Municipal Act, upper-tier and
single-tier municipalities have the option of implementing a program to provide
property tax rebates to non-profit organizations that are "similar to eligible
- Each upper-tier and single-tier municipality has
the discretion to identify which (if any) organizations will constitute
"similar" organizations for the purpose of this rebate program. Municipalities
can specify the name of qualifying organizations (e.g. Royal Canadian Legion)
or they can identify types of organizations (e.g. organizations dedicated to
the protection of the natural environment).
- Rebates of up to 100% of the property tax can be
provide to qualifying non-profit organizations located in any property
- Exemptions: The exemptions from
taxation for organizations and properties listed in section 3 of the
Assessment Act and in private legislation have been maintained.
The specific requests for expansion of tax relief
programs that were received from the non-profit sector and from municipal
representatives during the consultations included the following:
- give lower-tier municipalities the option of
providing rebates to non-profit organizations;
- expand the categories of organizations that are
eligible for the mandatory 40% rebate under section 442.1 of the Municipal
- expand the categories of non-profit organizations
that are eligible for inclusion in the residential property class;
- expand the categories of organizations that are
eligible for exemption from taxation under section 3 of the Assessment
- It is recommended that the rebate program under
section 442.1 of the Municipal Act be enhanced to give lower-tier
municipalities the option of providing property tax rebates to non-profit
organizations that have not been made eligible for rebates by the upper-tier
level of municipal government. Expanding the rebate program in this manner
would enable local municipalities to address local issues.
rebates are initiated by a lower-tier municipality, it is recommended that the
cost of the rebates be shared in the same manner as tax relief for brownfield
sites or heritage properties under sections 442.7 and 442.8 of the
Municipal Act whereby the lower-tier municipality decides on a
percentage of tax relief to be provided, a matching percentage of the education
tax may be provided, and the upper-tier municipality is given the option of
providing matching relief in respect of its portion of the tax.
- It is recommended that the definition of
"non-profit service organization" be clarified to ensure that non-profit animal
shelters, which by their nature provide a service for the welfare of the
community, are eligible for inclusion in the residential property
- Expansions to the list of statutory exemptions
are not recommended at this time. It is believed that the broad tax rebate
authority that has been given to municipalities under section 442.1 of the
Municipal Act should obviate the need to enact further tax relief
OFFICE BUILDING AND SHOPPING CENTRE CLASSES
The office building class and the shopping centre class
are among the optional property classes which municipalities may choose to
adopt for the purpose of applying different tax rates to different types of
The office building class includes the rentable area of
an office building that exceeds 25,000 square feet. ("Office building" is
defined to mean a building that is used primarily for offices.) The shopping
centre class includes the rentable area of a shopping centre that exceeds
25,000 square feet. ("Shopping centre" is defined to mean a structure with at
least three units, having different occupants, that primarily provide goods or
services to the public.) Properties that are included in these classes are not
actually included in their entirety. It is only the portion of an eligible
property that exceeds 25,000 square feet that is included in the office
building or shopping centre class. The first 25,000 square feet remain in the
The intention behind the 25,000 square foot threshold
was to maintain smaller properties predominantly within the commercial class.
This design feature was premised on the assumption that municipalities would
tend to set higher tax rates for the office building and shopping centre
classes than for the commercial class, and in this regard, the 25,000 square
foot threshold was designed to protect smaller properties from tax
Two issues relating to these classes were raised during
- It was proposed that the 25,000 square foot threshold
should be eliminated because it adds needless complexity to the assessment and
taxation process. It was suggested that properties should either be in or out
of the classes in their entirety.
- If the 25,000 square foot thresholds are maintained,
it was pointed out that O. Reg. 282/98 is not clear as to how the thresholds
should be applied. Specifically, in the situation where there is more than one
eligible building on a property (for example, where there are two stand-alone
office towers on a single parcel of land), it is not clear from the regulation
whether a single 25,000 square foot threshold should be applied to the entire
parcel or whether separate 25,000 square foot thresholds should be applied to
each eligible building on the property with the result that more than 25,000
square feet would be in the commercial class for some properties.
- It is recommended that the 25,000 square foot
thresholds be maintained for the office building and shopping centre
- It is recommended that there be only one 25,000
square foot threshold applied to each parcel of land on which there are one or
more buildings that are eligible for inclusion in the office building or
shopping centre classes.
Applying multiple 25,000 square foot thresholds to
a single property would defeat the intent of the thresholds which was to
maintain the commercial classification on smaller properties, not to augment
the portion of larger properties that would be included in the commercial
PARKING LOTS AND VACANT LAND CLASS
Rates and Ratios
The parking lots and vacant land class is one of the
optional property classes that municipalities may choose to adopt.
This class includes properties which would otherwise be
in the commercial class and which fall within one of the following
- a parcel of land that is used exclusively for the
parking of vehicles;
- vacant land; or
- land that is a railyard, owned and used exclusively
by a railway company, upon which no building or structure other than railway
tracks is located.
