Millions unpaid: The B.C. organizations and companies getting big property tax breaks

As municipal governments across B.C. look to set their budgets, CTV News looks at which organizations are exempt from property tax and why.

As municipal governments across British Columbia grapple with next year’s budgets and potential property tax hikes to maintain service levels, there are hundreds of organizations that aren’t even getting a property tax bill.

Decades-old provincial legislation under the Community Charter, which is largely duplicated in Vancouver’s charter, automatically exempts “a building set apart for public worship, and the land on which the building stands,” the lands around private and independent schools that are “regularly giving children instruction accepted as equivalent to that given in a public school,” municipally owned properties including libraries, provincially owned properties including hospitals, federally owned properties including docks and airports, universities and colleges, cemeteries and crematoriums, as well as care homes.

In addition, municipal governments have the discretion to grant “permissive tax exemptions” for heritage buildings, the land around places of worship and athletic and service clubs, heritage properties and revitalization projects, and buildings owned and occupied by operating charities.

“This is common in the English-speaking world – and actually beyond the English-speaking world,” said UBC tax law professor David Duff.

“The so-called ‘heads of charity’ are relief of poverty, advancement of education, advancement of religion, and other charitable purposes or uses that are beneficial to the community.”

A CTV News analysis of Lower Mainland communities, excepting Vancouver, found councils authorized $19 million in permissive property tax exemptions last year alone.

The outlier and the developers taking advantage

The City of Vancouver’s tax exemptions are largely automatic, with most of them statutory, except for heritage or certain redevelopment projects, which are permissive.

That makes it difficult to compare to other communities since the category for “places of worship” includes both the structure as well as the surrounding lands, the former of which is not publicly reported for other communities.

In recent years, the city has faced the increasing problem of developers giving themselves a tax break on vacant lands by taking advantage of a loophole: properties with publicly accessible planters for gardening and gravelled fenced-in lots labelled as “dog parks” have BC Assessment classifying them as “recreation” rather than “commercial,” resulting in a significant tax decrease.

“We see lots of developers who haven’t necessarily moved their rezoning along,” explained Vancouver Coun. Pete Fry. “And so, there’s still technically a commercial property, even if it’s a vacant lot. They repurpose them as community gardens or dog parks and then they can accrue pretty significant savings.”

He said the tax rate for recreational properties is approximately one-third of the rate for commercial properties, meaning there could be hundreds of thousands or millions unpaid on individual properties, and the landowners “don’t have to seek city permission.”

Fry would prefer that those lots are used for temporary modular housing, which he believes would provide a more significant community benefit than gardening or canine recreation.

How BC Assessment does its work

The Community Charter stipulates that all discretionary property tax exemptions must be published by municipalities (except Vancouver) annually, and they do so in their annual reports. There, residents can see whether their city council chooses to waive property taxes for their local legion or food bank, for example.

BC Assessment determines the value of all properties in the province every year, based on the use they had as of Oct. 31, which is important in determining which category they belong to and should be taxed on.

“It’s really important to know each year what is that property actually being used for,” explained BCA assessor Bryan Murao. “Exemptions are typically more determined by the actual use of the property as opposed to the highest and best use.”

There are myriad rules and regulations that determine which organizations are considered for exemptions. For example, if a church is renting out its basement to a daycare or other business, it could lose its exemption for that portion of the building. If a charity owns a building, but it’s no longer being used by that charity, property taxes must be paid.

Assessors usually adjust the value of properties based on market conditions that don’t require an on-site visit, but that’s not always the case, particularly if they receive a tip or complaint.

“Some properties, you know that they’re not very likely to change, whereas others, depending if you have a permit for demolition, a permit for a new tenant, something like that – it might flag it for us that we need to get out there a little bit more often to look at it,” said Murao.