• TAXPAYERS: PROPERTY TAXATION ON RESERVE

First Nation property taxation is like property taxation used by other governments in Canada, is an annual tax on the value of real property. Real property includes land and things affixed to the land, like houses, buildings, pipes, transmission lines, and towers. Like other property tax systems in Canada, First Nation taxation uses third-party appraisers or assessors to determine real property value. As well, First Nation councils set annual tax rates just like other city and town councils do, and they spend the revenue on local services. These services may include:

• Water and sewer services
• Police and fire protection
• Garbage collection
• Roads and lighting improvements
• Parks, recreation and cultural facilities

However, there are several notable distinctions with First Nation property tax. Not all First Nations have property tax. As of 2020, approximately 30% of 624 First Nations have established First Nation taxation on their reserve lands. Another important distinction is that First Nation property taxation derives its authority from federal legislation. In all other parts of Canada, property taxation falls under provincial authority. There are two different federal authorities which affirm First Nation governments jurisdiction to impose and collect property taxes on their reserve lands.

The first authority is the First Nations Fiscal Management Act, SC 2005, C9 (FMA). Enacted in 2005, the FMA is a modern comprehensive fiscal legal framework that supports fiscal law-making including property tax jurisdiction. It allows First Nations to opt-in (a First Nation council must request that the First Nation be added to the Schedule of the FMA before it can access the powers under the Act, or have the Act apply to their reserve lands). Once scheduled, a First Nation may enact laws relating to any power specified in the FMA.

The other authority is the Indian Act, RSC 1985, c I-5. Section 83 of the Indian Act enables the band council to make money by-laws, including property taxation by-laws.

• FIRST NATIONS PROPERTY ASSESSMENT

Just like provincial and municipal governments, First Nation governments have qualified, independent assessors to assess the leases, licenses, and other occupations of their reserve lands (generally referred to as “interests in land”). Over the past 30 years, a national approach to assessment of these interests in land has developed.

Property tax systems off-reserve generally levy taxes on the fee simple* interest of a property, and it is the owner of the fee simple interest who is liable for the taxes. There are no fee simple interests in reserve lands, which means a different approach is necessary. First Nation property tax systems levy taxes on occupiers of reserve lands, regardless of the nature of the occupation. This means that occupiers of reserve lands, whether they hold a lease, license, permit or simply occupy the land, can be liable for taxes. In this sense, the taxation is on the occupation of the land, and not related to the specific way that the person occupies the reserve lands. Occupations can be for a range of uses, including residential, commercial, industrial, agricultural, or utility. The full range of occupations can be taxable, just as they are off reserve.

Where provincial property tax is levied on the fee simple interest, the province assesses the value of the fee simple interest. Although the specific rules and approach vary among the provinces, generally the objective is to determine the market value of the property.

A common approach to determining market value is the sale price of the property on the open market. Some provincial systems also have rules for assessing non-fee simple interests that are taxable, including leases, licenses, and other occupations. Where a person occupies Crown land (whether by lease, license or otherwise), that person’s occupation is taxable, and the provincial assessment legislation directs the assessor to assess the occupation based on the full market value of the property as though it were held in fee simple by the occupier. An example of this is where public land is leased to a person in a National Park. The lessee’s occupation of Crown land would be taxed at the full market value of the property, as if they held the land in fee simple.

First Nations across Canada have adopted this approach to assessment of occupational interests in their reserve lands. On reserve lands, the First Nation’s property assessment law governs how the assessor must assess each interest in land, as provincial assessment legislation does not apply. The approach is reflected in each First Nation’s property assessment law, which generally directs the assessor to assess each interest in land as though it is held in fee simple off reserve. Property assessment is completed as if it is “off reserve” because there is no fee simple interest in reserve land. This means there is a lack of comparable data on reserve lands. By assessing on reserve properties as if they were held in fee simple, the issue of reserve land valuation is avoided and a similar tax burden to off reserve properties is experienced by taxpayers.

• • Assessors use the same rules for assessment that are used provincially. This means the assessment process does not require new and different rules, has comparable properties, and is cost effective to implement.
  • Tax revenues do not depend on whether the occupation is under a lease, license, or other arrangement or on the time remaining on the occupation. The assessed value and proportional share of taxes for a class of property will be the same as off reserve lands, whether a property is held under a lease or a license or whether that tenure is short or long term. This ensures a similar distribution of tax liability as is achieved on non-reserve lands.
  • The approach is used provincially for occupational interests and is familiar to taxpayers. Using an approach that is like the system used off reserve enables First Nations and their taxpayers to compare their annual tax rates to adjacent non-reserve jurisdictions.

Assessment Appeals

After properties are valued, First Nation assessors typically send property holders an assessment notice at the beginning of the taxation year. All assessed values can be appealed to an assessment review body. For First Nations using the FMA, there is an alternative to the more formal appeal process administered by the First Nation’s Assessment Review Board. The reconsideration process allows a person named on the assessment roll to request the assessor reconsider the assessment of their property. Property holders not satisfied with the outcome of a reconsideration, still can appeal their assessment to the Assessment Review Board. As assessment appeal processes can vary, property holders should refer to the relevant provisions in the First Nation’s assessment law.

• FIRST NATIONS TAX RATES & EXPENDITURES

Most taxing First Nations use the same tax rates as their adjacent local government. This is called reference jurisdiction rate-setting.

Some First Nations set their tax rates based on the average tax bill increase from year to year. If a First Nation decides to use this approach, they must ensure that when the tax rate is applied to the assessed value of a property, the average tax bill in each property class does not increase by more than either the previous year’s annual rate of national inflation (CPI) or the previous year’s average tax bill increase for that property class in their reference jurisdiction. There are exceptions to this, including situations where a First Nation’s cost of providing services have significantly increased in comparison with the previous year, or where the taxpayers in the affected property class support the proposed rate.

First Nation governments must set their property tax rates on an annual basis. First Nation laws made under the FMA must comply with the FNTC Standards for the Timing of First Nation Annual Tax Rates and Expenditure Laws, 2017. These standards require the First Nation governments to make an annual tax rate and annual expenditure law on or before November 30th of the taxation year.

• TAXPAYER ISSUES & CONCERNS

The FNTC considers establishing and maintaining good taxpayer relations to be a fundamental aspect of any property taxation system. Part of implementing a fair taxation system is ensuring that individuals subject to a law have prior notice of, and access to the law. When disputes arise, the FNTC encourages all stakeholders to try to resolve disputes locally. However, we are prepared to assist in resolving disputes, if needed.

For many types of laws, section 6 of the FMA requires First Nation governments to provide at least 30 days’ notice of a proposed law by publishing a notice of the proposed law in the First Nations Gazette and posting a notice in a public place on the reserve. Notices must describe the proposed law, state where to obtain the law, as well as invite the stakeholder to make written representations regarding the proposed law to the Council within the specified notice period.

Certain types of proposed local revenue laws require the section 6 notice period to be extended. The FNTC Standards respecting Notices relating to Local Revenue Laws, 2018 require First Nation governments implementing property taxation for the first time to provide at least 45 days’ notice of their property assessment and property taxation laws. Additionally, where a First Nation proposes to enact a development cost charges law, property transfer tax law, service tax law, business activity tax law, or fee law, 45 days’ notice must be provided.

Under the FMA, if a taxpayer makes a written representation regarding a local revenue law to Council, Council must invite those persons to make further written representation to the FNTC within 30 days of receiving a copy of the law. The FNTC considers all written representations received within the notice period before determining if the law meets the applicable legal requirements.

For more information about making representations to the FNTC, see Submitting Written Representations to the Commission.