Property Tax Rebates for Charitable and
Similar Organizations
The Strategic Policies and Priorities Committee recommends the adoption of the
recommendations in the following transmittal letter (July 13, 1998) from the
Assessment and Tax Policy Task Force:
Recommendations:
The Assessment and Tax Policy Task Force on July, 6, 7, 11, and 13, 1998, recommended
to the Strategic Policies and Priorities Committee and City Council that:
(A)Since the Assessment and Tax Policy Task Force has already recommended that Council
adopt the capping provision, as contained in the Small Businesses and Charities Protection
Act, for the commercial and industrial property classes, it recommends that:
(1)no property tax rebate program be instituted for charitable and similar organizations in
the industrial and commercial property classes for the duration of the capping period
(1998-2000);
(2)options to protect charitable and similar organizations in the commercial and industrial
property classes, including requesting from the Province the creation of a separate class for
such organizations, be included as part of the workplan to review assessment and taxation
changes prior to the next reassessment in 2001 in order to minimize any impact to charitable
and similar organizations arising from assessment and tax reform.
(3)no property tax rebate program be instituted for charitable and similar organizations
located in taxable properties in the residential or multi-residential property classes.
(B)Should Council not adopt the capping option on tax increases for the commercial and
industrial property classes the Assessment and Tax Policy Task Force recommends that:
(1)funding in the amount of $437.0 thousand be provided within Corporate Expenditures to
provide for a mandatory 40 percent rebate on property taxes for registered charities in the
commercial and industrial property classes; and
(2)funding in the amount of $3.4 million be provided within Corporate Expenditures to
provide for a 40 percent rebate on property taxes for similar organizations in the commercial
and industrial property classes as shown in the Category 1(b) and 1(c) type organizations
listed in Tables 3 and 4 of this report.
(3)the following preliminary eligibility criteria for similar organizations be referred to the
Municipal Grants Review Committee to be considered as part of the development of a
municipal grants policy, and that the Chief Financial Officer and Treasurer, after
consultation with the Community Social Planning Council and the United Way of Greater
Toronto, be requested to advise on the administration of the tax rebate program to that
Committee:
To be eligible as a similar organization under the tax rebate program, an organization(s):
(a)must demonstrate a concern for the relief of poverty, or for people in emotional, physical
or spiritual distress; or,
(b)must provide a clear service or benefit to the community, in that it concerns itself with
the advancement of science, education, philosophy, religion, art, sports and other causes
beneficial to the community (human services, culture and heritage, public health, recreation,
human rights and equity); and,
(c)must be operated on a not-for-profit basis (with no share capital) and be accountable to
the community; and,
(d)services and activities must be accessible to the community as a whole or for an
appreciable portion of it.
(4)No property tax rebate program be instituted for charitable and similar organizations
located in taxable properties in the residential or multi-residential property classes.
Background:
The Assessment and Tax Policy Task Force had before it a report (June 30, 1998) from the
Chief Financial Officer and Treasurer on the implications of the Small Business and
Charities Protections Act, 1998 (Bill 16) on property tax rebates for charitable and similar
organizations.
The Task Force also had before it the following communications respecting the current
value assessment and the property tax rebates for charitable and similar organizations:
(a)(July 7, 1998) from Mr. John Doherty, Interim Executive Director, Planned Parenthood
Toronto;
(b)(July 7, 1998) from Mr. Jack Slibar, Chief Operating Officer, Toronto Humane Society;
(c)(July 7, 1998) from Mr. Dan Clement, United Way of Greater Toronto;
(d)(July 6, 1998) from Mr. Sharon Saberton, Registrar, College of Medical Radiation
Technologists of Ontario;
(e)(July 7, 1998) from Ms. Janine Sindrey, Administrator, Canadian Peace Alliance;
(f)(July 8, 1998) from Mr. David Tang, Gowling, Strathy & Henderson, Barristers &
Solicitors;
(g)(July 7, 1998) from Mr. George R. Springle; and
(h)(June 15, 1998) from Anne Swarbrick, Manager, Toronto Operations and Dr. Phil Shore,
Chair, North York District Board, The Canadian National Institute for the Blind.
(Copies of the communications referred to in the transmittal letter of the Assessment and
Tax Policy Task Force have previously been circulated to all Members of Council with the
agenda of the Assessment and Tax Policy Task Force and copies thereof are on file in the
office of the City Clerk.)
