Property tax is a tax on real property, and should not be confused with other forms of taxation such as GST and income taxes. Real property consists of land and the improvements on the land (e.g., buildings, towers, pipelines, and other structures). On reserve lands, taxable properties include any land and improvements that are held or occupied, such as leases (residential, commercial and other), permits (section 28(2)), licenses, rights of ways and simple occupations (whether authorized or unauthorized). Linear properties such as transmission lines, pipelines and and railways are also taxable interests.
Owners or occupiers of the real property interests are the taxpayers. The amount they owe is determined by the value of their property interest (as determined by the assessor), the classification of the property, applicable exemptions, and the rates of tax set by the First Nation. Property owned by the federal government and federal Crown corporations are immune from property taxation; however, the government pays a grant in lieu of taxation to the First Nation.
In Canada, property taxes are used to cover the costs of local services that are not met from other revenue sources or transfers from federal and provincial governments. Property taxation revenue is expended on local programs and services in the same community where it is collected. These programs and services may include:
Most property taxation in Canada is under provincial or territorial jurisdiction, and therefore the specific approach is somewhat unique in each province and territory. However, although there are differences, there are also many similarities. Every province/territory uses market valuation for assessment, and sets rates to apply to those assessed value. Every government collecting property tax applies those revenues to create and improve local community infrastructure and services. First Nation property taxation has much the same objective, although in a different legal and constitutional framework.
Property taxation is an optional legislative power that a First Nation may choose to exercise. In making its decision to implement a property tax system, a First Nation must assess a wide array of considerations, which may include:
When a First Nation decides to exercise property taxation jurisdiction, it can access one of two enabling federal statutes: the Indian Act or the First Nations Fiscal Management Act. In either case, the First Nations Tax Commission (FNTC) is the body that provides institutional and regulatory support to First Nation property taxation.
In the toolkits for each legislative framework, you will find the applicable legislation, regulations, standards or policies, sample laws and notices, explanatory notes and information related to the support of First Nation property taxation.
Under section 83 of the Indian Act, a Band may, for local purposes, make by-laws for taxation of land or interests in land in a reserve. The concept of “interest in land” includes rights to occupy, possess or use lands in a reserve. Once the sole legislative authority for First Nation property tax, section 83 taxation continues to serve many First Nations as a basic regulatory framework for property taxation. Accessing section 83 normally requires consultation with local taxpayers on reserve lands, the development of section 83 property tax and assessment by-laws, and the passage of annual rates and expenditures by-laws each year thereafter. Each by-law is reviewed by the First Nations Tax Commission and is subject to the approval of the Minister of Indian Affairs and Northern Development. First Nations choosing to use section 83 may wish to consider the extent to which access to other fiscal governance tools, such as financial administration laws and debenture financing is important, and whether they wish to allow their by-laws to continue to be subject to Ministerial approval.
The other way to levy property taxation on reserve lands is the First Nations Fiscal Management Act (FMA). Enacted in 2005, the FMA provides First Nations with access to a more comprehensive property taxation framework, and offers an additional array of fiscal governance tools to increase revenue, improve financial management, and leverage property tax for long- term financing. These laws enhance the ability of a First Nation to make its property taxation regime an important part of its overall strategy of economic development.
First Nations wishing to access the FMA taxation and financing powers must pass a band council resolution requesting to be added to the FMA Schedule. Once the Minister adds the First Nation to the FMA Schedule by Ministerial Order, the First Nation’s tax powers are drawn from the provisions of the FMA, and any Indian Act property taxation by- laws that may have been in place are moved into the FMA framework. Property taxation under the FMA requires taxpayer notice and an opportunity for written input, the enacting of property tax and assessment laws, and the passage of annual laws for expenditures and rates. Laws are subject to the review and approval of the First Nations Tax Commission.
Any Aboriginal group that is not a band as defined under the Indian Act but is party to a treaty, land claim agreement or self-government agreement, who wishes to come under the provisions of FMA may do so through the development of regulations made under section 141 of the FMA.
The Commission will work with the interested group and the appropriate government officials to develop the section 141 regulations. Regulations are made by the Governor-in-Council.