General tax exemption rules
Effective January 1, 2019, the Employer Health Tax (EHT) exemption is increased from $450,000 to $490,000. The EHT exemption is adjusted according to inflation every five years using the Ontario Consumer Price Index.
Prior to January 1, 2019, eligible employers are exempt from EHT on the first $450,000 of total Ontario remuneration each year. Prior to January 1, 2014, the exemption was $400,000.
To be able to claim the tax exemption, employers (including registered charities) must be eligible employers as defined under the Employer Health Tax Act (EHTA). Employers who have a municipal representative on their board of directors, or who are under the control of any level of government, are generally not eligible employers.
Employers normally cannot claim the exemption if their payroll for the year (including the payroll of any associated employers) is over $5 million. However, eligible employers who are registered charities can claim the exemption even if their payroll exceeds $5 million.
Eligible employers who are associated with a registered charity are not required to include the payroll of the registered charity when determining whether the combined payroll of all associated employers is less than $5 million. The associated group is not required to share its exemption with the registered charity and is not required to include the registered charity on its Associated Employers Exemption Allocation Form.
Special exemption rules for registered charities
Effective January 1, 2017, the following special rules apply to eligible employers who are registered charities. For EHT purposes, a registered charity is a legal entity that is registered as a charity under subsection 248(1) of the Income Tax Act (Canada).
Exemptions for qualifying charity campuses
A registered charity that has two or more qualifying charity campuses may claim an exemption amount for each qualifying charity campus. The maximum exemption amount that may be claimed for a qualifying charity campus is the lesser of A and B where:
- A = The payroll paid during the year to employees who report for work at locations that are part of that qualifying charity campus. This cannot include:
- any payroll of employees who report for work at a head office location (head office payroll cannot be allocated to other qualifying charity campuses), or
- any payroll of employees who report for work at a place that does not meet the criteria for inclusion in a charity campus (this payroll must be reported on the head office EHT account and cannot be used in calculating the maximum exemption amount for any qualifying charity campus).
- B = The $490,000 exemption amount, prorated for the number of days in the year that the charity campus qualified for the exemption. For example, the exemption is prorated if the registered charity is an eligible employer or a registered charity during only part of the year or if the qualifying charity campus is in existence for less than a full year. For more information on proration, refer to tax exemption.
A charity campus is a qualifying charity campus for tax exemption purposes if it is publicly advertised and has been registered with the Ministry of Finance as described below under Registration and Refund Requirements. The requirement for public advertising does not apply to emergency shelters, or to group homes or intensive support residences as defined in the Regulation under the EHTA.
A charity campus includes all of a registered charity's locations that are in one building, or on one parcel of land (property), or on contiguous properties (properties that touch along a boundary or at a point). If a registered charity has branches, sections, parishes, congregations or other divisions (internal divisions), a charity campus includes all of the locations of the registered charity and all of the locations of any of its internal divisions that are in one building, or on one property or on contiguous properties.
A location is a place that meets all of the following criteria (location criteria):
- The place is a permanent establishment in Ontario.
- The registered charity has the exclusive right to occupy the place at all times.
- The place is used and occupied solely by the registered charity.
- The place is used and occupied by the registered charity for the purpose of carrying out its charitable activities.
Composition of charity campus
- A registered charity has one location in Toronto and one location in Ottawa. This charity has two charity campuses.
- A registered charity rents several office suites in one building. All of those suites are combined into one charity campus.
- A registered charity buys land and then builds several buildings on the land. All of the buildings are part of one charity campus.
- A registered charity owns a building and then buys the building next door. Both buildings are part of one charity campus.
Two charities in the same building
- Registered Charity E leases and has exclusive use of units 103 and 305 and advertises the programs it runs in those units plus the office addresses and other contact information on its website. Registered Charity F is a separate legal entity (it is not a branch, section, parish, congregation or other division of E) which leases and has exclusive use of unit 507 in the same building and similarly advertises the location on its website.
Because they are separate legal entities, it is possible for E and F to each have a qualifying charity campus in the same building. E has one charity campus that includes unit 103 and unit 305. F similarly has a charity campus composed of unit 507. Assuming they meet the other requirements, E and F may each claim one exemption.
