Property tax is a tax on land, and things attached to the land (like buildings, towers, pipelines, etc.). It is not a tax on consumption (like a GST or a provincial sales tax) nor is it an income tax. 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 railways may be 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 an assessor), the classification of the property, applicable exemptions, and the rates of tax set by the First Nation. Property owned by other governments and Crown corporations are constitutionally immune from taxation; however, the federal government can provide payment in lieu of taxation to the First Nation.
Property tax revenue is used to cover the costs of local services that are not met from other revenue sources or transfers from federal and provincial governments. It 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. While 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.
First Nation 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 provides 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.
Used by over one hundred First Nations, the First Nations Fiscal Management Act (FMA) provides participating First Nations with access to a comprehensive property taxation framework, and offers an array of fiscal governance tools to increase revenue, improve financial management, and leverage property tax for long-term financing. The FMA enhances 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 added, First Nations can develop their property taxation laws. This involves notification of proposed property taxation and assessment laws, opportunity for public input, First Nation enactment of the laws, and the passage of tax rates and expenditures laws each year thereafter. Each law is reviewed by the First Nations Tax Commission.
For First Nations who are added to the FMA and have existing section 83 property tax by-laws in place, these by-laws become FMA property tax laws upon being added to the FMA.
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.
Aboriginal groups that are not Indian Act “bands” may begin the process by providing a resolution from their governing body to the Minister of Crown-Indigenous Relations