The deadline for registered charities (and eligible, similar entities) to submit property tax rebate applications for 2015 is the last day of February, 2016. Given the many variables that may be involved in an application, and the opportunities for early submission and therefore earlier cashflows, now is a good time to get started on rebate applications.
Under Ontario municipal law, municipalities may offer registered charities a property tax rebate of at least 40% on eligible commercial or industrial property that the charity occupies. Municipalities may also offer rebates to organizations deemed similar in nature to registered charities. For example, the Niagara Region offers rebates to legions and navy leagues. Municipalities enact by-laws setting out the terms of their particular rebate program, so rebate programs and application requirements will vary across municipalities. Most municipalities offer registered charities the minimum 40% rebate, but some may offer higher rebates. For example, the City of Peterborough offers registered charities a 100% rebate to a maximum of $50,000 per annum. Rebates are not provided automatically, so eligible organizations must apply for the rebate annually, even if they have applied in previous years. Municipalities generally require that property tax accounts are current for any property for which a rebate is claimed.
In addition to the property tax rebates, there are other programs, including property tax exemptions or reduced property tax rates, which charities and non-profits can investigate.
To access the rebates, organizations must:
- Be a registered charity as defined in section 248(1) of the Income Tax Act, or, must meet the definition of “similar organization” set out in the municipality’s by-laws.
- Have occupied the property as owner or tenant, during the period for which the rebate is claimed.
- Have occupied a commercial or industrial property (i.e. the rebate is not available for residential properties).
- Be able to identify the amount of property taxes, exclusive of GST, paid or included in rent or lease payments.
- Complete and return the municipality’s rebate application form, with the required supporting documents or information.
Supporting information and documentation usually required includes:
- A letter from Canada Revenue Agency’s Charities Directorate, confirming the organization’s current registration, business registration number and effective date of registration.
- A copy of the lease or rental agreement. For some municipalities a copy of the lease is only required for the first application, whereas others require a copy of the lease with each year’s application even if a copy was provided in the past, and even if the same lease is currently in place.
- A reconciliation statement showing the total property tax and how it is allocated between tenants, in cases where the property has other tenants or occupants.
The landlord may be required to sign the application form, to attest to the accuracy of the information included. Municipalities generally require one application form for each property for which a rebate is being claimed. The information required is typically found in lease or rental agreements, and may include: square footage of the property; square footage occupied by the applicant; effective date of occupancy and whether the lease is a gross or net lease.
Some municipalities will deny the rebate if the application is late, so it is a good idea to aim for early submission. If for example, the municipality requires the landlord to sign the application form, the timing of completion will be partially outside the organization’s control, and this increases the possibility of delays in the turnaround time to complete the application. There may be further potential for delay if the organization occupies multiple properties and therefore has to complete more than one application.
Several factors are conducive to easy and early submission. There is a wide window, exceeding a year, for submitting applications, and applications may be submitted based on estimates. The municipality will later adjust the rebate based on the final tax bill. Additionally, some municipalities will accept applications through several means, including fax or email.
One incentive for for early submission (and therefore earlier cashflows) – municipalities must pay the rebate within 120 of receiving the application, with the first 50% being payable within 60 days of receiving the application.
- Submit applications early, or at minimum, on time – i.e. before the last day of the February following the tax year. (For 2015 applications this is February 29, 2016, however several municipalities’ application forms currently reflect a February 28, 2016 deadline, and in those cases it is best to meet the earlier deadline.)
- Even if the application is late, still submit it. Some municipalities may pro-rate the rebate.
- Even if some supporting documents are missing, submit the application. A municipality is less likely to forgive late submission of the application, but may be more flexible with the submission of supporting documents.
- Even if it is not 100% certain that the organization is entitled to the rebate, submit the application. There are no application fees and the municipality will evaluate the application and decide whether the organization is eligible.
- Retain proof of submission of the application. For example, retain copies of mail or courier receipts or fax transmission confirmations. If hand-delivering the application, have the municipality stamp and date an extra copy “Received”.