If, however, F was an internal division of E, all 3 units would be considered parts of one charity campus and only one exemption would be available.
- Registered Charity G leases and has exclusive use of unit 103 and publicly advertises the location on its website. G has arranged for employees of Registered Charity H to come to unit 103 twice a week to run a special program. H advertises the program and the unit 103 address on its website.
Unit 103 belongs to G. This charity campus only includes one location as G doesn't have any other locations in this building (or in neighbouring buildings that might be on the same property or on contiguous properties). It is G's charity campus for which it may be able to claim an exemption. Unit 103 does not belong to H. Although H sends employees to work at unit 103 twice a week, H cannot treat unit 103 as a charity campus and cannot claim an exemption for it.
- Registered Charity J has a written agreement with a school board to use one particular classroom in a school to carry out its charitable activities. The classroom address and phone number are advertised on J's website. No other organization is permitted to use that classroom at any time for any reason. As the classroom is publicly advertised and J has exclusive use of the space, the classroom meets the location criteria; it is a charity campus for which J may be able to claim an exemption.
- Registered Charity K runs a before and after school program in a community centre and advertises the program on its website. K has a use of space permit that enables it to use the gym for 4 hours per day. Although K is the only organization using the gym during those 4 hours, the gym is used by other organizations at other times of the day. As K does not have exclusive use of the gym at all times, it cannot be part of a charity campus. K's payroll for the before and after school program must be combined and reported with its head office payroll.
Supported living arrangements
- Registered Charity L owns a house that it operates as a respite care facility. In the house, L has an office and a staff room that are for staff use only and are not normally accessible by its clients. L has employees in the house 24 hours per day and permits its clients to stay at the house for up to two weeks at a time. L does not sublet to its clients or provide them with keys. The address of the house is publicly advertised and L has registered the charity campus with the Ministry of Finance and provided the necessary documentation.
As L has not sublet the house and has retained exclusive use of some of the rooms, the house meets the location criteria and can be included in a charity campus. The charity campus meets the advertisement and registration requirements so it is a qualifying charity campus for which L can claim an exemption.
If, however, L advertised that it offered respite care but did not publicly advertise the address of the house, the house would not be publicly advertised. It would not be a qualifying charity campus and L would not be able to claim an exemption.
- Registered Charity M provides support to clients who lease or sublet their own homes. M's employees provide services to its clients in their homes, an agreed upon number of hours per week (these are typically called supported independent living arrangements). Some homes are shared by two or more clients. M has signed as guarantor on the leases for some of its clients. In a few cases, M owns a house and leases it to its clients or rents an apartment and sublets it to clients.
Although M's employees provide services to its clients in their homes, the homes belong to the clients. The homes are used and occupied by M's clients and it is M's clients who have the exclusive right to occupy the homes and permit M's employees to work there.
These homes do not belong to M even if M owns or leases them or signs as guarantor on the clients' leases. Once they have been leased or sublet to clients, the homes belong to the clients. As these homes do not belong to M, they do not meet the criteria to be included in a charity campus and no exemptions can be claimed for them. The payroll related to these homes must be reported on the head office EHT account and cannot be used in calculating the maximum exemption amount for any charity campus. It is irrelevant whether M publicly advertises the services it provides at these homes or even whether its clients permit M to maintain some office space in their homes.
- Registered Charity N owns a house that it operates as a group home and another house next door that it operates as an intensive support residence. N leases some of the bedrooms in the group home and some of the bedrooms in the intensive support residence to its clients but N has retained exclusive use of its own office and staff room in each house that are not normally accessible to its clients. N does not publicly advertise the addresses of these houses. N's payroll for the group home is $300,000 per year and its payroll for the intensive support residence is $200,000 per year.
The addresses of group homes and intensive support residences are not required to be publicly advertised and these houses meet the other requirements to be considered locations that can be included in a charity campus. Because they are next door to each other (on the same property or on contiguous properties), both houses are part of one charity campus. The total payroll for this charity campus is $500,000 and the maximum exemption that can be claimed is $490,000 (prorated if necessary).