This class was created in 1998 to give municipalities a
vehicle for addressing the tax increases that land-intensive properties were
facing upon the reassessment due to the significant increase in the value of
these properties relative to built commercial properties. Adoption of this
class enables municipalities to apply a reduced tax rate to these properties to
offset or neutralize the reassessment-related tax impacts.
Concern was expressed during the consultations in
relation to vacant land and railyards. Both of these properties are normally
included in the vacant land sub-class which is taxed at 70% of the commercial
class tax rate. (This tax rate reduction is provided to reflect the pre-reform
treatment whereby these properties did not formerly pay business occupancy
tax.) When a municipality adopts the parking lots and vacant land class, vacant
land and railyards are removed from the commercial vacant land sub-class and
transferred to the parking lots and vacant land class.
It has been observed that in some municipalities, a tax
rate is being applied to the parking lots and vacant land class that is
considerably higher than the rate that is levied on the vacant land sub-class.
In some cases, a rate is being levied that is almost as high as the commercial
class tax rate.
- It is recommended that restrictions be placed
on the tax ratio of the parking lots and vacant land class to ensure that
vacant land and railyard properties are not penalized by the application of
The tax rate of this class should be no higher than the
rate that would be levied on vacant land and railyard properties in the
commercial vacant land sub-class.
A proposal was made to create parking lot sub-classes
within the parking lots and vacant land class to differentiate between the
following categories of parking facilities:
- municipally-owned parking lots;
- commuter parking lots;
- privately-owned parking lots.
The purpose of this proposal is to allow municipalities
to tax the different lots at different rates.
- It is recommended that Province not create
parking lot sub-classes to distinguish between different categories of
ownership or different types of parking lots.
A parking lot sub-class system would create added
complexity in the property tax system. As well, taxing similar properties with
similar uses at different rates based on differences in their ownership would
be inconsistent with the general premise of the property tax system to classify
properties based on their use.
Pipelines that are used for the transmission of oil and
gas are assessed at rates prescribed by the Minister of Finance pursuant to
section 25 of the Assessment Act. Different rates are prescribed for
different sizes of pipe (based on diameter) and for different types of pipe
(offshore, plastic, and others).
The assessment rate tables for pipelines have been
developed through consultation with the pipeline owners and MPAC. The rates are
intended to approximate the value of the pipeline. Updated rates have been
established upon each reassessment.
During the consultations for this review, the natural
gas sector proposed changes to the property tax treatment of pipelines.
Industry representatives expressed concerns about the dramatic fluctuations of
assessed values that have been contemplated upon each reassessment. Pipeline
owners would like a property tax system that provides stability and
predictability from one year to the next. With that objective in mind, the
natural gas sector proposed that the method of taxing pipelines be changed from
an assessment-based approach to a fixed tax rate approach.
The industry's proposal can be summarized as
- In respect of existing pipelines,
the pipeline owners would continue to provide municipalities with the same
amount of money that they currently pay on pipelines in the municipality
(annual lump sum payment).
- Any new pipelines that are built
would be taxed at a fixed rate per linear foot based on the size of the pipe,
with four different rates being prescribed based on the diameter of the
- The rates would be consistent province-wide.
- The rates would be calculated at the outset of
the new program by dividing the total tax yield on existing pipelines by the
total linear footage of existing pipelines.
- It is recommended that the property tax
treatment of oil and gas pipelines be changed from an assessment-based system
to a prescribed tax rate system.
The following approach to calculating
and applying tax rates is recommended.
- For each municipality, calculate the total
property tax yield from pipelines (in the year preceding the first year of
implementation of the new program) and calculate a tax rate which, when applied
to the length of pipes in the municipality, would yield the same amount of
- These tax rates would be prescribed by the
Minister of Finance for each municipality, further to discussions with MPAC and
the pipeline industry.
- It is recommended that consideration be
given to increasing the rates over time to reflect the rate of inflation. It is
also recommended that consideration be given to the appropriateness of making
downward adjustments to reflect the depreciation of the pipeline assets
(recognizing that the assessments currently factor in an annual depreciation
- To make this system operational, it would
be necessary for pipeline owners to report on the location and length of their
pipelines to the affected municipalities on an annual basis.
- As a long-term goal, it is recommended that the
municipal-specific tax rates be gradually phased into consistent province-wide
- It is recommended that the Ministry of Finance
participate in an ongoing dialogue with pipeline owners and municipalities to
ensure that this proposed new system is responsive to their needs.
- It is also recommended that gate stations,
which regulate gas pressure and monitor gas flow and quality, be included in
the commercial property class.
It is recognized that the proposed new system
would necessitate the creation of numerous municipal tax rates. However, once
the initial rates have been set, it is believed that this system would provide
predictability and stability in the longer term. Phasing into consistent
province-wide rates would facilitate greater equity and stability over