(Report dated June 30, 1998, addressed to the
Assessment and Tax Policy Task Force
from the Chief Financial Officer and Treasurer)
Purpose:
To report on the implications of the Small Business and Charities Protection Act, 1998 (Bill
16) on property tax rebates for charitable and similar organizations.
Funding Source, Financial Implications and Impact Statement:
A property tax rebate program for charitable and similar would not be necessary if Council
elects to adopt the property tax capping option in Bill 16 for the commercial and industrial
property classes. A rebate program would be optional under this scenario.
Should Council not elect to adopt the capping option for the commercial and industrial
property classes, then a property tax rebate program for charitable organizations in such
classes would be mandatory. Bill 16 mandates a minimum 40 percent rebate for registered
charities, and would result in a 1998 current funding requirement to the City estimated to be
in the range of $437.0 thousand (for a 40 percent rebate) to $1.1 million (for a 100 percent
rebate), payable to approximately 141 registered charities in the commercial and industrial
property classes.
Council also has the option, whether or not it elects to adopt the capping provision, to
extend the rebate program to include organizations that are similar to eligible charities or a
class of such organizations as may be defined by the City. The rebate (expressed as a
percentage), if any, need not be the same as that provided to registered charities. Preliminary
analysis indicates there may be 1,164 organizations whose activities may be similar to
charities to the extent that they may meet the preliminary eligibility criteria for similar
organizations outlined in this report. The municipal portion of taxes payable by these
organizations is estimated at $8.5 million, and a 40 percent rebate would require current
funding in the amount of $3.4 million. Preliminary analysis also indicates that there may be
in the order of 2,219 other organizations or properties that received preferential tax treatment
in 1997, and which are now taxable at the higher commercial/industrial rate under tax
reform. The municipal portion of taxes payable by these organizations or properties is
estimated at $13.9 million. A rebate for this latter group is not recommended.
Bill 16, which received Royal Assent on June 11, 1998, contains amendments to permit
municipalities to rebate taxes to charities or similar organizations located in the residential
or multi-residential property classes. Organizations located in such property classes are not
affected by tax increases resulting from the elimination of the Business Occupancy Tax
(BOT), as is the case with properties in the commercial/industrial classes. A tax rebate
would provide such organizations with a financial benefit they did not previously enjoy,
with direct funding consequences to the City. Preliminary analysis indicates that, on
average, taxable charitable and similar organizations in the residential and multi-residential
property classes will be paying less tax under Current Value Assessment (CVA) than under
the former tax system. A 40 percent rebate for these organizations would result in an
additional current funding requirement of $4.1 million.
Recommendations:
It is recommended that:
(1)Should Council adopt the capping provision, as contained in the Small Businesses and
Charities Protection Act, for the commercial and industrial property,
(i)no property tax rebate program be instituted for charitable and similar organizations in
the industrial and commercial property classes for the duration of the capping period
(1998-2000); and
(ii)options to protect charitable and similar organizations in the commercial and industrial
property classes, including requesting from the Province the creation of a separate class for
such organizations, be included as part of the workplan to review assessment and taxation
changes prior to the next reassessment in 2001 in order to minimize any impact to charitable
and similar organizations arising from assessment and tax reform.
(2)Should Council not adopt the capping option on tax increases for the commercial and
industrial property classes,
(i)funding in the amount of $437.0 thousand be provided within Corporate Expenditures to
provide for a mandatory 40 percent rebate on property taxes for registered charities in the
commercial and industrial property classes; and
(ii)funding in the amount of $3.4 million be provided within Corporate Expenditures to
provide for a 40 percent rebate on property taxes for similar organizations in the commercial
and industrial property classes as shown in the Category 1(b) and 1(c) type organizations
listed in Tables 3 and 4 of this report.
(3)The following preliminary eligibility criteria for similar organizations be referred to the
Municipal Grants Review Committee to be considered as part of the development of a
municipal grants policy, and that the Chief Financial Officer and Treasurer be requested to
advise on the administration of the tax rebate program to that Committee:
To be eligible as a similar organization under the tax rebate program, an organization(s):
(a)must demonstrate a concern for the relief of poverty, or for people in emotional, physical
or spiritual distress; or
(b)must provide a clear service or benefit to the community, in that it concerns itself with
the advancement of science, education, philosophy, religion, art, sports and other causes
beneficial to the community (human services, culture and heritage, public health, recreation,
human rights and equity);
(c)must be operated on a not-for-profit basis (with no share capital) and be accountable to
the community; and
(d)services and activities must be accessible to the community as a whole or for an
appreciable portion of it.
