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PROPERTY TAXATION ON RESERVE2020-08-12T10:47:29-07:00
  • TAXPAYERS: PROPERTY TAXATION ON RESERVE

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What is Property Tax

Property taxation is a process through which local governments (provincial, municipal and First Nations) generate revenue to fund the delivery of local services. Local governments have the authority and jurisdiction to collect property taxes and the responsibility to provide services.

These services may include:

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

In Canada, property tax jurisdiction generates nearly 40% of all local government revenues. Property taxes in Canada are used to cover the costs of local services that are not met from other revenue sources or transfers from federal and provincial governments.

How is First Nation property tax revenue used

Property tax allows First Nation governments to build communities. Property tax revenue is used to pay for services in the community where the tax is collected. It supports and enables a community to grow and thrive.

  • Property taxation allows governments to build and maintain infrastructure. Infrastructure are basic systems, like roads or water services, that are required building blocks for a community.
  • Property taxation allow governments to provide community services – like emergency services, parks and recreation, snow clearing and arts centres – and can grow their tax base by attracting more people to live, work, play and open businesses in their community.
  • Property taxation allows governments to provides services we all benefit from to be affordable and accessible.

  • First Nation Property Assessment

First Nations contract with qualified, independent assessors to assess the leases, licenses and other occupations of their 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.

To understand the approach and the reasons for the approach, it is important to understand the key elements of First Nation taxation systems.

What types of interests in land exist on reserve lands?

There are different ways that non-members of the First Nation may occupy reserve lands. The most common way is through a lease either with a member of the First Nation or with the First Nation itself. Leases can range from short term, such as 10 years, to long term, usually up to 99 years. Leases can be pre-paid for the term or have annual payments with periodic rent reviews. It is common for different types of leases with varying terms to exist on a single reserve at any given time.

What interests in land are taxable on reserve lands?

Provincial property tax systems 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. Because there are no fee simple interests in reserve lands, 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.

How are occupations of reserve lands assessed?

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 determine 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 is occupying 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.

First Nations across Canada have adopted this approach to assessment of occupational interests in their reserve lands.

On reserve lands, it is the First Nation’s property assessment law which 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 direct the assessor to assess each interest in land as though it is held in fee simple off reserve.

It is “off reserve” because there is no fee simple interest in reserve land, there tends to be a lack of comparable data on reserve lands, it avoids issues of reserve land valuation, and it provides for a similar tax burden to off reserve properties.

Why is this assessment approach the best for First Nation property tax systems?

There are several reasons why this approach is used and why it makes sense for First Nation property taxation systems:

  • The approach enables assessors to use the same rules for assessment that are used provincially, which are based on fee simple assessments. This means the assessment process does not require new and different rules, has comparable properties, and is cost effective to implement.
  • The approach ensures that 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 similar to the system used off reserve enables First Nations and their taxpayers to compare their annual tax rates to adjacent non-reserve jurisdictions.

  • First Nation Tax Rates and First Nation Lands

Determining Tax Rates

The method for determining taxes on reserve lands is the same as for properties on off-reserve lands. The First Nation sets annual tax rates for each property class (e.g. residential, commercial etc.). The applicable tax rate is multiplied by the assessed value of the property to create a tax bill. First Nation tax rates are similar, and in many cases identical, to those of adjacent governments.

How are tax rates calculated

The First Nation first determines the amount of revenue that is required to provide local services. The total amount of local revenue raised must equal the amount required for local services.

A First Nation or local government reviews its tax rate annually and may adjust the rate on an annual basis depending on its revenue requirements. By legislation, a new tax rate law requires approval annually.

  • The Role of the FNTC

What is the FMA

The First Nations Fiscal Management Act (FMA) is optional federal legislation which can be used by First Nations to maximize the economic potential of their lands. The FMA enables First Nations to participate more fully in the Canadian economy, become less dependent on government services and improve local economies through increased employment and business development.

  • It is enabling, in that it creates a framework for First Nations to create and implement their property taxation powers through their own laws.
  • It provides First Nations with several fiscal governance tools to increase revenue, improve financial management, and leverage property tax for long term financing.
  • It is one of two federal statutes that authorizes property taxation powers to First Nations. The other is s. 83 of the Indian Act (section 83). The FMA serves the very important role of providing confidence to investors by enabling tax powers and creating responsibilities for First Nations and institutions to support First Nations in the exercise of these powers and responsibilities.

Who is the FNTC

Based in T’kemlups te Secwepemc, near Kamloops, BC, (Head Office) and the National Capital Regional Office, in Ottawa, ON, the First Nations Tax Commission (FNTC) is a shared governance organization established under the First Nations Fiscal Management Act. It consists of ten commissioners, nine of which are appointed by the federal government.

The FNTC’s principal responsibility is to provide regulatory support and oversight for First Nation property taxation. In doing so, it reviews and approves First Nation-made laws under the FMA, and reviews and recommends for Ministerial approval by-laws made under the Indian Act.

The FNTC is committed to assisting First Nation governments build and maintain fair and efficient property tax regimes and to ensure First Nation communities, and their taxpayers alike, receive the maximum benefit from those systems.

FNTC law review and approval

One of the FNTC’s key functions is to review First Nation local revenue laws to ensure that they comply with the FMA, the applicable standards (established by the FNTC) and any applicable regulations under the FMA.

If the First Nation law complies with this legislative framework, the FNTC will then approve the law. Local revenue laws come into force and effect only after approved by the FNTC.

The FNTC establishes standards and procedures that form an important part of the FMA legislative framework. For each type of law that First Nations can make under the FMA (other than financial administration laws), the FNTC establishes standards setting requirements on the form and content of those laws. The FNTC also establishes procedures for the submission and approval of those laws.

How can I get copies of the First Nation laws

The First Nations Gazette is similar to a government gazette. It is used to publish government-related notices, which are usually those required by law, and the official versions of laws and regulations enacted by a government. First Nations publish their legislation and public notices in the First Nations Gazette to support enforcement, governance and transparency by providing taxpayers with access to their laws.

The First Nations Gazette:

  • Provides free access to First Nation legislation
  • Provides a free public notification service for Aboriginal matters
  • Provides an opportunity for comment on proposed laws and by-laws
  • Provides an opportunity to actively participate in the legislative process
  • Provides an archive of First Nation legislation and notices

FNTC Partnerships

The FNTC has a strong working relationship with the Canadian Property Tax Association. The CPTA’s focus is to advocate from the perspective of the taxpayer, and our statement of policy includes that ‘Assessment of real property should be based on market value, provide fairness, equity, simplicity and predictability, and be economic to administer.’ The CPTA also supports that ‘Property assessments should be based on an annual, common valuation date and the actual state and condition of the property as of that date.’