What is Real Property Tax?
Real property taxation is the oldest form of taxation in Canada. It represents 40% of the revenue generated by local governments.
Typically, real property (i.e., land and structures on the land like houses, commercial buildings, towers, and pipelines) is assessed and a rate of tax (often called a millrate) is applied annually to the value of the real property. Assessed value multiplied by the millrate equals the amount of tax that is due for the year. For example, a property valued at $100,000 subject to a millrate of 10, would generate $1000 in property tax.
REVENUE = ASSESSED VALUE x TAX RATE
It is the owner or occupier of the real property that must pay the property tax.
Other forms of real property tax include local improvement taxes and taxation for services.
First Nations under the FMA or section 83 of the Indian Act to implement their property tax jurisdiction.
How many First Nations levy Property Taxes on Reserve, and how much revenue is being generated?
First Nations exercising taxation jurisdiction continue to increase annually. Currently, more than 150 First Nations in Canada are levying property taxes on reserve.
Annual revenues to First Nations from taxation now exceed $70 million. Since 1989, more than $800 million has been generated through property taxation on reserve.
What can be taxed?
Agriculture permits and leases
Oil, gas, timber and resource leases
Crown corporations have tax immunity but grants in lieu of tax are often arranged.
Why enact a property taxation law/bylaw?
For First Nations, property taxes provide an independent, stable and flexible source of revenue, which can be reinvested in First Nation communities to build economic infrastructure, attract investment, and promote economic growth. Property taxation also establishes jurisdiction and provides First Nations with improved powers to control land development.
By enacting a property taxation law or by-law, a First Nation establishes jurisdiction over the territory to which the law or by-law applies -- the property within the reserve boundaries. Some provincial and municipal governments tax non-Native businesses located on reserve. In exercising its property tax jurisdiction, the First Nation serves notice that it is occupying the field and those provinces that are taxing on reserve lands will vacate accordingly.
Real property taxation provides First Nation communities an independent, stable and flexible source of revenue, which can be reinvested to improve services, respond to priorities, and address deficiencies in economic infrastructure. Improved community infrastructure and the provision of dependable services also attract commercial and residential development.
3. Establishment of a Regulatory Framework to Support Economic Growth
Property taxation is a fundamental pillar of financing government and future economic growth. In this regard, First Nations may choose to establish property taxation in anticipation of future growth or to better manage their current economic activity. Having the regulatory framework in place assists with community planning and allows potential investors to know what the rules are before they invest.
What is the First Nations Tax Commission?
The First Nations Tax Commission (FNTC) is a shared governance First Nation institution, which approves First Nation laws made under the First Nations Fiscal Management Act (FMA), and recommends by-laws made under s.83 of the Indian Act.
The FNTC assists First Nations in developing laws and by-laws, provides training, and dispute resolution services. It also protects the integrity of the First Nation property tax system, safeguards and enhances the First Nation tax jurisdiction, assists with capacity development, and promotes the understanding and use of First Nation property taxation and economic development.
For more information about the services provided by the FNTC, click here.
The purpose of the FNTC goes beyond property tax and local revenues. The FNTC is also about creating the legal, administrative and infrastructural framework necessary for markets to work on First Nation lands, creating a competitive First Nation investment climate, and using economic growth as the catalyst for greater First Nation self-reliance.
Established as part of the FMA, the organization receives funding from the Government of Canada, and is governed by 10 Commissioners.Nine of the Commissioners are appointed by the Governor in Council, while one is appointed by the Native Law Centre, University of Saskatchewan.
The FNTC has two offices: the Head Office located in Kamloops, BC and theNational Capital Region Office located in Ottawa, ON.
How can First Nations access the FMA?
In order to access the FMA, the Chief and Council of an interested First Nation must send a resolution of Council, to the attention of the Minister of Aboriginal Affairs and Northern Development, requesting to be placed on the Schedule. The resolution (see FNTC Sample BCR) can be mailed to:
Minister of Aboriginal Affairs and Northern Development
21st Floor, 10 Wellington Street
Once this request is made, the First Nations Tax Commission will work with the interested First Nation in developing its property tax laws.
Can First Nations with treaties or self-government agreements collect property tax?
Yes. First Nations that have Treaties or self-government agreements, and are operating outside the Indian Act, can, if they wish, come under the First Nations Fiscal Management Act (see s.141 of the FMA). This can be done through the development of regulations which can adapt the provisions of the FMA as required for this purpose. First Nations that are not Indian Act “bands” may begin the process by providing a resolution from their governing body to the Minister of Aboriginal Affairs and Northern Development
Minister of Aboriginal Affairs and Northern Development
21st Floor, 10 Wellington Street
What is the difference between s.83 taxation under the Indian Act and taxation under the First Nations Fiscal Management Act?
