2015-0594431E5 Ontario Energy & Property Tax Credit

Principal Issues: Are land lease payments for a mobile home eligible for determining the Ontario Energy & Property Tax Credit?

Position: Question of fact

Reasons: Payments must meet definition of Occupancy Cost in section 98 of the TA.

Author: Robertson, George
Section: 98(2), 98(2.1), 98(3.1) Ontario Taxation Act, 2007

XXXXXXXXXX                                      2015-059443
                                                              George A Robertson, CPA CMA
                                                             (905) 721-5196

November 2, 2015

Dear XXXXXXXXXX,

This is in response to your letter dated June 2, 2015, enquiring whether the land lease cost paid by you can be used in the property tax amount of the calculation of the Ontario Energy & Property Tax Credit (“OEPTC”). We also acknowledge our telephone conversation of September 15, 2015 (XXXXXXXXXX/Robertson).

You have explained that the amounts paid by you to the land lease community (“the community”) include rent [land lease], property taxes, maintenance and water/sewer. Based on the information provided, it appears that you own a modular home, lease the land the home is on, and pay a share for maintenance and the management of the community.

Our comments:

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

The OEPTC is determined using a number of factors, with the occupancy cost being one factor. Occupancy cost is determined by section 98 of the Ontario Taxation Act, 2007 and is used to calculate both the property tax amount and the energy amount of the OEPTC. Generally, under subsection 98(3.1) of the Ontario Taxation Act, 2007, if a designated principal residence for a taxation year is a non-seasonal mobile home owned by an individual or his or her spouse or common-law partner, or by both of them, the individual’s occupancy cost in respect of the non-seasonal mobile home for the year is the amount determined as follows:

1.    Determine the sum of all amounts, if any, each of which is the amount paid for the year by, or on behalf of, the individual or the individual’s qualifying spouse or common-law partner to the owner of the land on which the mobile home is located that can reasonably be considered to have been paid to compensate the owner for municipal tax assessed against the land for the year.

2.    Determine the sum of all amounts, if any, each of which is an amount of municipal tax paid for the year by, or on behalf of, the individual or the individual’s qualifying spouse or common-law partner in respect of the non-seasonal mobile home.

3.    Add the amounts, if any, determined under paragraphs 1 and 2.

Therefore, in general, if a taxpayer owns and occupies a modular home on a leased lot, only the amount paid for municipal tax for the home, if any, and the amount paid to the owner of the leased land for municipal tax (or that can be reasonably considered to be paid to the owner for municipal tax), if any, are included in the occupancy cost.

You can find detailed information on the property tax component of the OETPC under question #10 at http://www.cra-arc.gc.ca/bnfts/rltd_prgrms/fq_ntr_ptc-eng.html and on the Information for Residents of Ontario webpage available at http://www.cra-arc.gc.ca/E/pub/tg/5006-pc/5006-pc-14e.html under the subheading “Amounts paid for a principal residence.”  As noted on these webpages,

“If you owned and occupied a non-seasonal mobile or modular home, enter [beside box 6112 of the Ontario Trillium Benefit and Ontario Senior Homeowners' Property Tax Grant form 5006-TG] the combined total of the property tax you paid for your home plus the property tax that your landlord/site owner paid for the lot you leased. If the landlord does not provide a breakdown of the property tax paid for the lot, and you do not have an assessment for the lot from the Municipal Property Assessment Corporation, you can estimate the property tax based on the fees paid to your landlord/site owner for the lot. It would be reasonable to take 20% of the fees and add that amount to any property tax paid on the mobile home.”

We trust our comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

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