WHEREAS machinery and equipment (M&E) property is assessed in accordance with the Alberta Machinery & Equipment Assessment Minister’s Guidelines (the Guidelines), adopted by way of Ministerial Order every year; and
WHEREAS additional depreciation may be granted under Schedule D of the Guidelines “[f]or any depreciation that is not reflected in Schedule C…provided acceptable evidence of such loss in value exists”; and
WHEREAS several assessment complaints have been filed with the Municipal Government Board respecting assessments for M&E requesting additional depreciation under Schedule D of the Guidelines on the basis of industry-wide economic conditions; and
WHEREAS the Provincial Assessor’s policy with respect to Schedule D is to not grant additional depreciation on the basis of industry-wide economic conditions; and
WHEREAS the Provincial Assessor’s policy ensures that assessments are not affected by industry-wide economic conditions and that assessment of M&E is based on a stable, predictable system; and
WHEREAS policies are already in place to reduce assessments prepared for and taxes paid on M&E, including the reduction of all assessments of M&E to 77% of the value determined in accordance with the Guidelines, a 25% immediate depreciation on M&E pursuant to Schedule C of the Guidelines, and the exemption of M&E from education requisitions; and
WHEREAS municipalities depend on the stable, predictable assessment system established by the Guidelines; and
WHEREAS if the Provincial Assessor’s policy respecting the assessment of M&E is changed, there will be a significant redistribution of the assessment base within municipalities;
THEREFORE, BE IT RESOLVED that the Rural Municipalities of Alberta (RMA) advocate for the Government of Alberta to take steps to ensure that assessments for Machinery and Equipment are not adjusted under Schedule D of the Alberta Machinery & Equipment Assessment Minister’s Guidelines on the basis of industry-wide economic conditions; and
FURTHER BE IT RESOLVED that RMA advocate for the Government of Alberta to amend Schedule D of the Alberta Machinery & Equipment Assessment Minister’s Guidelines to confirm the status of the current policy that additional depreciation under Schedule D is not available on the basis of industry-wide economic conditions; and
FURTHER BE IT RESOLVED that RMA advocate for the Government of Alberta to not consider any changes to the Alberta Machinery & Equipment Assessment Minister’s Guidelines without full consultation and consideration of the impact of any changes on all Alberta taxpayers.
Canadian Natural Resources Limited (“CNRL”) filed complaints with the Municipal Government Board (MGB) for property assessments prepared by the Provincial Assessor for designated industrial property in the 2018 and 2019 tax years.
The complaints seek reductions in assessments for Machinery and Equipment (M&E), as well as Buildings and Structures, across Alberta. The requested reductions in assessments are in the range of 50%. The properties under complaint are found within 52 Alberta municipalities (the full list of which is provided below). The specific properties under complaint and the affected municipalities vary for 2018 and 2019. The full list provided includes those municipalities affected by both or either of the complaints.
In relation to the assessment of M&E in both 2018 and 2019, CNRL argues that the regulated standard found in the Alberta Machinery & Equipment Assessment Minister’s Guidelines (the Guidelines) should include depreciation on the basis of industry-wide market or economic conditions under Schedule D.
The Municipal District of Opportunity No. 17 understands that this same argument has been raised in other complaints before the MGB, and it is expected that further complaints will be filed in 2020 (and beyond) on the same basis.
If industry-wide market or economic conditions form part of the regulated assessments, then there is little difference between a market value assessment and the regulated assessment process established by the Guidelines.
The Provincial Assessor’s current policy is to not allow additional depreciation under Schedule D of the Guidelines on the basis of industry-wide economic conditions. Regulated assessments are not intended to vary with general changes in the economy the way that market value assessments do; this perceived disadvantage is more than offset by the preferential policies embedded in the system. Municipalities depend on this stable, predictable system to ensure an even distribution of property taxes amongst all taxpayers.
If this current policy is changed, there will be a significant impact on the distribution of property taxes throughout every municipality in the Province that collects property taxes on M&E. The result will impact all taxpayers within those municipalities due to the resultant shifting of the tax burden.
No changes should be made to the current policy respecting application of the Guidelines without full consultation and consideration of the impact such changes would have on all taxpayers.
The following municipalities host assets that are subject to the complaints filed by CNRL:
RMA has no active resolutions directly related to this issue.
Alberta Municipal Affairs
It continues to be Municipal Affairs’ perspective that Schedule D depreciation is not applied as a result of general economic conditions, and this has been reinforced in directives from the Provincial Assessor. We will await the outcome of the ongoing complaint process related to this issue before determining whether any additional response is warranted.
In 2020, the Government of Alberta undertook a review of the assessment model for regulated oil and gas properties. The review process included consideration of changes to how Schedule D depreciation is applied to various property types, including a shift away from the use of additional (Schedule D) depreciation in some proposed scenarios.
Following the review, the Minister of Municipal Affairs made temporary adjustments to the assessment model, which included a further reduction in the assessment value of low producing wells through changes to Schedule D of the Alberta Machinery & Equipment Assessment Minister’s Guidelines. This change is intended to reduce costs of oil and gas companies responsible for low-producing wells due to the broader economic challenges currently facing the industry, which is in direct opposition to the request in the first operative clause of the resolution.
Recently, Canadian Natural Resources Limited (CNRL) launched a mass appeal of the 2018 and 2019 assessment of its machinery and equipment (M&E) properties in 52 rural municipalities based on the argument that the assessment should be reduced under Schedule D depreciation due to general economic circumstances impacting the productivity and profitability of the properties. The Land and Property Rights Tribunal (LPRT) rejected CNRL’s complaints related to M&E properties. CNRL has appealed the LPRT decision to the Court of Queen’s Bench, and the appeal is expected to be heard in early 2023. Regardless of the decision made on the appeal, the complaint process has resulted in significant costs for the province and some impacted municipalities, and demonstrates the risks of the vague language currently found in Schedule D. During the upcoming assessment model review scheduled to begin in 2022, RMA plans to continue calling for increased clarity within Schedule D. This resolution is assigned a status of Intent Not Met.