(4)No property tax rebate program be instituted for charitable and similar organizations
located in taxable properties in the residential or multi-residential property classes.
Council Reference:
Bill 16, the "Small Business and Charities Protection Act, 1998" (the Act), amends the
Assessment Act, the Municipal Act and other statutes in relation to local government
financing. Specifically, this proposed legislation provides measures to protect all small
businesses, as well as charities and similar organizations, from large property tax increases
that result from changes to the property taxation system made by the Fair Municipal
Finance Act, 1997 (Nos. 1 and 2).
The most significant change made by Bill 16 is that it adds a new Part XXII.1 (the "capping
option") to the Municipal Act. This new part introduces the option for a municipality to cap
property taxes for the commercial, industrial and multi-residential property classes to limit
increases for the years 1998, 1999 and 2000 to 2.5 percent per year.
The Act also replaces Section 442.1 of the Municipal Act, previously introduced under
Section 48 of the Fair Municipal Finance Act, 1997 (No. 2), respecting a property tax rebate
program for charitable and similar organizations. The Act introduces new requirements for a
mandatory tax rebate program for registered charities in the commercial and industrial
property classes if the capping option for these classes is not adopted. However, should the
municipality choose to adopt the capping provision, tenants of leased premises, including
eligible charities and similar organizations, will also be protected by the 2.5 percent limit on
property tax increases, and a rebate program would be unnecessary, but still optional to the
municipality.
The Act also permits municipalities to rebate taxes to charities or similar organizations
located in the residential or multi-residential property classes. Rebates to charities in these
classes were not included in the original provisions of the Bill.
Other provisions and definitions of the Act respecting a tax rebate program are as follows:
Program options (the following apply with respect to what a tax rebate program under this
section may provide, but is not required to provide):
(i)the program may provide for rebates to organizations that are similar to eligible charities
or a class of such organizations defined by the municipality;
(ii)the program may provide for rebates to eligible charities or similar organizations for
taxes on property to which the capping option applies;
(iii)the program may provide for rebates that are greater than 40 percent;
(iv)the program may provide for adjustments in respect of the rebates for a year to be
deducted from amounts payable in the next year for the next year's rebates;
(v)starting in the year 2000, the program may permit municipalities to match payment of
rebates to charities and similar organizations with tax installment dates. The municipality
must pay the rebate installment to the organization at least 21 days before the tax installment
is due, and each rebate installment must be the same percentage of each tax installment; and
(vi)the program may provide for rebates to eligible charities or similar organizations
located in the residential or multi-residential property classes.
Rebates for charities (mandatory in the commercial and industrial classes if the capping
option is not adopted):
(i)a charity is defined as eligible if it is a registered charity as defined in subsection 248 (1)
of the Income Tax Act (Canada) that has a registration number issued by the Department of
National Revenue;
(ii)the amount of a rebate must be at least 40 per cent of the taxes payable by the eligible
charity on the property it occupies;
(iii)the program must provide for the payment of a first installment of the rebate on or
before January 15 of the year. The first installment must be at least half of the estimated
rebate for the year;
(iv)the program must provide for the payment of the balance of the estimated rebate on or
before June 30 of the year;
(v)the program must provide for rebates even if the charity does not begin to occupy
property until after the installments would otherwise be payable;
(vi)the program must provide for final adjustments, to be made after the taxes paid by the
charity can be determined, in respect of differences between the estimated rebate paid by the
municipality and the rebate to which the charity is entitled; and
(vii)the program must provide for a rebate for 1998 and subsequent years, however, the
rebate for 1998 and the first installment of the rebate for 1999 must be paid on or before
October 31, 1998.
Sharing costs of rebates:
(i)the costs of a rebate of taxes on a property shall be shared by the municipality and school
board that share in the revenue from the taxes on the property in the same proportion as the
municipality and school board share in those revenues. The municipality shall also give the
charity or similar organization a written statement of the proportion of the costs of the rebate
that is shared by the school board.
Regulations governing program:
(i)the Minister of Finance may make regulations governing programs under the tax rebate
provision including prescribing additional requirements for such programs and governing
the procedural requirements that such programs may include.
