WHEREAS the Matters Relating to Assessment Sub-Classes Regulation authorizes a municipality to set tax rates for small business property at no less than 75% of the tax rate of other non-residential property; and
WHEREAS some municipalities currently have non-residential classes for both their urban service areas and rural service areas; and
WHEREAS there may exist an inequity in taxation between similar properties depending on their location in either the rural service area versus the urban service area; and
WHEREAS some municipalities may be restricted in their ability to provide tax equity within the small business property sub-class as it limits the tax rate differential for the small business sub-class in relation to the other non-residential property sub-class;
THEREFORE, BE IT RESOLVED that the Rural Municipalities of Alberta urge the Government of Alberta to amend the Matters Relating to Assessment Sub-Classes Regulation to allow a tax rate differential of up to 50% between the “small business property” and “other non-residential property” sub-classes.
The Regional Municipality of Wood Buffalo (RMWB) is a specialized municipality established in 1995 by the Government of Alberta. Recognizing the uniqueness of the region, section 10 of the establishing Order In Council (O.C. 817/94) provided the RMWB with the ability to create different taxation rates for the rural service area and for the urban service area.
The oil sands industry is located within the RMWB, specifically within the Municipality’s rural service area. This industry is assessed and taxed within the rural non-residential property sub-class. Section 2 of Matters Relating to Assessment Sub-Classes Regulation authorizes municipalities to divide the non-residential class further into a small business property sub-class but limits the differential between the small business property sub-class and the other non-residential property sub-class to no less than 75% of the tax rate for the non-residential property sub-class. The Municipality has determined that properties within the small business property sub-class operating within the rural service area require a further tax rate differential modification, to no less than 50% of the rural non-residential sub-class, to provide tax equity between the rates assessed between the rural small business sub-class to the urban small business property sub-class.
This RMA resolution is critical to tax equity in the RMWB and the continued economic viability of rural small business properties in the Municipality.
RMA has no active resolutions directly related to this issue.
Alberta Municipal Affairs
The Government of Alberta commends municipalities for recognizing and supporting the needs of rural small businesses. At the same time, we must continue to be mindful of tax fairness for all taxpayers as we work to promote economic recovery. The purpose of this policy is to balance municipal autonomy in setting property tax rates with providing non-residential property owners with certainty and predictability in property taxes.
Municipalities are encouraged to continue exploring how existing legislative measures can help with achieving these outcomes. Legislative mechanisms already exist to provide councils the ability to address exceptional circumstances in a targeted way. For example, a council may reduce property taxes for specific small businesses if they believe it is equitable to do so, using section 347 of the Municipal Government Act.
Alternatively, a council may choose to provide tax incentives for non-residential property as stated in Section 364.2, which provides municipalities with the flexibility to define the incentive criteria locally.
While RMA appreciates the tools currently in the Municipal Government Act that allow municipalities to modify tax rates for certain non-residential properties, this resolution specifically requests an amendment to the Matters Relating to Assessment Sub-Classes Regulation, which is not considered in the Government of Alberta response.
The resolution request would be particularly helpful for municipalities with large oil and gas properties within their boundaries, as the current 75% tax rate differential allowance may not allow for adequate tax equity between large industrial properties and small commercial properties taxed under the same rate class. While this issue could potentially be addressed through MGA sections 347 or 364.2, neither appear to be designed for a permanent, broad tax rate differential within a rate class, and applying them in this way may result in increased red tape and complexity in the taxation process.
RMA assigns this resolution a status of Intent Not Met and will continue to advocate on this issue.