On March 27, federal Agriculture Minister Heath MacDonald announced that the government will propose amendments to the Income Tax Act to extend the income tax deferral period for livestock producers in Alberta, Saskatchewan and Manitoba.

Eligible producers received compensation for their animals to be destroyed due to bovine tuberculosis in 2024 and 2025.

This action is a response to concerns from livestock producers about the challenges of replenishing their herds during the same tax year that they received compensation.

Under the Health of Animals Act, the Canadian Food Inspection Agency provided compensation to livestock producers whose animals were destroyed in 2024 and 2025 due to the bovine TB outbreak.

A section of the Income Tax Act allows for only a one-year deferral, but the proposed amendments will allow livestock producers to defer compensation for a prescribed schedule from 2026 to 2030, enabling them to have greater flexibility to manage their incomes and sustain their operations as they rebuild their herds.

Producers who received amounts as compensation in 2025 or 2026 under the Health of Animals Act because they had to destroy their animals due to tuberculosis outbreaks will have the option of including those amounts in income for tax purposes as follows:

• Up to 100 per cent of the compensation deferred to the 2027 tax year, with at least 83 per cent included in income in 2027.
• Up to 17 per cent of the compensation deferred to the 2028 tax year, with at least nine per cent included in income in 2028.
• Up to eight per cent of the compensation deferred to the 2029 tax year, with at least four per cent included in income in 2029.
• Up to four per cent of the compensation deferred to the 2030 tax year, with the remaining four per cent included in income in 2030.

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Some grazing leases are set in expire at the end of February, and residents of the Municipal District of Taber were given one last chance at public consultation earlier this month in what has been a string of standing-room only discussions on the topic.

WHY IT MATTERS: With acres of native grassland dwindling in Alberta, agricultural producers across the province are taking a keen interest in what the future of tax-recovery lands in the MD of Taber will look like in its land-management strategies with various grazing leases set to expire soon.

Concerns from all directions have been voiced, including conservation groups, concerned residential taxpayers and lease holders, over how hundreds of millions of dollars worth of tax-recovery land should best be used to help the MD provide services for its approximately 8,000 residents.

Those issues resurfaced again at the Feb. 10 public consultation meeting as council takes feedback on the proposed draft policy updates to guide its decisions at its Feb. 24 meeting.

Because some tax-recovery land grazing leases are set to expire at the end of the month, any decision made at that council meeting concerning the 81,355 acres of land the municipality holds will likely be the final one.

The contentious issue has dragged on for two years and has gained interest across Alberta.

The packed information and feedback session meeting on Feb. 10 was attended by multi-generational ranching families with significant financial investments, conservation groups, high-value crop producers, residents feeling left out of a possible market-value tendering process and concerned taxpayers.

One resident in attendance read an excerpt from a memorandum of agreement from 2007 and 2011 when the MD first took on the tax-recovery lands.

“It is our intention to provide insurance to both the Province of Alberta as well as to existing lease holders, that this sensitive land will be protected in the future from breaking.”

The resident then went on to say: “This was probably mostly related to the MD selling lands to leaseholders, but where I guess what was coming, is they failed to protect this land from the MD itself. None of these caveats were ever put on title, and this is why we are where we are now trying to fight to keep this native grass.”

Former councillor Don Johnson cautioned the current council about the direction it takes with possible future land sales and the handling of grazing leases with future tenants.

He agreed council must get far better rates than it currently receives.

Transitional and community pasture grazing leases were set at $26.10 per AUM in August, and the new council is now proposing two times the provincial grazing lease rate for Zone 1.

Other proposed changes would allow lease rights to be sold and for leaseholders to receive some oil-and-gas payments based on thresholds. Tendered grazing leases would also have the option to purchase.

Johnson said council knew oil-and-gas revenues would eventually dwindle, and other municipalities, such as the County of Warner and Cypress County, sold tax-recovery land for a short-term cash infusion, but that’s now gone as a revenue stream.

“The intent was that it would never be sold, that the native grasslands would be protected and preserved. We met a number of times with grazing associations and the folks around that area, and with their input, we were able to come to an agreement in how these lands should be managed,” said Johnson.

“I have no problem with having a discussion about looking at are the rates appropriate? They need to be changed. Where I part company is any discussion about putting up for sale any tax-recovery land. I think that is wrong. I think if the council proceeds the way they’re going with this, it’s a violation of the trust in our council.”

