Charitable and non-profit entities may receive a range of tax advantages, some of which can potentially be quite significant. One such advantage is a break on property taxes. In Ontario, the Assessment Act provides a full exemption from property tax to various charitable and non-profit outfits, including religious organizations, care homes, child care centres, cemeteries, educational institutions, public hospitals, and more. Similar exemptions can be found throughout Canada, as well as abroad.
These exemptions can amount to real and vital savings for the affected organizations. However, as always, it is the responsibility of the organizations themselves to ensure that they meet the requirements of such exemptions and that they are receiving everything they are entitled to. The government is unlikely to come knocking and alert you to a tax exemption you are not taking advantage of. What it might do instead is to question or re-assess an exemption you are already enjoying, so it pays to be prepared.
The key question non-profits must consider is whether they meet the exact specifications in the relevant legislation. For example, section 12 of the Assessment Act provides for a property tax exemption for “land owned, used and occupied by…any charitable, non-profit philanthropic corporation organized for the relief of the poor if the corporation is supported in part by public funds.” This one exemption includes a veritable laundry-list of boxes to be ticked.
It is especially important to note that the word “charitable” in provincial laws does not necessarily refer to charitable registration with the CRA. An organization’s purposes can be considered charitable within that province’s law regardless of whether or not the organization is a registered charity. The section 12 exemption quoted above is referring to qualifying as a “charitable corporation” under the common law, which in the case of Ontario means the definition set out by the Public Guardian and Trustee.
Engaging exclusively in activities that are legally charitable is not enough to earn, or keep, an exemption from property taxes. The organization must also have a set of corporate purposes that meet the relevant definition of “charitable”. They must also be exclusively charitable – one bad apple will most definitely spoil the bunch. As such, it is eminently important that corporations engaged in charitable work undertake a periodic review of their purposes, as stated in their governing documents, to ensure they accurately and completely describe the corporation’s current activities and do not contain wording that unnecessarily brings them outside of the definition of charitable. Your tax rates depend on it.
Author: Alexandra Tzannidakis
Alexandra Tzannidakis is an associate lawyer at Drache Aptowitzer LLP. She practices in the areas of Tax and Charity Law. She can be reached at firstname.lastname@example.org.