Farmland owners may be able to get a 75 percent discount on the municipal residential tax rate. This special rate for farmland offers a significant savings compared to the regular residential rate, and if you handle the accounting for any farmers, you may want to help them explore this program. For example, if the residential tax rate on their land yields a $1,000 tax liability, the farm property class tax rate brings that amount down to only $250.
To qualify for this rate, farmers must have a valid farm registration number. Canadian citizens or permanent residents must own at least 50 percent or more of the farm, and the farm must earn more than $7,000 in gross farm income annually.
If the farm’s income is below the $7,000 threshold, the taxpayer can apply for an exemption. Typically, the ministry approves exemptions for startup farms, but these farmers need to be able to prove their farm is likely to earn over $7,000 in future years. They may also need to provide copies of recent tax returns showing some farming income.
If your client’s income was unusually low for a year, it may also be able to get an exemption on the income requirements, but again, it must show its farm can make $7,000 or more in future years. There are also exemptions related to age, illness, or death. To qualify for these exemptions, the farmer, farmer’s spouse, or same sex partner must be unable to carry on farming activities as usual due to aging, illness, or death. The farmer must have been operating the farm for at least 10 years before claiming this exemption, and must have been eligible for the Farm Property Class Tax Rate program during those years. Finally, the farmer must have reported at least some farming income to the Canada Revenue Agency the previous year.
Applying for the Program
When someone purchases farmland, the Municipal Property Assessment Corporation should send an application for the Farm Property Class Tax Rate program. Make sure to complete and return the application by the due date listed on the form. If your client doesn’t receive an application within 90 days of buying its farm, contact the Ministry of Agriculture, Food, and Rural Affairs.
Your clients should also contact the ministry if they want to make a change to their farming operation. If they want to get property assessed as farmland that is currently assessed as residential or another class, they need to contact the MPAC directly.
Rented Farm Land
When a property owner rents farmland to a tenant, the property owner can also claim the special farm property rate. Tenants cannot directly claim this rate because property owners bear the responsibility for paying municipal property taxes. However, the tenant must have a valid Farm Business Registration Number or the owner cannot claim the special rate. If your client rents out farmland, make sure it understands the importance of tenant farmers keeping the business registration up to date. The owner also needs the tenant to sign the application form for the Farm Property Class Tax Rate program; the tenant’s signature attests to the fact that the land is being farmed. Without that signature, the application will be denied.
Annually, your clients should receive a property assessment notice. To determine if they are receiving the Farm Property Class Tax Rate, make sure the assessment says “farm” in the property classification area. If that area is marked “residential” or anything else, they are not receiving the reduced rate. This notice also contains the assessed value of the property.
If your client believes the property is incorrectly classified or if you don’t agree with the assessed value of the property, you have the right to request a reconsideration.
Appealing Property Assessments
Requests for Reconsideration are due by the date listed on the property assessment notice. As of 2016, property owners typically have 120 days from the date the assessment was issued, but you should check the date on the form to be on the safe side. The reconsideration form requires basic contact information as well as a written explanation of why the property owner disagrees with the assessment. The property owner also needs to submit documents such as photos, assessments of similar properties, municipal zoning records, or sales information for similar properties.
Consider helping your client to fill out this form. You can mail the reconsideration request or submit it online at AboutMyProperty.ca. To submit online, your client needs a roll number and an access key from the property assessment notice.
After receiving the reconsideration request, MPAC should respond in writing within 180 days or less. If your client doesn’t agree with the response, you can appeal. You have 90 days from the date MPAC issued the response. Submit the appeal to the Assessment Review Board. This is an independent body of the Ontario Ministry of the Attorney General. Unfortunately, if the review board rejects the appeal, your client has to pay the tax as assessed.
Farming can involve a lot of hard work and low margins. To help your farming clients succeed, you should let them know about programs like this as well as about farming grants and special tax credits.