Recently my colleague Stephen Longo mentioned the "highest
and best use" principle which has been leading to sky
rocketing property assessments. It's a real estate
appraisal principle whereby property is valued based
on its possible uses. In a property tax context,
such a valuation can result in not-for-profits and charities
receiving significant increases in
their assessments because property they own is
valued on its notional "highest and best
use" instead of its actual current
use. To further explain the concern and what
organizations should do, I asked Stephen some questions...
Question: Would you please provide an example of how the
"highest and best use" principle could affect
not-for-profits and charities?
Stephen: If an NFP or charity owned a
property that was not tax-exempt and the assessing authority has
re-valued it based on its "highest and best use", the
NFP/charity would be paying property taxes based on a higher order
of use than the actual use – for example, high density condo
development. The increase in value and higher property tax
class means the NFP/charity would be paying much higher taxes that
don't reflect the actual use of the property.
Question: Aren't there tax rebates provided to
not-for-profits and charities regarding property tax?
Stephen: NFPs/charities are eligible for
a rebate of property taxes paid in commercial or industrial
property they own or lease. The rebate is typically 40% of
the taxes paid and an application must be made by the last day of
February of the year following the year for which the rebate is
claimed (i.e. Feb. 28, 2014 for 2013).
Question: What should these organizations look for to
determine whether the highest and best use principle has been
Stephen: If there has been a significant
increase in your assessed value year over year – by an amount
greater than 15% – it is possible the property has
been re-assessed using its perceived redevelopment potential.
You can determine this by looking at your Property Assessment
Notice or your Final Tax Bill issued by your local
Question: What should organizations do if they suspect
the principle has been used?
Stephen: The organization should request
the detailed valuation records from the assessing authority, known
as the Municipal Property Assessment Corporation
("MPAC"). If the property has been valued using
land rates, rather than income (for an office building), this is a
pretty clear sign it has been valued on "highest and best
use". If this has happened, the organization should
consult a property tax professional to get advice as to how to
challenge the assessment, such as by filing an appeal.
Question: Are there any risks with filing an appeal on
one's assessed value?
Stephen: It is possible that MPAC could
seek an increase in the assessment if an appeal were filed.
When reviewing your assessment, make sure you canvass the
"exposure" to the possibility of an increase in the
assessment with your professional advisor.
For property in Ontario, it is too late to appeal the 2013 tax
year assessments. However, the deadline to
appeal your property assessment for the 2014 tax
year is March 31, 2014. An appeal filed for 2014 can
also impact the 2015 and 2016 tax years.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).