Tax Appeals - Sections 442 and 443 of the Municipal Act -

Creation of a Committee of Council for Tax Appeals

The Strategic Policies and Priorities Committee recommends the adoption of the following report (December 14, 1998) from the Chief Financial Officer and Treasurer:

Purpose:

To establish a policy for The City of Toronto for the hearing and disposition of tax appeals pursuant to sections 442 and 443 of the Municipal Act including the creation of a committee of Council to carry out the function. For Council to authorize this function for implementation in 1999, a by-law must be adopted by Council prior to December 31, 1998.

Recommendations:

(1)That under Section 105 of the Municipal Act, a by-law be passed authorizing the Corporate Services Committee to hear and make recommendations on all tax appeals, pursuant to sections 442 and 443 of the Municipal Act for 1998 and subsequent tax years;

(2)That the Assessment Review Board continue to hear and dispose of all section 442 appeals that relate to 1997 and prior tax years for all former municipalities with the exception of North York where outstanding appeals filed prior to 1998 be dealt with by the Corporate Services Committee on a priority basis;

(3)That any outstanding by-laws in place in any of the former municipalities that established committees or delegated responsibilities to hear and dispose of applications under section 443 of the Municipal Act be repealed;

(4)That as a matter of policy, the hearing and disposition of applications submitted under section 442 (e) of the Municipal Act, as poverty appeals, be delegated to the Assessment Review Board;

(5)That the Chief Financial Officer and Treasurer be responsible for the full administrative process as delegated by the City Clerk for the receipt of the applications and the mailing of the required notices;

(6)That no fee be charged by the municipality to initiate appeals under section 442 of the Municipal Act; and

(7)That the City Solicitor be directed to introduce a bill in Council to have the Corporate Services Committee hear and dispose of appeals pursuant to section 442 and 443 of the Municipal Act.

Funding Source, Implications and Impact Statement:

None.

Background:

Section 442 of the Municipal Act allows Council to cancel, reduce or refund taxes levied for the following reasons:

(a)property that has ceased to be liable to be taxed at the rate it was taxed on the returned roll;

(b)property became exempt from taxation;

(c)property razed by fire or demolished;

(d)mobile unit that has been removed from the municipality during the year;

(e)taxpayer unable to pay taxes due to sickness or extreme poverty;

(f)overcharged by gross or manifest clerical error; or

(g)property could not be used for at least three months due to repairs or renovations.

These tax appeal applications can be initiated by the property owner, the Regional Assessment Commissioner or by the City itself. All former municipalities in Toronto, except North York, delegated the authority to hear and dispose of all applications and appeals pursuant to section 442, of the Municipal Act to the Assessment Review Board (ARB). Only 14 of the more than 900 municipalities in Ontario delegate this function to the ARB.

Section 443 of the Municipal Act allows Council to make decisions relating to errors of fact on supplementary and omitted assessments. This section permits correction of these types of errors for the previous two years.

Comments:

Section 442 Appeals:

A consistent and uniform policy must be established prior to the processing of any 1998 tax appeals. Unless delegated by City Council by-law, section 442 applications are to be dealt with by municipal council. Although most of the former municipalities in Toronto delegated the disposition of Section 442 appeals to the ARB, there are legitimate reasons for Council to retain responsibility to hear them.

The following table sets out the advantages and disadvantages for these appeals to be heard by either the City or the ARB.

It is expected that the number of applications under section 442 for tax relief will decrease substantially in 1998 and in subsequent years due to the elimination of the Business Occupancy Tax (BOT). The BOT accounted for approximately 80 percent of all section 442 applications because this type of appeal was submitted whenever a business tenant moved or closed a business. For example, in 1997, for all the former municipalities in Toronto, the total number of section 442 applications was approximately 24,000 and of these, approximately 19,000 or 80 percent were applications related to business closures or movements. With the elimination of the BOT, the number of section 442 applications is expected to decrease significantly and is further justification for the City to be responsible for their hearing and disposition.