Regulations, later date for payment for 1998 and 1999:
(i)the Minister of Municipal Affairs and Housing may make regulations prescribing a date
later than October 31, 1998 on or before which rebates for 1998 and first installments of
rebates for 1999 shall be paid, and requiring and governing interest to be paid by
municipalities on rebates for 1998 and first installments of rebates for 1999 that are paid
after October 31, 1998.
Background:
This section provides a background of the intent of the tax rebate provision of Bill 16.
Section 3 of the Assessment Act, R.S.O. 1990, exempts from assessment and taxation
properties owned and occupied by certain organizations as listed in the legislation. Such
organizations include churches and religious organizations, educational institutions,
seminaries of learning maintained for philanthropic purposes, houses of refuge or for the
care of children, incorporated charitable institutions organized for the relief of the poor or
similar incorporated institutions conducted on philanthropic purposes and not for the
purposes of profit or gain. In circumstances where the organization does not own the
property, it would be subject to property taxation. This Act does not necessarily exempt all
registered charities from property taxation.
Prior to the Fair Municipal Finance Act, in cases where the organizations occupied (owned
or leased) properties in the commercial or industrial property class, certain charitable
organizations, not-for-profit organizations and other Anon-business use@ entities, as
determined by the Province, were exempted from paying the Business Occupancy Tax
(BOT) and were taxed at the residential property tax rate rather than the commercial tax rate.
Whereas prior to 1998, the Province was responsible for establishing the tax class of these
entities, enactment of the Fair Municipal Finance Act discontinues the Province=s role in
this practice. Thus, those affected entities in the commercial and industrial property classes
are no longer classified for treatment at the preferential rate and are now taxable at the
commercial or industrial rate as the case may be. In its place, the Fair Municipal Finance
Act, as amended by Bill 16, allows municipalities to provide similar preferential tax
treatment to eligible charities and Asimilar@ organizations through a rebate program. The
minimum 40 percent rebate is designed to offset the move to the commercial/industrial rate
and the accompanying transfer of the burden of the former BOT amongst that class. The Bill
now provides the municipality the option of providing a rebate greater than the minimum
required and also allows the flexibility of having different rates for charities versus similar
organizations. If the capping option is not adopted, then the Bill mandates a rebate for
charities from 40 percent to 100 percent of property taxes. Whether or not the capping
option is adopted, the Bill allows municipalities the option to provide rebates of from zero to
100 percent of the property taxes to similar organizations or any such class of organizations
as may be defined by the municipality.
Charities and similar organizations located in the residential or multi-residential property
classes would not be affected by tax increases as a result of the elimination of the BOT, and
will continue to be taxed at their respective residential or multi-residential rate. The Act now
provides the municipality the option to provide rebates of from zero to 100 percent of the
property taxes to charities and similar organizations in these property classes.
Discussion:
Eligible Charities:
Should the City not elect to adopt the capping provision, the Act mandates that all eligible
charities in the commercial or industrial property classes be granted a minimum of a 40
percent tax rebate. AEligible charity@ means a registered charity as defined by subsection
248(1) of the Income Tax Act (Canada) that has a registration number issued by the
Department of National Revenue.
To qualify for registration under the Income Tax Act, an organization must be established
and operated for charitable purposes, and it must devote its resources to charitable activities.
The charity must be resident in Canada, and cannot have any income payable to benefit its
members.
Under the Federal Income Tax Act standards, as enunciated through common law, a charity
has to meet a public benefit test. To qualify under this test, an organization must show that:
(i)its activities and purposes provide a tangible benefit to the public;
(ii)those people who are eligible for benefits are either the public as a whole or a significant
section of it in that they are not a restricted group or one where members share a private
connection, such as social clubs or professional associations with specific membership;
(iii)the charity=s activities must be legal and must not be contrary to public policy; and
(iv)the organization has to be either incorporated or governed by a trust or constitution.
Based on 1995 Revenue Canada data, there are currently more than 75,000 registered
charities in Canada, with approximately 6,072 registered charities located in Toronto. A
summary of these registered charities is shown in Table 1. While there appears to be a
significant number of locations occupied by registered charities, the tax rebate program
would not be applicable to most of these, as many of these organizations are
owner-occupants and already exempt from taxation through the Assessment Act, such as
properties used for religious or educational purposes, or they are located in the residential
property class, to which the mandatory rebate program does not apply. Nevertheless,
approximately 141 registered charities were identified from the 1997 Assessment Roll as
being located in the commercial/industrial property class, and now subject to the higher rate
of taxation, and thus would be eligible for the rebate program.
