• FMA TOOLKIT: PROPERTY TAXATION SYSTEM

The development of a First Nation tax system under the Fiscal Management Act (FMA) begins with the drafting and enactment of the core property taxation and property assessment laws. A First Nation must have both of these laws in place to establish the legal authority required to levy real property taxes and set out the administrative framework. FNTC staff work closely with the First Nation to ensure the First Nation’s proposed laws are consistent with the FMA, the Regulations, and the FNTC Standards

• 7 STEPS TO ESTABLISHING PROPERTY TAXATION LAWS

FNTC has established Standards for the Form and Content of First Nation Property Taxation Laws, and Standards for the Form and Content of First Nation Property Assessment Laws. Sample laws have been developed for each region in order to enable harmonization with provincial approaches where appropriate. See standards, guides and samples on right sidebar: or below on small screens:

• Property Taxation Law

The enactment of a First Nation Property Taxation Law creates the legal framework to levy and enforce property taxation on reserve.

The Property Taxation Law establishes the property taxation system:

• Establishes how taxes are levied and what property interests are taxable
• Appoints the tax administrator to administer and enforce the property taxation system
• Specifies the duties of the tax administrator
• Establishes timelines and requirements for creating the tax roll and sending tax notices
• Provides for exemptions from taxation (if any)
• Provides for the imposition of penalties and interest on unpaid taxes
• Outlines the enforcement and collection mechanisms available to the First Nation

First Nations tend to establish real property taxes first, and then consider building on that established framework with additional local revenue laws such as service taxes, development cost charges, property transfer taxes and business activity taxes.

• Property Assessment Law

A First Nation Property Assessment Law creates the legal framework for assessing interests in reserve lands.*

The First Nation appoints a qualified assessor to determine the assessed value of property interests to be taxed. The assessment law outlines how the assessor will assess the value of real property interests on a First Nation’s reserve lands.

The Property Assessment Law establishes the property assessment system:

• Appoints a qualified assessor
  
• Specifies the duties of the assessor
  
• Creates the timelines for conducting assessments
  
• Specifies the rules for determining the assessed values of properties
• Establishes the Assessment Review Board responsible for conducting appeals
• Creates timelines and rules for appealing assessments
  

Assessment laws under the FMA must comply with the FMA, the Regulations and the applicable FNTC Standards.

• Annual Tax Rates Law

First Nations are required to make an Annual Tax Rates Law setting out the tax rate to be applied to the assessed value of each class of property for the current taxation year. This law also establishes the minimum tax to be applied in that year, if any. Sometimes called the ‘mill rate’, the tax rates are typically determined by the budgetary requirements of the First Nation with consideration of the tax rates used by the adjacent local government (called the reference jurisdiction) and the resulting tax burden.

The Annual Tax Rates Law sets out the:

• Tax rate for each property class (established in the assessment law) in which a First Nation has assessable properties

The timing of when annual tax rates must be set is established in the First Nation’s property taxation law.

SECTION 10 of the Fiscal Management Act (FMA) and FNTC Standards for the Timing of First Nation Annual Rates and Expenditures Laws require First Nations to make annual rates laws and annual expenditure laws at least once each year of the taxation year to which the annual laws apply.

Annual tax rates laws enacted under the FMA must comply with all requirements and regulations made under the FMA, along with applicable FNTC standards.

• Annual Expenditure Law

First Nations are required to make an Annual Expenditure Law which provides the First Nation with the authority to expend revenues collected under their property taxation laws for the current taxation year.

The Annual Expenditure Law sets out how the First Nation:

• Intends to spend the property tax revenues it will collect
• Authorizes grant amounts
• Establishes reserve funds

Expenditure of local revenues can only be made in accordance with a budget set out in an expenditure law. Under the FMA, the budgeted expenditures must not exceed the budgeted revenues.

SECTION 10 of the Fiscal Management Act (FMA) and FNTC Standards for the Timing of First Nation Annual Rates and Expenditures Laws require First Nations to make an annual expenditure law at least once each year of the taxation year to which the annual law applies. The timing of annual expenditure laws is set out in the FNTC Standards for the Timing of First Nation Annual Tax Rates and Expenditures Laws.

Annual expenditure laws enacted under the Fiscal Management Act (FMA) must comply with all requirements and regulations made under the FMA, along with applicable FNTC standards.

• Property Transfer Tax Laws

First Nations may enact a Property Transfer Tax (PTT) Law under the FMA.

PTT is generally paid by the transferee (or purchaser) of the property and is based on the fair market value of the property being transferred. The PTT is levied and paid at the time the transfer is registered in the land registry.

The PTT law establishes the PTT regime, and sets out:

• When and how the tax will be levied
• The rate of tax
• The exemptions from PTT
• Reporting requirements to Chief and Council as the tax authority

The FNTC has developed standards for PTT laws based on best practices, while allowing for local variation where appropriate and supporting harmonization with provincial jurisdictions where appropriate.

First Nations have discretion in setting their rate of PTT; however, their rate cannot exceed the provincial rate for PTT. If there is no PTT in their province, First Nations may choose any other province to follow for rates and exemptions.

PTT laws must be developed in compliance with the FMA, regulations and the the FNTC Standards. The First Nation must comply with the public input process requirements in s. 6 and s. 7 of the FMA, as well as the additional requirements set out in the Notice Standards. Once notice is completed, the First Nation enacts the PTT law and submits it for FNTC approval.

• Taxpayer Representation to Council Law

First Nations may enact a Taxpayer Representation to Council (TRTC) Law under the FMA.

TRTC laws are intended to build and maintain strong taxpayer relationships. They establish procedures respecting the administration of the tax system. A TRTC law can establish key processes and opportunities for ongoing taxpayer and First Nation engagement so that taxpayers and the First Nation can communicate and articulate their concerns in an effective manner.

The procedures in a TRTC law can assist the First Nation in preventing disputes and can support the efficient resolution of disputes that arise.

The Standards for TRTC laws:

• Establish minimum notice periods for proposed tax rates and draft budgets
• Require provisions for taxpayer access to specific tax-related documents
• Require descriptions of methods that will be used to ensure on-going communication with taxpayers and allow taxpayer input to Council on taxation matters
• Includes dispute resolution procedures for taxpayers and First Nation representatives

The TRTC laws must comply with all statutory requirements, any regulations made under the FMA, and applicable FNTC Standards.

TRC laws must be developed in compliance with the FMA, regulations and the FNTC Standards. The First Nation must comply with the public input process requirements in s. 6 and s. 7 of the FMA. Once notice is completed, the First Nation enacts the TRTC law and submits it for FNTC approval.