Frequently Asked Questions
- Why doesn't the Government of Canada pay property
taxes on the property it owns?
- Why does the Government of Canada make payments
in lieu of property taxes?
- How many kinds of PILT are there? How is each
calculated?
- Where do the funds to pay the PILT come from?
- Why was the name of the payment changed from Grant
to PILT?
- How are the values used for calculating PILT set
for federal property?
- Does the federal government set the tax rates?
- Why is PILT not paid for third party tenants in
Crown properties?
- Is there any exception where PILT may be paid
for third party tenants in Crown properties?
- Do third party tenants in Crown properties have
to pay realty taxes on the space they occupy?
- What happens if third party tenants in Crown
properties default on their realty taxes?
- What can a custodian department do to ensure
the PILT is correct on its properties?
- Does the federal government pay property taxes
or PILT on property leased from the private sector?
- Does the federal government pay PILT on property
leased from other tax exempt bodies, like the Provincial Government?
1. Why doesn't the Government of Canada pay property taxes on the property
it owns?
A. Under Section 125 of the Constitution
Act, 1867, the Government of Canada is exempt from paying
any taxes levied by local and provincial levels of government of
which property taxes are an example. However the Government of Canada
does make payments in lieu of property taxes to local governments.
2. If it is exempt, why does the
Government of Canada make payments in lieu of property taxes?
A. The federal government recognizes the valuable benefits
received from both provincial and municipal levels of government
in Canada and feels it has a moral obligation to contribute to the
cost of local government where federal property is located. However,
in light of the federal government's constitutional exemption from
taxation, these payments are made at the discretion of the Minister
of Public Works and Government Services Canada, or the heads of
Crown corporations/agencies.
3. How many kinds of PILT are
there? How is each calculated?
A. There are five kinds of charges against real property
for which payments in lieu are made:
- Payments in lieu of real property taxes - The PILT is the product
of the federal property value multiplied by the effective tax
rate plus any mitigation measures and is paid on an annual basis.
- Payments in lieu of frontage or area charges - These are similar
to improvements/betterment charges, for instance, for installation
or repair of sanitary and storm sewers, or street lighting. The
PILT is calculated by multiplying an applicable rate by a dimension
of the property, such as the frontage or area. The total eligible
cost for the improvement is calculated and then billed either
as a one-time payment, or debentured and billed in annual installments.
- Payments in lieu of service charges, for municipal services
not included in the tax rate, for example, unmetered water or
garbage collection. To be eligible, these must be set as annual
flat rate charges for a service provided to all property in a
particular class, billed to the property owner, and not dependent
on consumption.
- Late Payment Supplements - These supplements are made to compensate
taxing authorities when payments in lieu of real property taxes,
frontage or area charges or service charges are unreasonably delayed.
They are calculated by applying the lesser of either the taxing
authority's late payment rate, or the rate set by the Financial
Administration Act, to the amount of the payment that is late,
over the period for which it is late, plus 15 days for processing
and mailing after the cheque requisition date.
- Payments in lieu of business occupancy tax (where applicable)
paid by Crown corporations listed in Schedule IV of the Act against
their property held as an agent of the Crown. Business occupancy
taxes are usually calculated as a percentage of the real property
tax, depending on the type of business.
4. Where do the funds to pay the PILT come from?
A. For all departmental property, the actual payments are
made by Public Works and Government Services Canada (PWGSC), as it is the
common service provider for all aspects of the PILT to all government
departments and the Minister of PWGSC is responsible to administer the PILT Act.
However, each custodian is responsible for the PILT liability on its properties
as they receive PILT funding as part of their annual departmental budgets received from Treasury
Board. A memorandum of understanding (MOU) is signed between PWGSC (PILT Program)
and each custodian department which details the services being provided, and the
manner, timing and source of reimbursement for the funds expended as payments in
lieu of taxes.
For Crown corporations, such as Canada Ports Authorities or the
Seaway Bridge Corporation, that contract to use the services of
the PILT program, the MOU includes a full range of
valuation services. However the amount of PILT determined to be
paid is recommended to the corporation and payments are issued by
the corporation itself.
5. Why was the name of the payment
changed from Grant to PILT?
A. PILT is the acronym for "payment in lieu of taxes."
It is a relatively new term used to describe what was previously
known as "grant in lieu of taxes" or GILT, which had been
authorized under the Municipal Grants Act, 1980. As part
of the Minister's modernization initiative of the Municipal Grants
program, which begun in the late 1990s, the name of the Act was changed
to the Payments in Lieu of Taxes Act and the acronym
became PILT. These changes were originally suggested by the
Federation of Canadian Municipalities (FCM)
whose members believed that using the term "grant" for
the payments made in lieu of property taxes did not reflect the
value of the services provided by municipal levels of government
to federal properties. Using "payments" rather than "grants"
puts the emphasis on the Government's responsibility as a property
owner to share in defraying the cost of local government, rather
than its generosity in making a payment which it is not legally
obliged to make.
6. How are the values used for calculating PILT set for
federal property?
A. In Canada, assessment of real property and the setting
of property class is typically the responsibility of the provincial
or municipal levels of government. However under the Payments in Lieu of Taxes Act, the class and value to be applied
to federal property for calculating the PILT is that class and value
which, in the opinion of the Minister of Public Works and Government
Services Canada, would be applied if the property were privately
owned. Due to the unique nature of many of the federal facilities,
it can take considerable expertise to establish an appropriate class
and value. In addition, the PILT Act does establish slight differences
between private taxable property improvements and federal improvements
that are subject to PILT. For example; the runway surfaces at federal
airports are improvements that are specifically excluded under the
PILT Act, but are assessable and taxable at privately owned airports.