A previous council decision last year to proceed with a joint venture with the Bow River Irrigation District to convert 3,100 acres of grasslands to irrigated cropland was put on hold by the new council after October elections.

Only 4.2 per cent of the native grasslands were to be converted under the MD’s control for the proposed Scope Reservoir Joint Venture Agreement, generating considerably more revenue with the venture than with current leases.

However, some fear this would create a slippery slope, with more grasslands converted to irrigated cropland or sold to the highest bidder outside the MD.

Feedback from the MD’s numerous open-house discussions and written recommendations from residents, which had a Feb. 17 deadline, will be taken into consideration for council’s Feb. 24 meeting.

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The local government holds title to 81,535 aces of land, with about 73,000 acres of that leased under two programs:

• tax recovery grazing leases
• municipal district grazing leases

A further 6,191 acres are leased for crop production under cultivated leases. Some leases are expiring at the end of February as the M.D. looks to present it latest proposed changes to both grazing and cultivation policies and leases, and a draft land sales policy that applies to both grazing and cultivation lands, at a public engagement session on Feb. 10.

WHY IT MATTERS: Balancing tax bases between residential/non-residential and farm land can be a tricky thing for rural municipalities across Canada.

There have been several starts and stops in a fractured council drafting grazing lease annual rates, term lengths, term conditions and compensation, all met with distinctive split votes among councillors back in December. A previous council decision to convert 3,100 grassland acres to irrigated cropland in a joint venture with Bow River Irrigation District was halted by the newly elected council in October.

The Feb. 10 engagement session is expected to be standing-room only as previous sessions have been, as ranchers/conservationists and high-value crop producers have been at odds at exactly how the tax-recovery lands should be utilized along with the processes on who has access to them in serving the municipality.

Concerns over tax disparity

As the focus has been on agricultural producers, one resident hopes other taxpayers that help prop up rural municipalities, are not lost in the debate with farm versus residential/non-residential property owners in how best to utilize the M.D.’s asset valued at $345 million minimum.

“It is no longer uncommon for residents to pay $500 to $1,000 plus a month in residential property taxes, and even more, for non-residential property owners,” said Tom Rodwell, in a delegation at M.D. council’s Jan. 27 meeting, prior to discussing the latest tweaks in policy.

“If property taxes continue to increase, the M.D. may be in danger of losing the great businesses and residents that keep farms and farming industries running.”

Rodwell noted the huge disparities of taxation on farm land and residential property.

According to Rodwell, prime irrigated land in the coveted southern Alberta ag corridor sells for around $20,000 per acre, yet the assessment on that land is set at $450 per acre by the province, and $350 per acre per dry land.

Transposing the mill rate for residential and on-residential on land valued at the same rate for a quarter section shows stark differences in servicing the needs of the municipality.

“The mill rate on that $3 million quarter section of irrigated land is taxed at $914 base rate. Contrast that to residential property using the same $3 million for dollar value … and you get $11,100. Non-residential property rate on the same $3 million for dollar value works out to $28,530. That means dollar per dollar the M.D. rate, excluding provincial taxes, for residential property taxes, is 1,114 per cent higher than on farmland,” said Rodwell.

“The M.D. non residential property tax rate is a staggering 3,021 per cent higher than on farm, excluding provincial taxes.”

As the M.D. looks to service its operating budget partially with approximately $18-$20 million in tax revenue, Rodwell hopes the highly subsidized rates grazers and cultivators have got in the past will be addressed in the latest policy changes for the benefit of all nearly 8,000 residents, as oil and gas revenue continues to decline.

True cost of subsidies

Revenue from the M.D. tax recovery grazing leases of 58,340 acres was $40,838. In addition, leaseholders were paid $164,000 for oil and gas revenue. Leaseholders received a payment of $123,162 per year more than what was paid to lease the land.

“In addition, leases were allowed to be bought and sold for large amounts of money, possibly under the misconception that these leases could continue in perpetuity, contrary to what contracts clearly stated. The M.D. received a fraction of those funds as a transfer fee. All of this against the backdrop of ever increasing residential and non residential property taxes,” said Rodwell.

Rodwell cited an agriculture commission survey of residents that was amended last April. It showed 57 per cent saying lease rates should be set on market value. Seventy per cent said oil and gas payments to leaseholders should be eliminated. Seventy-one per cent of respondents said leaseholders should not be able to sell their leases. Respondents were split 50/50 on whether the land should be sold.