TABLE 1
REGISTERED CHARITIES IN THE CITY OF TORONTO
REGISTERED CHARITY NUMBER OF% OF
TYPES LOCATIONSTOTAL
ANIMAL SOCIETIES210.3%
ARTS & CULTURE4347.1%
COMMUNITY ORGANIZATION3175.2%
EDUCATION/TRAINING1,06217.5%
HEALTH4307.1%
HERITAGE540.9%
HOSPITAL470.8%
LIBRARIES/MUSUEMS891.5%
MILITARY UNITS110.2%
OTHER1682.8%
RECREATION921.5%
RELIGIOUS 2,03633.5%
WELFARE1,31121.6%
TOTAL6,072100.0%
"Similar Organizations":
Bill 16 further provides that the rebate may be extended to "organizations that are similar to
eligible charities" or a class of such organizations defined by the municipality. Such an
extension of the rebate program is optional to the City whether or not it elects to adopt the
capping option. The Act extends the option to charities and similar organizations in the
residential or multi-residential property classes. The amount of the rebate, expressed as a
percentage, need not be the same between that provided to eligible charities and that to
similar organizations.
This section provides a context in which to develop criteria to determine the eligibility of
organizations that are similar to eligible charities, should the City wish to consider this
option under the tax rebate program.
The Ontario Law Reform Commission has released a working paper entitled "A Report on
the Law of Charities" (1996). Among other things, the report reviews three types of
organizations (charities, non-profit corporations, and unincorporated non-profit
organizations). The report discusses the difficulties with the current common-law definition
of "charity", sets out the rudiments of a reformed definition, and identifies policy
implications of that definition. The report acknowledges that there is no universally accepted
definition of what constitutes activities similar in nature to charities, and the interpretation of
various definitions is largely philosophical in nature.
(i)The Commission recommends against the adoption of a statutory definition of charity,
and instead recommends a more liberal interpretation of the common-law definition. The
Commission recognizes that the range of charitable activities is so diverse that a specific
definition would be problematic. The Commission also emphasizes that these improvements
to the common-law definition should be implemented by courts and public policy
administrators, not by legislators. The Commission presents, as a rudimentary definition:
"a truly charitable act is that act whose form, actual effect, and motive are the provision of
the means of pursing a common or universal good to persons who are remote in affection
and to whom no moral or legal obligation is owed."
(ii)The second type of organization reviewed by the Commission was Non-Profit
Organizations (NPO's). A NPO is not a registered charity. The key distinction is that a
registered charity can issue charitable receipts for tax purposes, whereas NPO's cannot issue
tax receipts for donations or membership fees contributed. Organizations can be
incorporated as NPO either federally or provincially but are not required to be incorporated.
A NPO described in paragraph 149(1)(1) of the Income Tax Act is a club, society, or
association that is organized and operated solely for:
(a)social welfare; or
(b)civic improvement; or
(c)pleasure or recreation; or
(d)any purpose other than profit.
Also, no part of the income of these organizations can be payable to, or otherwise available
for the personal benefit of any proprietor, member, or shareholder, unless the proprietor,
member or shareholder was a club, society, or association whose primary purpose was to
promote amateur athletics in Canada. The provincial requirement for NPO's essentially
mirrors that of the federal requirements.
Revenue Canada uses several indicators in assessing whether or not an organization is
operated exclusively for non-profit purposes or is carrying on a trade or business. Revenue
Canada looks to the activities of the organization and how it is operated in order to
determine whether the organization is operated on a profit basis rather than a cost recovery
basis.
The Commission concludes that the current statutory provisions governing NPO's in
Ontario is in serious need of reform. First, they note that it provides for only one class of
non-profit corporation, and that class is identified by an open-ended list of non-profit
purposes. Second, it is unclear whether non-profit corporations are permitted to carry on
ancillary or incidental commercial activities. Thus, incorporation as an NPO is in itself not a
definitive indicator of an organization meeting the "pubic benefit" test that is characteristic
for charitable activities.
(iii)The third type of organization reviewed by the Commission was unincorporated
NPO=s and Associations. Of the three forms of organization available to non-profit entities
today, the unincorporated organization requires the minimum in the way of legal
sophistication to create and maintain. The diverse range of activities include social clubs,
debating societies, political interest groups and interest group coalitions, alumni
associations, religious organizations and churches, home and school associations, sports
associations, and trade associations.