The only type of appeal under section 442 of the Act that is recommended to be delegated to the ARB is an application under section 442 (e). These are appeals for which the taxpayer is requesting relief from payment of tax due to sickness or extreme poverty for which personal financial information is required to justify the request. The application would be submitted to the City, as with all other applications under section 442, and would be reviewed by City staff. However, it is recommended that these appeals be heard by the ARB to ensure confidentiality and impartiality.

Previously, the former City of Scarborough was the only municipality to charge a fee for filing appeals under section 442. City Council at its meeting held in April 16, 1998, (CSC, Report No. 3, Clause 31) adopted a standard fee structure for administration fees applicable to tax revenue, and discontinued the fee previously charged by Scarborough.

The section 442 process should to be administered entirely by the Finance Department. Although the Municipal Act specifies that applications made under section 442 be submitted to the City Clerk, its function would be that in name only and the actual process would be administered by the Finance Department. Finance staff would receive the applications, provide notices of acknowledgment of receipt, forward applications to the Regional Assessment offices for review, calculate the tax adjustment, prepare and mail the notices of decision, and schedule the hearings before the Corporate Services Committee. If any taxpayer did not agree with the tax adjustment, the opportunity to be heard before the Corporate Services Committee would exist.

The Treasurer would provide a report to the Committee for each meeting containing a list of all applications, account numbers, reasons for applications along with the recommendation for tax adjustments for each application, for review and approval by the Corporate Services Committee. The Corporate Services Committee would be required to consider Finance staff's recommendation for each application and the applicant's objection, if any. The report would also include the total number of applications and total dollar value of adjustments.

To ensure that all applicants are dealt with in a timely manner. The application should be dealt with at the regular meeting. There should be no minimum number of applications to be disposed of for the Committee to consider them. Delays to taxpayers should not be due to volume of applications to be heard.

There are some applications filed under section 442 for the 1997 tax year and prior years in the former municipalities that remain outstanding. These applications should be dealt with in the same manner and process under which they were filed. For all former municipalities except North York, these applications should be dealt with by the ARB. In North York, the applications were dealt with by Management Committee through to City Council. Since that committee no longer exists under the amalgamated new City of Toronto, outstanding applications remain to be disposed of. It is recommended that Corporate Services Committee deal with the outstanding North York applications on a priority basis.

Section 443 Appeals:

Applications under section 443 of the Municipal Act should also be disposed of through the Corporate Services Committee. Section 443 of the Municipal Act allows Council to make decisions relating to errors of fact on supplementary and omitted assessments. This section permits correction of these types of errors for the current and previous two years. The errors cannot be an error of assessor judgement.

In the former municipalities, section 443 applications were disposed of through Council except the City of Toronto where they were delegated and disposed of through the Court of Revision. It is recommended that the City Solicitor be directed to repeal any by-law in place that delegated the authority to dispose of section 443 applications in any former municipality in Toronto. For the former City of Toronto, the authority for the Court of Revision to hear section 443 applications should be repealed as well.

A by-law to delegate section 443 applications for the new City of Toronto should be put in place and that responsibility be delegated to the Corporate Services Committee.

I have consulted with the City Solicitor in the preparation of this report.

Conclusion:

In the former municipalities of Toronto, different methods were employed to hear and dispose of applications for tax appeals under Section 442 and 443 of the Municipal Act. In order to establish a uniform policy for the City of Toronto, it is recommended that the Corporate Services Committee hear and dispose of all such applications for 1998 and subsequent years. However, it is recommended that Council delegate to the Assessment Review Board the responsibility for tax appeals made under Section 442(e) of the Municipal Act (poverty appeals). These recommendations will ensure that all tax appeal adjustments are processed on a prompt and timely basis for taxpayers.

Applications filed for tax years prior to 1998 should be dealt with using the same process under which they were filed. For all former municipalities, except North York, the ARB should dispose of them. For North York, which had its City Council hear these appeals, it is recommended that any outstanding appeal be heard by the Corporate Services Committee on a priority basis.