Therefore the eligibility, class and value used to calculate the
PILT on federal property is established by the PILT Program valuation staff
within the context of both local assessment legislation and procedures, and
the PILT Act and its regulations.
7. Does the federal government
set the tax rates?
A. No... The tax rates and tax classes are set by local municipal
taxing authorities, according to municipal and provincial legislation. Once the
PILT valuation staff is satisfied that, in the opinion of the Minister,
a particular property and/or tax class would apply if the property were privately
owned, the tax rates consistent for that class are used to calculate
the PILT.
8. Why is PILT not paid for third
party tenants in Crown properties?
A. Under the Payments in Lieu of Taxes Act,
federal property - either occupied or vacant - is only eligible
for PILT when it is under the administration and control of a Minister
of the Crown. Therefore, when the Crown grants an interest in its
real property, such as a lease, to a third party occupant, it ceases
to be federal property under the Act, therefore no PILT is paid.
9. Is there any exception where
PILT may be paid for third party tenants in Crown properties?
A. Yes... One of the changes to the PILT Act is that for
tenancies or other occupancies of less than one year, the space under short-term
occupancy should be considered federal property and thus PILT eligible.
Another situation where a PILT may be paid on property leased to a third party tenant
is when the federal government acquires property from the private sector that has
existing leases. The federal government would respect the fact that under those
existing leases the landlord would pay the property taxes to the taxing authority and
collect the tenants share of the taxes as part of the rent. Therefore, PILT would be
paid on those leases until they expire and once renegotiated that tenant would be
responsible for the taxes and that space would no longer be PILT eligible.
10. Do third party tenants in
Crown properties have to pay realty taxes on the space they occupy?
A. Under the Constitution Act, federal property is
always exempt from taxation. However, if occupied by a third party,
the property is not eligible for a payment in lieu of taxes, unless
the period of the tenancy is for less than one year or if it was a lease
that existed when the property was acquired by the federal government.
Under prevailing assessment legislation, assessors are generally required
to assess tenant occupied Crown property as if it were owned by the tenant.
Furthermore, the legislation governing realty taxing authorities
gives them the right to tax the tenant's interest and the billing
and collecting of the tenant's taxes must be a direct interaction
between the taxing authority and the tenant.
11. What happens if third party
tenants in Crown properties default on their realty taxes?
A. When the owners of private property do not pay their realty
taxes, eventually the taxing authority has the right to register
a property for sale to recover unpaid taxes. However, since federal
property is exempt from taxation, it cannot be registered for tax
sale under any circumstances. Therefore, if third party tenants
in Crown property do not pay their taxes, the taxing authority must
take other means to recover the taxes. Generally, this has involved
going to court and obtaining judgment against the tenant. In many
instances, taxing authorities have never been able to recoup the
loss.
This situation changed beginning with the 2000 tax year, as the
PILT Act includes a provision for the taxing authority to
request a payment in lieu of taxes on that portion of the federal property
occupied by the defaulted tenant, after it demonstrates that every reasonable
attempt has been made to collect the taxes from the tenant without success.
12. What can a custodian department
do to ensure the PILT is correct on its properties?
A. There are several areas where custodian departments can
assist the PILT Program directly:
- Provide the PILT Program by January 31st of each year,
with any realty asset capital plans or multi-year plans, detailing
planned changes to the portfolio that could influence value and/or PILT amounts.
- Inform them as soon as possible when property changes, either planned
or unplanned, are implemented. Relevant changes would include:
- major renovations or additions
- changes to the areas, dates, of tenants in third party occupancies
in federal property
- long-term vacancies
- construction of new buildings
- demolitions
- Acquisition of property
- pending or completed property disposals or transfers between
- departments
- land severance
- significant change of use
- With reasonable notice, provide access for PILT staff to conduct
physical inspections of any property so that the nature and
quality of improvements affecting value can be confirmed.
- Advise PILT of all servicing issues that may have
an impact on PILT amounts. For example, when a municipality cannot
or will not provide the same level of services that they normally
provide to similar taxable property.
- Ensure that the relevant taxing and assessment authorities are
informed of all third-party occupancies that will exceed one year,
then monitor and confirm that these tenants meet their obligations
to pay any real property taxes levied in respect to their occupancies.
13. Does the federal government
pay property taxes or PILT on property leased from the private sector?
A. The federal government pays rent to landlords for
property or space leased on behalf of federal departments but the landlords,
alone, are responsible for paying any real property taxes on their property.
The federal government cannot pay property taxes directly, as it is constitutionally
exempt from taxation. Therefore, the landlord must contract for
sufficient rent and recoveries to cover any costs associated with
real property taxes on federally occupied property.
14. Does the federal government pay PILT on property
leased from other tax exempt bodies, like a province?
A. Property leased from a province is PILT eligible. However,
PILT can not be paid on property leased from a municipality, other
exempt bodies, or private concerns. Also if the federal government owns
a building which is located on land leased from the Province, PILT
is payable on both the land and the building. However, if a federal
building is located on land owned by a municipality or other exempt
body, only the federally owned building would be PILT eligible, the land would not.
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