Eligibility Criteria for "Similar" Organizations:
Based on a review of the literature, including recent works, and from the foregoing
discussion, it appears that a number of criteria have been highlighted which could constitute
a definition or framework to determine the eligibility of a "similar" organization for a tax
rebate, pursuant to Bill 16. The criteria includes:
(i)the organization must demonstrate a concern for the relief of poverty, or for people in
emotional, physical or spiritual distress; or,
(ii)the organization must provide a clear service or benefit to the community, in that it
concerns itself with the advancement of science, education, philosophy, religion, art, sports
and other causes beneficial to the community (human services, culture and heritage, public
health, recreation, human rights and equity); and,
(iii)the organization must be operated on a not-for-profit basis (with no share capital) and
be accountable to the community; and,
(iv)the services and activities must be accessible to the community as a whole or for an
appreciable portion of it.
These criteria, which arise from a more progressive interpretation of the common-law
definition of charity, provides a basis from which to evaluate the eligibility of the three types
of organizations for the purpose of the tax rebate: charities (other than charities registered
under the Income Tax Act), incorporated non-profit organizations, and unincorporated
non-profit organizations.
The by-law outlining the details of the tax rebate could define "similar organizations" by
listing all the organizations deemed by Council to be eligible for the rebate. This would
eliminate the administration required to determine which organizations would be eligible for
rebates. Alternatively, the by-law could contain clear criteria for defining a Asimilar
organization@ so that the criteria can be applied effectively by staff (see Administrative
Issues on page 18).
(A)Analysis of Potential Applicants - Commercial & Industrial Property Classes:
As previously discussed, the Province has discontinued its role of classifying units assessed
for the BOT as well as identifying those units in either commercial or industrial properties to
be taxed at the preferential residential rate. In conjunction with this, the Fair Municipal
Finance Act now requires that the assessment be based on property portions, whereas
previously, individual units were individually assessed. As such, the 1998 assessment
information received provides no information that may be used to identify units that were
previously or might now be in a position to be a potential applicant for a tax rebate.
Furthermore, in the case of multi-use properties and leased premises, it is now the landlord's
responsibility to apportion taxes amongst tenants.
Notwithstanding the above limitations, an analysis was performed utilizing the returned roll
used for 1997 taxation purposes and by matching it to the 1998 phase-in tape. The 1997 tape
provides information respecting all occupancies in the industrial and commercial property
classes that were taxed preferentially (i.e., no BOT and taxed at the residential rate). The
1998 taxes payable, at the commercial rate, were estimated assuming any tax increase or
decrease was passed on proportionately to each tenant within the tax class. It is noted these
are only estimates and are intended to provide an order of magnitude. The tax impact
estimates presented in this report were prepared based on the CVA base case (with one tax
rate for all commercial properties). Other factors, such as the number of vacant units in the
property or whether the tenant is on a gross lease or a net-net lease, and the specific terms of
the lease, may also affect this estimate.
The estimates presented in this section are relevant only if Council does not elect to adopt
the capping option for the commercial and industrial property classes which would limit any
tax increases to 2.5 percent.
The analysis revealed 3,524 locations receiving preferential treatment in 1997. A summary
of the results is presented in Table 2, and issues specific to the other organizations is
presented in the following section.
Table 2
Summary of Eligibility Categories
(Organizations Located in the Commercial & Industrial Property Classes)
The first category included those organizations that are charitable or appear to be similar to
charitable in nature, based on the limited information available, and according to the
suggested eligibility criteria outlined previously. This category includes:
(iii)other Community Related Organizations (unincorporated non-profit).
This category includes organizations concerned with human and community services (such
as family, health, immigration, seniors, women, legal, daycare, etc.), arts and culture,
recreation, and religion. Again, based on the limited information, these organizations would
appear to meet the public benefit test in that they provide what appears to be a concern for
the relief of poverty, or for people in emotional, physical or spiritual distress, there appears
to be a clear service or benefit to the community in the areas of science, education,
philosophy, religion, arts, sports or other causes beneficial to the community (human
services, health, recreation, human rights and equity), the services appear to be accessible to
the community, and probably, many of these are non-profit in nature (incorporated or
unincorporated). Table 3 provides a distribution of charitable activities referred to under
category 1(a) of Table 2, and Table 4 provides a distribution of activities that appear to be
similar to charitable in nature and that appear to meet the preliminary eligibility criteria, as
referred to under categories 1(b) and 1(c) of Table 2.
