Proposed Property Taxation By-law Policy

Press Release

Property Tax By-laws made under section 83 of the Indian Act are subject to Ministerial approval. A Memorandum of Understanding (MOU) between the FNTC and the Minister of Aboriginal Affairs and Northern Development provides for the FNTC to review and recommend section 83 by-laws for ministerial approval.

Policies established by the Commission further the policy objectives expressed in the MOU, including to ensure the integrity of the First Nations property taxation system and to promote a common approach to real property taxation nationwide.

The Property Tax By-law Policy sets out the requirements that should be met for First Nation Property Tax By-laws enacted under section 83, and is to be used by the Commission in its review and recommendation of First Nations’ by-laws.

To the extent possible, section 83 policies are consistent with FNTC standards.

A series of proposed changes to the Standards for Property Tax Laws are being recommended for Commission review and approval for the purposes of seeking public input. The proposed Standards would replace the existing Standards in their entirety.

A series of parallel changes to the Property Tax By-law Policy are presented to ensure that section 83 tax by-law policy reflects FNTC tax law standards to the extent possible.

The proposed changes are intended to bring greater clarity and effectively address several ongoing key policy issues, these include: establishing property tax in certain jurisdictions, use of tax districts, use of reference jurisdictions, and granting and abatement programs.
Property Tax Transition Periods for Certain Jurisdictions

Under the current Annual Rates By-law Policy, new tax jurisdictions are required to use the tax rates of the previous tax jurisdiction or the reference jurisdiction where no tax jurisdiction previously existed. The provisions are based on an objective of promoting harmonization (i.e., taxpayers on reserve can expect to have a similar level of taxation as those taxpayers on similar properties off the reserve).

In all provinces except BC and Quebec, most occupiers on First Nation lands are not subject to provincial property tax for the property interests they have on reserve. For certain types of these on-reserve property holders (residential leasehold and commercial leasehold), a system of service fees has evolved to pay for basic services (e.g., road maintenance, garbage collection, etc.).

In most instances, these fee for service arrangements are tantamount to a flat tax levied on a per unit basis. The introduction of property value taxation is intended to replace the service-fee structure with a more progressive structure to help pay for improved services for the community. However, applying property valuation taxation based on reference jurisdiction rates may lead to a significant difference between the cost of a service fee and a property tax bill.

To assist in mitigating adverse financial impacts on the introduction of property taxation, the FNTC is proposing changes to the FNTC Property Tax By-law Policy. The changes would require affected First Nations (i.e., those First Nations whose lands were not subject to provincial property tax and have interest- holders who pay a fee for services) to establish a transition period of up to 5 years in the property tax by-law. During the 5 year period, rates in each year would be based on local service budget requirements, or incremental movement towards rates equal to the reference jurisdiction rates. The Policy would further require the property tax by-law to:

a list of services to be provided,
an estimate of the cost of services,
and the anticipated property tax rates for each applicable property class in each year of the transition period.

Corresponding changes to the Rates By-law Policy would accommodate the transition period provisions in the Property Tax By-law Policy. However, First Nations would be able to vary from the transition period rates with justification and notice. Notice would include a meeting with the taxpayers.
Tax Districts

Several First Nations have established districts to either better align rates with services, respect previous jurisdictional boundaries, or to ensure that the rates for each of their reserves is similar to the rates of the respective reference jurisdiction for each reserve.

The proposed policy change would require that districts, if used, be established in the taxation by-law, with a description, or map, for each district. The establishment of districts would be limited to two scenarios: multiple reserves with differing service requirements and reference jurisdictions or within a single reserve that has differing service requirements and reference jurisdictions.
Use of Reference Jurisdictions

Reference jurisdictions are used in various FNTC policy instruments, notably in the review of First Nation tax rates. Proposed changes will add and clarify that reference jurisdictions are to be adjacent to the First Nation and provide comparable services that the First Nation provides or will provide.

This definition is replicated in proposed changes to the FNTC Annual Tax Rates By-law Policy.
Grants and Abatements

First Nation property tax by-laws typically provide for the use of grants and abatements. In practice, the application is limited to grants (e.g., HOG, unique granting programs to promote Aboriginal employment). In this way grants assist taxpayers in meeting their tax obligations, in comparison to abatement which reduces the liability. The proposed changes would clarify the distinction between grants and abatements, and enable them where they are used in the province the First Nation is situated in.
Other Proposed Changes

A key change to the FMA law notification provisions (Section 6 of the FMA) will require that section 83 notification provisions be brought into line. Specifically, for the enactment of by-laws or amendments, First Nations are no longer required to send a copy to taxpayers. Instead, First Nations shall publish notice of a proposed by-law on the First Nations Gazette website, post notice in a public place on reserve lands, and send a copy of the notice to the FNTC. Representations are also no longer required to be sent to the FNTC.

An additional change to the Collection and Enforcement provisions will clarify that if a First Nation wishes to recover its costs of enforcement, the By-law must set out the types of costs and how the amounts are determined.

A further change to the policy specifies the tax administrator’s role with respect to enforcement and the day-to-day management of the local revenue account.

Finally, a proposed change to the Confidentiality section would add greater flexibility by extending the authorization for access to tax records to the Tax Administrator.
The FNTC is seeking public input in respect of this proposed Policy. If you wish to learn more about the proposed changes, please contact the FNTC at mail@fntc.ca or by telephone at (250) 828-9857. Click button below to view electronic version of the proposed Policy (changes are highlighted in red):

Proposed Property Taxation By-law Policy
Please direct your written comments on or before December 2, 2015 to:

First Nations Tax Commission
321-345 Chief Alex Thomas Way
Kamloops BC V2H 1H1
Telephone: (250) 828-9857
Fax: (250) 828-9858
Email: mail@fntc.ca

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