- Registered Charity Q similarly owns a house that it operates as a group home and another house next door that it operates as an intensive support residence. Q operated both houses throughout the entire year. As in the previous example, Q leases some of the group home bedrooms to its clients but has retained exclusive use of its own office and staff room in the group home that are not normally accessible by its clients. In this example, however, Q leases the intensive support residence to its clients. Q also has payroll for the group home of $300,000 per year and payroll for the intensive support residence of $200,000 per year.
Group home: Although it leased some of the space to its clients, Q has kept the exclusive right to use the office and staff room, and those rooms are used and occupied solely by Q. The group home meets the criteria to be included in a charity campus. Because it is a group home, it may qualify for an exemption even if it isn't publicly advertised.
Intensive support residence: This residence does not meet the criteria to be included in a charity campus. It is occupied by and belongs to Q's clients; it is Q's clients who have the exclusive right to occupy the residence and permit Q's employees to work there. The payroll paid to the employees reporting for work at the intensive support residence must be reported on the head office EHT account and cannot be used in calculating the maximum exemption available for the group home charity campus or any of Qs other charity campuses. In this example, the maximum exemption that can be claimed is $300,000 (the payroll of the group home which meets the location criteria).
Registration and refund requirements
To register a charity campus, mail or fax a letter with the required documentation (listed below) to the Ministry of Finance at:
Ministry of Finance
101‑215 Eugenie Street West
Windsor ON N8X 2X7
Fax : 1‑866‑888‑3850
If you have already filed your annual return(s) claiming only one tax exemption, you can request a refund when you register your charity campus(es). Refund requests must be made in writing and must be received by the Ministry of Finance within 4 years of each return's due date.
Include all of the following documentation when registering a charity campus or requesting a refund:
- charitable registration number
- if you were not a registered charity throughout the entire refund claim period, provide the date you became a registered charity
- if your charitable status was revoked and/or reinstated at some point during the claim period, provide copies of letters from the Canada Revenue Agency showing the dates and details of the revocation and reinstatement.
- copies of by-laws and/or other relevant documentation to show whether the registered charity is an eligible employer (e.g., funding agreements that include the right to appoint directors)
- if applicable, the name of the act under which this registered charity operates (e.g., Public Libraries Act)
- details of any relevant changes such as changes in by-laws or changes in legislation
- a list of the members of the board of directors and the organizations they represent (e.g., municipal appointee).
Composition of charity campuses
- a complete list of all of your charity campuses
- a complete list of the addresses of all locations included in each charity campus
- the time period that the registered charity occupied each location.
Criteria for inclusion in a charity campus
- for each place that you lease: a complete copy of the original lease, copies of lease renewals and copies of any sublet agreements covering the entire refund claim period
- for each place that you own: a copy of the deed and copies of property tax bills/assessments for each year of the refund claim period
- for each place that involves supported living arrangements:
- copies of the lease/deed etc. as noted above
- copies of any leases, sublet agreements, or other similar tenancy/service agreements with your clients
- a copy of the Ministry of Community and Social Services, Service Description Schedule (or similar contract with another ministry/funding entity), and
- a copy of the floor plan with the charity's office and/or other exclusive use rooms clearly marked.
- Evidence that the address and other contact information of at least one of the locations in each charity campus:
- is publicly advertised through information readily accessible by the public such as brochures or internet sites, or
- is an emergency shelter, a group home, or an intensive support residence.
Effective January 1, 2017, registered charities must complete and file an EHT Annual Return for each qualifying charity campus every year.
Effective January 1, 2017, registered charities must remit monthly instalments if the combined payroll of all of their charity campuses for the year exceeds $600,000.
Monthly instalments are not required until after your total payroll for the year exceeds your exemption amount. For example, a charity campus has payroll of $100,000 per month and an exemption of $490,000. Its payroll for the year exceeds the exemption amount during May so it will remit its first monthly instalment for the year in June.
Request for written interpretations
To obtain a written interpretation on a specific situation not addressed in this publication, please send your request in writing to:
Ministry of Finance
33 King Street West, 3rd Floor
Oshawa ON L1H 8H5
For more information
Visit ontario.ca/eht or contact the Ministry of Finance at 1‑866‑ONT‑TAXS (1‑866‑668‑8297) or 1‑800‑263‑7776 for teletypewriter (TTY).