The second category ("Other Organizations") on Table 2 consists of those organizations,
which after reviewing the limited information, do not appear to meet the suggested
eligibility criteria for similar organizations for one of two reasons: (1) the activity does not
appear to be charitable in nature or the organization would appear to provide benefit to a
narrow segment of the community (Category 2(a)); and (2) that it is a space occupied by
individuals or commercial entities for which the space was deemed to have no business use
(Category 2(b)). Previous preferential tax treatment in itself should not be considered as
cause for the City to continue with providing preferential treatment, and some 1,400
locations of this type should not be included within the scope of the tax rebate program.
These spaces include not-specified properties, consisting of properties in commercial space
occupied by individuals, parking spaces, storage lockers, basements, garages, property rental
offices and utility rooms, all of which the Province has previously coded as non-business
use. Table 5 provides a distribution of the activities covered by these other organizations.
Specific issues are discussed in the following section.
The preliminary eligibility criteria, as previously outlined, would exclude the organizations
within the second category in Table 5 above ("Other Organizations"). These organizations
benefited from the tax reduction for non-business activities under the old tax system.
Council can identify which, if any, of these types of organizations might also be considered
for the tax rebate. The by-law would then include the desired organization(s) under the tax
rebate program. The following organizations have voiced concerns to date:
Consists of private studios occupied by individuals or collectives (groups of artists working
together under a group name) for artistic purposes. Activities include the creation of works
in the area of visual arts, film and video, choreography, writing, music. Purpose may include
some commercial activities, which may be incidental and subordinate in purpose to the
production process.
It is noted that the City has a grants program to assist artists. Rather than modifying the
definition of "similar" organizations to include activities of a limited membership or for
which incidental and subordinate commercial activities may be engaged in, an alternative
approach my be to modify the existing grants program in order to provide additional
financial assistance. However, grants would be funded by the municipality and there would
no sharing on the education side.
Legion and Veterans Clubhouses (23 organizations, municipal rebate $113.0 - $282.0
thousand):
Consists of clubhouses and halls occupied by those who served in the armed forces of Her
Majesty or Her Majesty's allies in any war.
It should be noted that property tax relief for Veterans' Clubhouses may be provided
through exemptions from general purpose rates through the Municipal Act or by a
municipality=s general power to make grants.
Prior to 1998, the former City of Toronto was the only municipality that provided a
significant level of property tax relief for Veterans' Clubhouses, which included City, Metro
and school board taxes. The cities of York and Etobicoke provided grants to Veterans'
clubhouses, but their grants were limited to the municipal share of taxes only. The cities of
Scarborough, North York and the Borough of East York do not provide any property tax
relief for Veterans' clubhouses.
By direction of the Budget Committee, status quo funding in the amount of $194,362.00
has been provided in the 1998 grants programs budget for Veterans' clubhouses. A separate
report on Veterans' Clubhouses is included in the agenda of the Task Force.
(B)Analysis of Potential Applicants - Residential & Multi-Residential Property Classes:
It should be noted that the assessment data does not provide a unique identifier for charities
or similar organizations located in the residential or multi-residential property classes.
Nevertheless, a sample survey was conducted using the 1997 Directory of Community
Services in Metropolitan Toronto ("the Blue Book"). This directory provides a
comprehensive list of human services, community, cultural, arts, health, education and
recreational organizations, which are primarily non-profit in nature. The 1997 publication
lists 1,275 such organizations in Toronto. Based on a sample, estimates of the number of
organizations within various property classes along with the old and new taxes payable is
shown in Table 6 below.
Charities or similar organizations located in the residential or multi-residential property
classes are not affected by tax increases resulting from the elimination of the Business
Occupancy Tax, as is the case with properties in the commercial/industrial classes. A tax
rebate would provide such organizations with a financial benefit they did not previously
enjoy, with direct funding consequences to the City. From Table 6, a 40 percent rebate to
charities and similar organizations in the residential and multi-residential property classes
would result in a current funding impact estimated at $4.1 million (City share).
Finally, it should noted that the tax rebate program under Bill 16 does not affect treatment
of those properties that currently enjoy either a tax exemption or a tax cancellation under a
Private Member's Bill.