“The M.D. of Taber residents expectations for the directions of lands policy was clearly defined. Selling for anything less than market value is turning up to a subsidy. How will it be explained to the other 7,800 or so M.D. ratepayers? How will it be explained to the majority of residents made up of residential and non-residential property owners who are subject to taxation based on market value that they are essentially subsidizing someone’s operation?,” questioned Rodwell.

“In the end, this isn’t about any one group. It’s about prudent management of a publicly-owned asset for the benefit of all the citizens of the M.D. of Taber.”

By the numbers: the property tax divide

During his delegation, resident Tom Rodwell provided a comparison of how different property types in the M.D. of Taber are taxed based on a theoretical $3 million market value:

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From April, the threshold for individual inheritance tax relief will rise to 2.5 million pounds (C$4.62 million) from 1 million pounds, significantly reducing the number of farms and agricultural business owners facing higher tax bills, the government said.

“We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms,” Environment Secretary Emma Reynolds said in a statement.

“It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities,” she said.

Tom Bradshaw, president of the National Farmers Union, said the original proposals represented a “pernicious and cruel tax” that his organization had fought for 14 months.

“I am thankful common sense has prevailed and government has listened,” Bradshaw said. “From the start the government said it was trying to protect the family farm and the change announced today brings this much closer to reality for many.”

Tractor protests in London

The move represents the latest policy reversal by Prime Minister Keir Starmer’s government. In July, it backed down on plans to cut welfare spending, and in June it scaled back a proposal to reduce subsidies on energy bills for the elderly.

Under the revised rules, 100 per cent relief will apply up to the new 2.5 million pounds threshold, with 50 per cent relief on assets above the new level. Spouses or civil partners will be able to pass on up to 5 million pounds’ worth of farm assets between them, the statement said.

The government estimated that around 85 per cent of estates claiming agricultural property relief in the 2026/27 year, including those that also claim for business property relief, will pay no more inheritance tax as a result of the changes.

The original announcement in 2024, which ended an exemption from inheritance tax for agricultural families from next year, triggered protests in London by tractor-driving farmers that have continued regularly.

The government had said the measure was intended to raise revenue to help pay for strained public services. Farmers warned it would destroy family farms and cut food production.

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“Our research shows that an average grain farm in Canada, most of which are family owned and operated, will see a tax increase of 30 per cent due to the two-thirds capital gains inclusion rate,” said Kyle Larkin, Executive Director of GGC in a news release, adding “this hike targets farmers’ retirement plans, complicates intergenerational transfers, and threatens the long-term viability of family farms across the country.”

The 2024 federal budget proposed several key changes to the way capital gains are taxed in Canada:

• After June 25, 2024, any capital gains up to C$250,000 remain subject to the normal 50 per cent inclusion rate, however, gains above C$250,000 will be subject to a new 66.67 per cent inclusion rate for individuals.
• All capital gains generated through a corporation will be subject to a 66.67 per cent inclusion rate.
• The lifetime capital gains exemption for eligible property increases from $1,016,836 to $1,250,000.

Since many family-run grain farms are structured as corporations, family members can become shareholders in the corporation. During the sale of a farm, shareholders can each use their lifetime capital gains exemption upon the sale of their shares. While the combination of two lifetime capital gain exemptions would help reduce the taxes owing by each individual, ultimately the proposed changes will still result in a substantial increase in taxes, according to the GGC research.

In examples provided by the GGC, an 800-acre farm purchased in 1996 in Ontario would incur nearly C$1.2 million in additional taxes if sold today, while a 4,000-acre farm in Saskatchewan would face an increase of just over C$900,000.

“With over 40 per cent of farmers nearing retirement over the next decade, this tax increase introduces substantial uncertainty into their retirement planning,” said Andre Harpe, GGC Chair and Alberta grain farmer in the release. “Despite Budget 2024’s title of ‘Fairness for Every Generation,’ this change will actually burden the next generation of farmers, who are already grappling with costly transfers.”

With the higher taxes leading to increased costs for transferring a farm to the next generation, “this puts the family farm at risk, as the only ones that will be able to afford to pay millions of extra dollars will either be corporate farms or development companies,” said Larkin.

Already, Canada is experiencing a decline in family-owned farms, with a two per cent decrease between 2016 and 2021, according to the most recent data from Statistics Canada.

