Additional School Tax Exemption for Developers
A property under construction is generally exempt from Additional School Tax (AST), HOWEVER land in the development phase prior to construction is TAXED as BC Assessment state that it has “no use.”Additional School Tax is paid on “dwelling property” as defined under Section 117.1 (1) of the School Act, amended in 2018 which clause includes land having no present use.
Does land going through the development process have “no use?” This concept was challenged at the Appeal Board (2021 PAAB BC 2021-0032), known as the Musqueam case.
BCA argued that many Court Cases had concluded that for determining “classification,” actual construction must have commenced for use to change. Thus the definition under the School Tax would be the same.
The Board considered that the interpretation in the School Tax Act of “land having no present use” is different, determining that, in principle, development sites were exempt.
The reasoning was as follows:
1. The School Act is a different act than the Assessment Act.
2. It is designed to raise revenue for school boards.
3. It must be interpreted separately as intended by Parliament.
4. Had the Government meant it to be as per the Assessment Act, it would have referenced that Act.
5. The objectives of AST were to:
- Exempt rental properties.
- Encourage owners to develop.
- Discourage land bankers.
- Bring stability to the market.
1. Rental use.
2. Significant steps taken in the process of development such as:
- Development/construction agreements in place.
- Rezoning application made.
- Financing in place.
- Soft costs incurred.
- Offsite costs incurred.
- Site clearance.
- Property fenced.
- DP application made.
4. Phase I of a development needed to be completed before Phase II started.
We await BC Assessment’s interpretation of the ruling and their requirements of what is needed to qualify for exemption.
Please contact us if you have any concerns about how this decision affects your property now and in the future.
Peter Austin, BSc., AACI., C.Arb.
Publications
- Additional School Tax (AST) APPEALS UPDATE
- Effect of Consolidation on Property Taxes
- 2024 Property Assessment Value Changes
- Potential Property Tax Relief For Local Businesses
- Reasons For Landlords To Appeal Their Property Assessments
- Developers need to Appeal the Additional School Tax (AST)
- Misconceptions within the Property Assessment Process
- Additional School Tax Exemption for Developers
- Minimizing Property Tax on Development Land
- Assessment Of Residential Sites Under Construction
- Should Homebuilders Be Paying Additional School Tax?
- Vancouver Vacancy Tax
- Resolving Disputes - A New Approach
- Opportunities for Brokers
- How are School Taxes Calculated? | doc