The administrative details for the implementation of the tax rebate program, if required,
have yet to be developed. The Act now prescribes certain administrative procedures,
including the timing of the tax rebates and a transition process for 1998. The Bill further
provides for the Minister of Finance to make regulations governing procedural requirements
that such a program may include.
Any tax rebate would have to be implemented by by-law of the City. The by-law outlining
the details of the tax rebate could define "similar organizations" by listing all the
organizations deemed by Council to be eligible for the rebate. This would eliminate the
administration required to determine which organizations would be eligible for rebates.
Alternatively, the by-law could contain clear criteria for defining a "similar organization" so
that the criteria can be applied effectively by staff.
Should the capping option not be adopted, significant administrative resources would be
required to implement the tax rebate program. This would involve screening all applicants
and the determination of eligibility. The preliminary estimates suggest 1,305 potentially
eligible organizations in Category 1, and it is anticipated that a significant number of other
organizations would apply for a rebate, and would be screened out as ineligible. An appeals
process may then have to be administered to ensure due process for those applicants
determined as ineligible in the initial application. It is estimated such a program would
require the dedication of several staff persons.
A tax rebate program is not a grant program. However, the decision process shares similar
issues and challenges that are encountered in a grants program including the administration
of an eligibility criteria and an appeals process. The Municipal Grants Review Committee
was established to oversee the development of a Municipal Grants Policy and to provide
direction with respect grants administration decisions. Many of the "similar organizations"
identified as potentially eligible for a tax rebate under the preliminary eligibility criteria
outlined in this report already receive grant support from the City for providing non-profit
public services in the areas of human services, culture and heritage, public health, recreation,
human rights and equity. These organizations could be eligible for the tax rebate. It is
recommended that the preliminary criteria for the determination of the eligibility of similar
organizations be referred to the Municipal Grants Review Committee to be considered as
part its development of a municipal grants policy.
A further report on the administrative procedures relating to the tax rebate program will be
forthcoming if necessary.
The Bill also introduces new requirements for a mandatory tax rebate program for registered
charities in the commercial and industrial property classes. However, should the
municipality choose to adopt the capping option, tenants of leased premises, including
eligible charities and similar organizations, as well as owners, would also be protected by
the 2.5 percent limit on property tax increases, and a rebate program would be unnecessary,
but still optional to the municipality.
Should Council adopt the capping provision for the commercial and industrial property
classes, this report recommends that no property tax rebate program be instituted for the
duration of the capping period.
Pursuant to Bill 16, should Council not adopt the capping provision, a minimum 40 percent
tax rebate would be mandated for registered charities (as defined under the Income tax Act
that has a registration number issued by the Department of National Revenue) located in the
commercial and industrial property classes. Bill 16 makes it optional to provide a tax rebate
to organizations that are similar to eligible charities or a class of such organizations as may
be defined by Council, provided they are in the commercial or industrial property classes.
If Council does not adopt the capping provision for the commercial and industrial property
classes, it is recommended that a 40 percent property tax rebate program be instituted for
registered charities, and similar organizations located in the commercial or industrial
property classes and that meet the eligibility criteria outlined in this report. Similar
organizations would include non-profit community-related organizations (incorporated or
unincorporated) as shown under Category 1 of Table 2. Such a program would result in a
1998 current funding requirement of $3.8 million, which would benefit approximately 141
eligible charities and 1,164 similar organizations potentially eligible under the eligibility
criteria presented in this report.
The recent (June 2, 1998) amendment to Bill 16 allows municipalities to rebate taxes to
charities or similar organizations located in the residential or multi-residential property
classes. Organizations located in such property classes are not affected by tax increases
resulting from the elimination of the Business Occupancy Tax, as is the case with properties
in the commercial/industrial classes. A tax rebate would provide such organizations with a
financial benefit they did not previously enjoy, with direct funding consequences to the City.
Preliminary analysis indicates that, on average, taxable charitable and similar organizations
in the residential and multi-residential property classes will be paying less tax under CVA
than under the former tax system. A 40 percent rebate to charities and similar organizations
located in the residential and multi-residential property classes would result in a current
funding impact to the City estimated at $4.1 million. This report recommends against
extending the tax rebate to these property classes. Rather, financial assistance for charitable
and similar organizations should be considered by the Municipal Grants Review Committee
under the overall grants allocation policy yet to be established.