“To protect family farms, we are asking the government to exempt intergenerational transfers and allow them to be taxed at the original capital gains inclusion rate,” said Larkin. “This will ensure that farmers’ retirement plans remain secure and that the next generation can afford to take over, enabling family farms to continue being the backbone of Canada’s agriculture sector.”

With 40 per cent of Canadian farm operators set to retire over the next decade, “we need to ensure that the proposed personal income tax measures announced in Budget 2024 do not jeopardize the transfer of assets from one generation of farmer to another, but rather encourage the next generation of farmers to take up the calling, drive much needed rural economic activity and help the agriculture sector reach its growth potential,” said the Canadian Federation of Agriculture in a separate news release.

“By ramming these very significant tax changes through while farmers are in the field planting, we aren’t giving producers enough time to fully assess the implications for their families and their businesses,” said Keith Currie, CFA President.

*Update: A comment from the Canadian Federation of Agriculture was added.

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Bill C-208 was initially introduced as a private member’s bill by Manitoba MP Larry McGuire in 2021. The bill sought to amend the federal Income Tax Act to exclude the intergenerational transfer of farms and other small businesses from current anti-avoidance rules. Under the changes, those transfers receive equal capital gains treatment as businesses selling to unrelated parties.

Capital gains are the profits from the sale of property or an investment. Every Canadian has a $1-million lifetime capital gains exemption, meaning the first million dollars is not taxed and anything over $1 million is taxed at 25 per cent.

But until Bill C-208, anti-avoidance rules in Canada’s Income Tax Act characterized capital gains earned for shares sold to a family member’s corporation as a taxable dividend, which came with a tax rate of 46 per cent. They were ineligible for the capital gains exemption. Shares sold to a third party, however, would not be viewed as a taxable dividend and would be eligible for the exemption.

The bill passed in 2021, but in a release issued in July of that year, Canada’s Finance Minister Chrystia Freeland said amendments to the legislation were needed in order to close tax avoidance loopholes that may have resulted from the bill. Those amendments came into effect on Jan. 1 of this year.

Among those changes was the removal of a requirement that purchasers have to hold shares for at least 60 months after purchase. Changes also introduced two different transition plan term options: an immediate (three-year) or a gradual (10-year) approach.

This capital gains treatment eligibility is “very important, because it gives us the lowest tax rate,” said Edith Frison, a tax specialist with MNP in Brandon.

“It was pretty unfair that if we were selling our business to our own child, we weren’t allowed to get capital gains treatment or use capital gains exemption, but if we were selling to a third party, we would,” she said. “Why would you ever want to pass on equity from something you built your whole life to some stranger instead of your own child?”

How it works

Frison, speaking in January at Manitoba’s Ag Days, focused on how farmers could best take advantage of the legislative change.

Producers can now sell farm shares to their children, creating a shareholder loan. In basic terms, she said, “We take the asset; we sell it to our kids; we record the million-dollar gain on our personal tax return. It’s sheltered by capital gains exemption, and mom and dad can pull that money out over time. So, they don’t have to take wages; they don’t have to take dividends and they have very little income to report in the future.”

Frison outlined one simplified scenario for how a transaction might unfold. In her example, mom and dad have a farm worth $2 million (a number she admits is probably too low, but it makes the math easier) and are ready to retire and transfer the farm to their offspring. The son or daughter would need to go to a lawyer to set up a new company that they will control.

That new company, owned by the children, would either get a loan to buy the shares of their parent’s company, or they would arrange to finance the deal by paying mom and dad over time through farm operations.

If the farm was bought out immediately, each parent would have a $1 million capital gain on their personal tax return. That would then be sheltered by their lifetime capital gains exemption. It would be the same if, instead, the deal were drawn over time.

“So, essentially, we’ve created a new company that owns the family farm, and that new company owes mom and dad, or the bank, $2 million,” Frison said.

Immediate or gradual?

When it comes to opting for the immediate or gradual plan, Frison said it depends on how ready everybody is to transition.

“Are mom and dad ready to give up everything right away? Are the children ready to take on that management role? Sometimes we see that children need a bit of training to get the skills and knowledge to the point where they are able to continue,” she said.

In addition to the transfer of all assets and equity, both plans require the transfer of legal and factual control of the company. Legal control refers to the voting of common shares. Factual control means controlling the day-to-day operations.