Section 83 of the Indian Act provides First Nations with by-law making authority for real property taxation on reserve. First Nations exercising taxation under section 83 must pass the following by-laws: Real Property Taxation and Assessment By-law, Expenditure By-law, and an Annual Rates By-law. All by-laws are subject to Ministerial approval.
The First Nations Fiscal Management Act (FMA) provides First Nations with law making authority for real property taxation on First Nation lands. First Nations that wish to exercise real property taxation under the FMA must first request to be added to the FMA schedule. Once added, First Nations can pass local revenue laws for the purposes of taxation, assessment, rate setting and expenditures. All laws are subject to the review and approval of the First Nations Tax Commission.
Taxation under the FMA has added benefits. These include:
- Certainty over tax jurisdiction
- Improved First Nation enforcement and related property tax powers
- Access to other revenue powers including Development Cost Charges, Business Activity Taxes, and Provision of Services
- Improved certainty to stimulate investor confidence
- Ability to lever property tax revenues to access low cost long term financing through debentures
What is the First Nations Fiscal Management Act?
The First Nations Fiscal Management Act (FMA) is First Nation-led legislation, which came into force on April 1, 2006.
The FMA expands local revenue jurisdiction, provides financial management certification and expertise, and improves data and statistics quality. It also improves the private sector investment climate on reserves, and provides access to debenture markets.
As an alternative to section 83 of the Indian Act, the FMA provides a comprehensive regulatory framework to support First Nation economic growth.
What is the governance structure of the FNTC?
The FNTC consists of 10 Commissioners including a Chief Commissioner and Deputy Chief Commissioner. Nine of the 10 Commissioners are appointed by the Governor-in-Council on the recommendation of the Minister. In accordance with the FMA regulations, an additional Commissioner is appointed by a non-government body.
All Commissioners hold office for no more than five years in a term. Commissioners may be reappointed.
Three Commissioners must have direct taxpayer experience on reserve – one is a taxpayer using the reserve for commercial purposes; one is a taxpayer using the reserve for residential purposes; and one is a taxpayer using the reserve for utility purposes.
The Chief Commissioner serves full time, while the other Commissioners serve part time.
Why do some First Nations collect property tax and others donot?
First Nation property taxation is an optional fiscal power. Over 150 First Nations have chosen to exercise that power for several reasons: jurisdiction, revenue, or the need to establish a sustainable long term framework to support economic growth.
How many First Nations are using section 83 of the Indian Act or have opted to use the FMA?
First Nations opting to use the FMA
First Nations using section 83 of the Indian Act
What is the Tax Administration Software (TAS)?
TAS is a tool to assist Tax Administrators working for First Nation governments through the complete annual tax cycle: assessments, budgeting, rate approval, tax notices, collection and enforcement. The software addresses the administrative rules and legislative requirements.
Click here, for more information.
As a tax administrator, what training is available to me?
The FNTC, the Tulo Centre of Indigenous Economics, and Thompson Rivers University (TRU) have developed an accredited certificate program in First Nation Tax Administration.
The Certificate in First Nation Tax Administration is intended to help First Nations implement these new powers and develop the skill set for First Nation tax administration using the FMA. This certificate assists those wanting to learn more about First Nation tax administration or those working under section 83 of the Indian Act.
For more information about the Tulo Centre and the training it offers, you may visit the Tulo Centre website.
How do I get copies of laws/by-laws?
All laws and by-laws are available on-line at www.fng.ca
. Sample laws and by-laws are also found at www.fntc.ca
What other professional support is available?
The First Nations Tax Administrators Association was formed in 1993, and provides a wide-range of support to First Nation Tax Administrators. Membership is open to employees of any First Nation who are interested or engaged in the development, implementation or administration of a program, or department of taxation or revenue generation on behalf of a First Nation.
How do I transition to the FMA from s.83?
In order to transition to the FMA from s.83, you must first pass a resolution of Council to be added to the schedule of the FMA. Once on the schedule, you must develop new property tax and assessment laws to replace existing s.83 by-laws. For more information and further steps, go to the property tax toolkit
How do I borrow under the FMA using property tax revenue?
