Although several municipalities have private legislation that allows limited deferral of taxes for certain eligible categories of homeowners, there is currently no general legislative power to defer taxes. Under the new provisions, single tier and upper tier municipalities are required to pass a by-law to defer, cancel or provide other relief with respect to all or part of the increases in municipal and education taxes resulting from changes to the assessment on property in the residential/farm property class owned by low income seniors or low income persons with disabilities or their spouses. Municipalities have the flexibility to determine the amount of relief and the type of relief (e.g. deferral or cancellation), as well as the rate of interest (up to market) to charge on deferrals. They also have the flexibility to define what constitutes low income, senior, and disabled, for the purposes of the program.
In developing these definitions, it is helpful for municipalities to consider existing definitions that have been developed by those municipalities with private legislation to grant deferrals. For example, the City of Kingston Private Bill (1993) uses eligibility to receive benefits under the Family Benefits Act, the General Welfare Assistance Act and the Old Age Security Act (Canada) to define who is eligible for a tax deferral. Other definitions could also be used.
Assessment-Related Tax Increases
The definition of assessment-related tax increase will vary depending on the year that a municipality wants to provide the relief. For the 1998 taxation year, the assessment-related tax increase for which the relief will be provided is the same as the amount calculated for phase-in purposes. Where the municipality has opted to phase-in tax increases, the maximum amount of taxes that can be deferred is the tax responsibility after the phase-in adjustment.
Assessment-related tax increases for any year after the 1998 taxation year will be determined in accordance with regulations made by the Minister of Municipal Affairs and Housing.
No Delegation
The upper tier cannot delegate the authority to defer taxes to lower tier municipalities, but an upper tier by-law providing for a deferral also applies to its lower tier municipalities and school boards which are responsible for some of the amounts deferred. Limiting the ability to defer taxes to only upper tier and single tier municipalities makes it possible to maintain uniform deferral practices across the different lower tier municipalities in an upper tier.
Charge Backs
While upper tier and single tier municipalities have the authority to pass by-laws to provide relief from assessment related tax increases, lower tier municipalities may have the task of collecting the taxes. If a lower tier municipality levies a tax rate for school board and upper tier purposes in respect of which there is a deferral or cancellation of tax increases or other relief, the amount of taxes the lower tier municipality shall pay the school board and the upper tier municipality shall be reduced accordingly. When the deferred taxes and interest are paid back to the lower tier, the lower tier is required to pay the school board and the upper tier its share of the amount.
Interest to be Charged on Deferral of Taxes
A municipality that passes a by-law to defer taxes may also specify an interest rate to be charged on deferred taxes. The municipality is free to choose any rate up to the market rate. Municipalities may waive interest and penalties on amounts that were not paid when they were due but are no longer owed as a result of a deferral or cancellation given to the ratepayer. If a taxpayer paid their taxes before a deferral or cancellation was given by the municipality, the municipality may pay interest on the excess taxes paid by the taxpayer.
