2022-0956851I7 Ontario Energy and Property Tax Credit
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Are tenants who live in rent geared to income housing eligible to claim the OEPTC where the housing provider receives a property tax subsidy after paying their assessed property taxes in full?
Reasons: In the scenario described, the housing units are not exempt from municipal tax.
Section: Ontario Taxation Act, 2007 98(2), 98(5), 103.9(3)
E. Wirag, CPA, CMA
January 31, 2023
Re: Ontario energy and property tax credit
We are writing in response to your email of November 21, 2022, regarding your questions about the Ontario energy and property tax credit (OEPTC). More specifically you have asked whether tenants who are living in subsidized housing units, where the property taxes and/or operating costs are subsidized, are eligible for the OEPTC.
You describe a scenario where a municipality provides a property tax subsidy for municipal capital facilities for affordable housing projects located at various properties owned by non-profit and co-operative housing service providers. The subsidy is based on the number of Rent Geared to Income (RGI) units at each property. Market rate rental units are not eligible for this particular subsidy. We understand that this subsidy is in addition to any operating and RGI subsidies a property may receive.
It is our understanding that a housing provider is assessed by their respective municipality and then pays their property tax bill to their municipality in full. The housing provider is then reimbursed through pre-scheduled monthly subsidy payments from the municipality’s Municipal Service Manager. An annual reconciliation process ensures the property tax subsidy covers 100% of the actual costs paid by the housing providers.
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 IC70-6R12, Advance Income Tax Rulings and Technical Interpretations.
The calculation of the OEPTC is determined by sections 103.9 to 103.11 of the Ontario Taxation Act, 2007 (the TA). An eligible individual’s energy amount and property tax amount for the OEPTC is calculated using a formula that includes a number of factors. One of those factors is the individual’s occupancy cost.
Occupancy cost is determined by section 98 of the TA. For instance, under subsection 98(2) of the TA, the occupancy cost for a taxation year of a single individual is the amount determined as follows:
1) Determine the sum of all amounts, if any, each of which is the amount of municipal tax that was paid for the year by, or on behalf of, the individual in respect of the residence of the individual that was, during the year, beneficially owned by or held in trust for the use and occupation of the individual.
2) Determine the sum of all amounts, if any, each of which is 20 per cent of the amount of municipal tax paid for the year by, or on behalf of, the individual in respect of the residence of the individual that was not beneficially owned or held in trust for the individual.
3) Determine the sum of all amounts, if any, each of which is 20 per cent of the amount of rent paid for the year by, or on behalf of, the individual for the residence of the individual, to the extent that the rent applied to the period in the year in which the individual occupied the residence as a principal residence. Add the amounts, if any, determined under paragraphs 1, 2 and 3.
There does not appear to be a provision that would reduce the occupancy costs determined under section 98 of the TA where amounts paid by the property owner are subsequently reimbursed.
Additional rules related to the determination of an individual’s occupancy cost are provided in subsection 98(5) of the TA. Subparagraph 98(5)(4)(ii) prevents an amount from being included in an individual’s occupancy cost that are in respect of a principal residence that was exempt from municipal tax for the year. Based on the information you have provided, it does not appear that the properties in question are exempt from municipal property tax in the year. It is our understanding that the housing providers’ municipal property taxes are assessed in full, and subsequently paid by the housing providers to their local municipality.
Therefore, it appears that an individuals living in subsidized units, where the property taxes are reimbursed to the property owners, would be eligible to claim the OEPTC, assuming all the requirements for the credit are also met.
We trust our comments will be of assistance to you.
Eric Wirag, CPA, CMA
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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