2017-0687431E5 Property Tax Deferral Program

Principal Issues: Can homeowners who join the XXXXXXXXXX include the property tax deferral amount in the calculation of the Senior Ontario Energy and Property Tax Credit or the Senior Homeowner's Property Tax Grant?

Position: No.

Reasons: One of the required factors that must be met in order to include property tax amounts in the calculation of the Seniors Property Tax Credit and the Seniors Property Tax Grant is that the municipal taxes must be paid by or on behalf of the individual (or the individuals qualifying spouse or qualifying common-law partner). Property taxes that are deferred by Homeowners who are part of the XXXXXXXXXX cannot be said to have paid by or on behalf of the homeowners and as such the property taxes that are deferred cannot be included in the calculation of the Seniors Property tax Credit or the Seniors Property Tax Grant.

Author: D'Angelo, Sandro
Section: Ontario Taxation Act, 2007 - section 103.1, subsection 103.9(2), section 98, subsection 104.1(3), ss. 104.1(1.2.1), Ontario Municipal Act, 2001

XXXXXXXXXX                                                                                                                         2017-068743
                                                                                                                                                 Sandro D’Angelo
June 14, 2017

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

We are responding to your email dated February 6, 2017, and our subsequent telephone conversation (D’Angelo/XXXXXXXXXX), in which you asked about the XXXXXXXXXX (the “Region”) XXXXXXXXXX (the “Program”).  Specifically, you asked whether homeowners (“Homeowners”) are eligible to include the amount of the property taxes that have been deferred under the Program for purposes of calculating the Ontario Energy and Property Tax Credit (OEPTC) or the Senior Homeowner’s Property Tax Grant (SHPTG) in a year of deferral.

You have provided the following link to the XXXXXXXXXX Program XXXXXXXXXX (“Website”).

The Website describes the Program as a program that allows an older adult homeowner living on a fixed income of less than $XXXXXXXXXX a year to fully defer annual property taxes interest free. (footnote 1)

The following pertinent information about the Program is provided on the Website:

XXXXXXXXXX

The Website also notes that when a registered owner(s) participates in the Program they will not be eligible to claim the Ontario Property Tax Credit.

Our Comments

This technical interpretation provides general comments about the provisions of the Ontario Taxation Act, 2007 (“Ontario 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 70-6R7, Advance Income Tax Rulings and Technical Interpretations.

The amount of an eligible individual’s property tax amount for the OEPTC is calculated using a formula that includes the individual’s occupancy cost.  As indicated in subsection 98(2) of the Ontario Act, generally, the occupancy cost for a single individual includes municipal taxes paid for the year by, or on behalf of, an individual in respect of a designated principal residence where the individual beneficially owned the residence. Similarly, as indicated in subsection 98(3) of the Ontario Act, the occupancy cost of an individual who is a qualifying spouse or qualifying common-law partner includes municipal taxes paid for the year by, or on behalf of, the individual or the individual’s qualifying spouse or qualifying common-law partner in respect of a designated principal residence of the individual that was, during the year, beneficially owned by either or both of them.

With respect to the determination of the SHPTG subsection 104.1(1.2.1) of the Ontario Act clarifies that “an amount paid on behalf of an eligible senior is deemed to have been paid by that eligible senior.”

The determination of whether Homeowners who have joined the Program can include the amount of property taxes that have been deferred for purposes of calculating the OEPTC or the SHPTG for the year will depend on whether the municipal taxes that are deferred have been paid by, or on behalf of, these Homeowners.

Homeowners who have joined the Program are not required and do not have to pay any municipal taxes (unless they choose to) while they are part of the Program. As per the Website, section XXXXXXXXXX of XXXXXXXXXX (the “By-Law”) states that the Program is a loan program between Homeowners and the Local Municipality (footnote 2) which requires a lien on the property pursuant to section 349 of the Ontario Municipal Act, 2001, S.0, 2001 c. 25, as amended (“OMA”).

As we understand it, section 349 of the OMA is a provision that allows the Local Municipality to recover taxes as a debt due to the Local Municipality from the taxpayer originally assessed for them. Subsection 349(1) of the OMA states:

“Taxes may be recovered with costs as a debt due to the municipality from the taxpayer originally assessed for them and from any subsequent owner of the assessed land or any part of it.  2001, c.25, s. 349(1).”

Also, section XXXXXXXXXX of the By-Law states that when property taxes are deferred, adjustments shall be made such that the portion of the deferred property tax owing to the Region on the eligible properties minus the interest accrual on those properties shall be paid by the Local Municipality to the Region.   Section XXXXXXXXXX of the By-Law, requires the Local Municipality to pay the portion of the deferred property tax owing to the school boards as if full payment had been made by the Homeowners.  So while the full amount of deferred property taxes are paid by the Local Municipality as a funding arrangement between the Local Municipalities and the Region, Homeowners that are part of the Program are not paying any property taxes.  (footnote 3)

From our review of the information provided, and the By-Law, it appears that the Local Municipality is able to recover the deferred property taxes from the Homeowner and is also able to put a lien on the property until the deferred property taxes are paid.  The Program does not eliminate property taxes and the deferral of the property taxes takes the form of an interest free loan between the Homeowner and the Local Municipality which will eventually need to be repaid by the Homeowner.

It is a question of fact whether the Municipal Taxes that are deferred have been paid for the year by, or on behalf, of these Homeowners. However, based on our understanding of subsections 349(1) and 353(1) of the OMA and the By-Law, while the Local Municipality pays the portion of deferred taxes owing to the Region and the school boards as part of a funding arrangement between the Local Municipality and the Region, in our view, the deferred property taxes are not paid by or on behalf of the Homeowners while they are part of the Program.

Therefore, based on our understanding of subsections 349(1) and 353(1) of the OMA and the By-Law, it is our view that property taxes that are deferred as part of the Program will not be eligible to be included in the calculation of the OEPTC or the SHPTG.

We trust our comments will be of assistance.

Yours truly,

Lita Krantz, CPA, CA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

FOOTNOTES

Note to reader:  Because of our system requirements, the footnotes contained in the original document are shown below instead:

1  XXXXXXXXXX
2  Per the By-law, “Local Municipality” means one of XXXXXXXXXX local municipalities located within the Region: XXXXXXXXXX, as applicable.
3  We understand that subsection 353(1) of the OMA requires a Local Municipality that is required to impose a tax for a body to pay those taxes to the body regardless of whether the taxes have been paid or not. This means that in situations where individual homeowners do not pay property taxes the Local Municipality must still remit those unpaid amounts to the Region. This is the case with individuals who are part of the Program.

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