As with other jurisdictions collecting property tax, First Nations now have the ability to use their tax revenues to access long term debt financing. Under the FMA, First Nation governments can participate in the debenture financing system, and borrow money based on the certainty of collecting property tax each year.
To begin borrowing with property tax revenues under the FMA, First Nations must satisfy several prerequisites. Briefly, First Nations must have:
• Property tax jurisdiction under the FMA;
• Financial management system certification from the First Nations Financial Management Board;
• FNFA Membership;
• Sufficient borrowing room capacity; and
• An eligible project.
First Nations opting to lever their property tax revenues to access long term capital financing through the provisions of the FMA may only do so through a FNTC approved borrowing law made under section 5(1)(d) of the FMA. The Commission has developed a sample borrowing law, and a sample borrowing agreement law. Debt servicing will be based on a percentage of annual property tax revenue. The percentage will depend on the composition of the tax base, support of membership, security of leasing arrangements, expenditure obligations, and other factors.
Are there any other types of taxes beyond property taxation?
Provision of Services
Whereas property taxes generally serve the entire reserve area of a First Nation, taxes for the provision of services are imposed on a specific area within a First Nation to fund the service or improvement applied to a particular area only.
The taxes are generally applied to parcels of land. This means that the owner of the parcel of land is responsible for paying the services tax. A services tax is allocated as an annual charge that may be levied for a set number of years depending on the law. Types of local services include:
- Street improvements;
- Bridge developments;
- Sewer and water-works; and,
- Park acquisitions and improvements.
The cost of work undertaken as a provision of services is paid up front by the First Nation then recovered from property owners within the service area using the tax. The tax may be based on a single amount for each unit or the taxable frontage of the parcel. In some instances, owners may commute the charges imposed on them for payments in cash. Typically, First Nations will contribute a portion of the cost from the local revenue generated through the First Nation’s property tax law.
Development Cost Charges
Development Cost Charges (“DCC”) are taxes collected from developers of reserve land to pay the capital costs of servicing the development with transportation (roads), water/sewer/storm-water drainage, and providing park and recreation lands and facilities. DCCs must be collected under the authority of a DCC law made under
As a taxpayer on reserve, how are my interests considered?
There are many measures that are taken to ensure the interests of taxpayers are taken into account.
For instance, a First Nation must give fair and adequate notice to taxpayers. This includes notice of their property tax laws, assessment inspections, assessments, assessment appeals, taxation, enforcement, and any FNTC reviews.
First Nations are required to provide 60 day noticeand an opportunity for persons to make representations concerning most local revenue laws. The Council must consider these representations before it makes its law. Some First Nations may also have taxpayer representation to Council laws which provide a formal structure for taxpayer representation to Council.
Taxpayershave access to the First Nation and the First Nations Tax Commission in the event disputes arise. Formal mechanisms for dispute resolution are also available through the FNTC.
The FNTC has taxpayer representation on the Commission with considerable expertise in the field of real property taxation which is represented in all decision-making.
In addition, the FNTC has a policy objective dedicated to reconciling the interests of taxpayers with those of First Nations. First Nations may develop Taxpayer Representation to Council Laws to support the interests of taxpayers. These laws provide formal structures and procedures to address taxpayer issues or concerns.
Taxpayers are encouraged to form and participate in taxpayer advisory bodies and associations. Individual and collective ideas in dialogue can create greater awareness of how real property taxation can improve services to taxpayers.
Can assessments be appealed?
Yes. Each First Nation provides a right to appeal to a First Nation appointed appellate body. Sometimes called an Assessment Review Board or Board of Revision, the appellate body uses procedures that are similar to assessment appeal procedures used throughout Canada. The process ensures appeals are conducted in an efficient, timely and fair manner. In some cases, a First Nation may have two appellate bodies for appeals.
As an efficient alternative to launching a formal appeal, some First Nations use a mechanism called a request for reconsideration of assessment. A request for reconsideration, in this instance, is where a taxpayer asks an assessor to reconsider the original assessment.
Taxpayers usually have 30 days from the time the assessment notices are mailed to make a request for reconsideration. Specific deadline dates are printed on the assessment notice. In this process, the assessor reviews the assessment of the taxable property in question and provides the taxpayer with the results of the reconsideration. If the assessor modifies the assessment, a revised notice is sent to the person who requested the reconsideration and to any other persons who were sent an assessment notice concerning the property. Typically, a request for reconsideration will deal with valuation; however, reconsiderations can also concern classification, errors, omissions, or use of exemptions.
For more information, contact the First Nation Tax Administrator.