Developers need to Appeal the Additional School Tax (AST) AST Should Not be Applied to Sites Awaiting DevelopmentIf a developer holds a parcel of land for future development, it likely will be charged an additional amount of school tax (AST). In our opinion, that tax is not applicable, and an APPEAL must be filed by January 31st to the Property Assessment Review Panel (PARP).
So why is the tax not applicable?
If the property:
- Is vacant, it is exempted based upon the Musqueam Assessment Appeal Board case, recently decided.
- Has temporary use, or has a house located on the site, then it has “use” under the School Tax Act and should also be exempted.
Additional School Tax is charged on Any “dwelling unit” with a value over $3,000,000.
Under Section 117(1) of the School Act, a “dwelling unit” includes land with “No present use.”
The first question then is whether a property purchased or held for development and actively in the development application process has a “use.” If it does, then NO Additional School Tax should be payable.
Main Issue (Musqueam Case)
In an Appeal Board case, Musqueam Block F Land Ltd (2021 PAAB BC 2021-0032), the Board found that for the purposes of the School Act, that for a property with the amount of development activity that had occurred before Oct 31, 2020, it cannot be said that the land under development has “no use.” Hence, the tax did not apply.
The case is being appealed by BC Assessment to the supreme court.
BC Assessment advocated that if a property had a “present use,” it would not qualify under 1(1)(c) as residential and would be classed (06), further increasing the costs of housing. The Board did not agree.
Subsequent Issue (Temporary Use)
Development sites with residential houses are being charged School Tax. The use of these sites is “development” but has a temporary use of “residential.”
The assessor stated that “use that is interim and incidental to development can occur on a property without that use constituting “present use.” This opinion is BCA’s interpretation of Vancouver vs. Bastion Development Corp 1996 (CA021118 BCCA). In that case, the court stated that incidental permission given by Bastion for parking on the site, until construction was to begin, did not affect the classification of the site as residential. The Appeal Board found that such use was for security reasons. In the case of residential occupancy, it is to avoid the Empty Homes Tax.
A developer should consider the ramifications of AST for any property that has a residential classification, and lodge an appeal if the above circumstances are relevant.
If you need further elaboration or have questions, contact Peter Austin.
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