Area of Law: Tax Law
Answer # 173
Municipal property taxes & assessmentsRegion: Ontario Answer # 173
The Fair Assessment System is Ontario’s method of property assessment. The Fair Assessment System reassesses property values and allows municipalities to determine new tax rates.
The old method of assessing property values
The old system assessed property values as of a certain date, and then taxed properties at a percentage of the assessment amount. In some areas the assessment dates did not change for many years, so that older houses did not have their assessment amount increased to reflect the increased value of the property, while new houses with lower values were assigned higher assessment amounts. This resulted in owners of older homes paying substantially less tax than owners of new homes, regardless of the actual value of the property.
The Fair Assessment System
The Fair Assessment System still taxes properties based on a percentage of an assessed value, which may not necessarily be the amount paid to purchase the property. The assessment values are reviewed yearly. Properties are assessed based on what is called their current value. Current value means the amount of money the property could sell for to an independent buyer.
There are four main bodies that participate and control the System in Ontario.
- The Provincial Government passes laws, sets assessment policies and determines education tax rates.
- The Municipal Property Assessment Corporation (MPAC) determines current value assessments and classifications for all properties in Ontario.
- Municipalities determine their revenue requirements, set municipal tax rates and collect property taxes.
- The Assessment Review Board, an independent tribunal, hears assessment appeals.
There are several Acts that govern property assessments in Ontario. The main laws are: the Municipal Property Assessment Corporation Act, the Assessment Act, and the Assessment Review Board Act.
Property tax rates
Property tax rates will be set by the municipality, which can choose to tax different classes of properties at different rates. Some of these classes include: residential, farming, commercial, and industrial. If your property falls within two or more classes for tax purposes, and the rates for the classes are different, the property may be assessed based on what percentage of the property falls into each class.
Request for Reconsideration Process
If you do not agree with a property assessment, depending on the type of property in question, you can either file a Request for Reconsideration (RFR) with MPAC, or make an appeal directly to the Assessment Review Board (ARB).
If you are dealing with a residential property, a farm, or a managed forest or conservation land, you are required to first file a RFR with MPAC. MPAC will review the request and send an acknowledgement letter. After its review, MPAC will send a written response stating either that it agrees to lower the rate, or reasons why it does not agree to lower the rate.
If you are dealing with any other type of property, you can file an RFR or file an appeal directly with the ARB.
Some valid reasons for filing an RFR or an appeal are:
- the assessed value of the property appears to be different than similar properties in the area;
- the property has been incorrectly classified;
- the school support is incorrect;
- MPAC’s records are incorrect (e.g., wrong lot size, building area);
- the property was purchased close to the valuation date for a different amount than the assessed value;
- the value, classification or effective date on the Property Assessment Change Notice or Amended Notice is incorrect; and
- there are factors that negatively impact the property’s current value, which may not be reflected in the current value assessment.
If you do not agree with the outcome of a RFR, you can file an appeal with the ARB. You will be required to fill out formal documents and pay a fee. Leave to appeal a decision made by the ARB, can be made to Ontario’s Divisional Court.
Land exempt from assessment and taxation
Under the Assessment Act, there are certain properties that are not subject to taxation. Such property includes land that is:
- owned by the Federal Government or any of our provinces,
- owned by a church or other religious organization,
- a cemetery or burial site,
- owned, used and occupied solely by a university, college, community college or school (as defined in the Education Act),
- used and occupied by a children’s treatment centre (which receives funding under the Ministry of Community and Social Services Act),
- used as care homes, and so on.
If an organization that believes the land it is using qualifies to be exempt from municipal property taxes, but it has received an assessment, it may ask MPAC to reconsider its assessment. MPAC will review the organization’s purpose and activities and decide whether the property falls under one of the exemptions specified in the Assessment Act. If MPAC agrees that the property is exempt, it will make the change in its tax rolls, and if any tax payments were made, they will be refunded. If, however, MPAC does not agree that the land use qualifies for the exemption, the organization can appeal the decision. According to the Assessment Act, an appeal from decisions regarding tax exemption is outside of the jurisdiction of the ARB. The appeal, in such cases, must be made to the Ontario Superior Court of Justice. A further appeal can be made to the Divisional Court.
For legal advice and assistance with tax planning, a CRA tax dispute, or other tax issues, contact Tax Chambers LLP
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