“There has to be a transfer of management,” said Frison. “Management would include who’s making decisions daily about the operation. That has to transition to the next generation; it can’t stay with mom and dad.”

For the immediate transition plan, all parties have to be ready to transfer the majority of legal and factual control to the children immediately, with the rest of the control, along with management of the business, going to the children over the next three years. After all control is transferred, the children will have to maintain ownership and control of the farm for three years before they are allowed to sell.

“We can’t do this if mom and dad continue operating the farm and the child lives in Bermuda or somewhere,” said Frison.

If the child isn’t quite ready for that immediate switch, she suggested the family might be better to look at the longer-term option.

With the gradual transition plan, legal control (voting shares) must be transferred immediately. But the parents can still participate in the factual control of the company. Then, over the next 36 months, most of that factual control must be transferred to the children. By the end of 10 years, the parents will have no more control or equity in the company.

“They would have to transfer management decisions to the children within a reasonable amount of time — which is always up for debate, but probably within five years,” said Frison. “I think we’d be pushing it to 10 years.”

With the gradual transition plan, after all control is transferred, the children will have to maintain ownership and control of the farm for five years before they are allowed to sell.

Also, with the gradual plan, everything remains open for reassessment for 10 years after the transaction is complete, whereas normally, everything becomes statute-barred three years after filing a tax return, Frison noted.

In both scenarios, while the parents must give up control of the company, they can remain employees.

“Sometimes folks want to continue to drive the combine or the tractor,” said Frison. “We can continue to pay them as employees. It’s just that we have to pay them a reasonable wage. So, whatever we’re paying our hired hand, that’s what we also have to pay mom and dad.”

Frison added that there are a number of ways to approach a farm transition, and the options opened up by Bill C-208 aren’t always going to be the best approach.

“This is really just another tool in our toolbox that could help your family pay very little tax overall,” she said. “It’s a complex transaction and needs to be well documented. So please be sure to include an accountant or a lawyer if you’re planning to do this.”

– Don Norman is a reporter with the Manitoba Co-operator.

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The controversial abolition of tax breaks and diesel subsidies for farmers will not happen in one swoop, the spokesperson said.

Instead, tax concessions for agricultural diesel will be reduced by 40 per cent this year, then by 30 per cent in 2025 and a complete end to the subsidy from 2026.

The planned abolition of the tax break prompted hundreds of German farmers to protest in central Berlin last month.

German Chancellor Olaf Scholz’s three-party coalition announced in December an agreement on the key points of the draft budget for 2024 following weeks of negotiations.

The agreed changes to the 2024 draft budget announced on Thursday, which also impact a plastic levy and funds for the national railway, will result in 2.5 billion euros (CAD $3.66 billion) less in savings than initially anticipated, said the government spokesperson.

–Reporting for Reuters by Maria Martinez.

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After a constitutional court ruling last month that cancelled 60 billion euros of earmarked debt, the federal government last week announced plans to save around 900 million euros ($983.34 million USD) annually in subsidies for farmers.

According to next year’s budget, a partial tax refund on agricultural diesel, along with a tax exemption for agricultural vehicles, will be abolished to meet the saving targets – a measure farmers said would threaten their livelihood and the competitiveness of Germany’s agricultural sector.

Farmers protested the planned cuts at the Brandenburg Gate, carrying placards reading “YOUR POLITICS ARE A DECLARATION OF WAR AGAINST FARMERS” and “TOO MUCH IS TOO MUCH! IT’S OVER NOW!” parking a number of tractors along Berlin’s Strasse des 17. Juni boulevard in central Berlin.

Germany’s DBV and LSV farmers lobbies called for the protest last week and on Monday threatened to organise further country-wide demonstrations if the measures were implemented.

“Then from January 8th we will be present everywhere in a way that the country has never experienced before. We will not accept this,” DBV President Joachim Rukwied said.

The cuts, agreed by the ruling coalition leaders of the Social Democrats, Greens and Free Democrats, could cause dispute not just within the coalition, now opposed by FDP liberals, but also within the Greens party itself, as Greens Agriculture Minister Cem Ozdemir joined the farmers in Monday’s protest.

“I will do everything in my power so that this won’t happen this way, ladies and gentlemen,” Ozdemir said.

Additional burden

Farmer Jule Bonsels from the western Rhineland region said the tax break cancellation meant an additional financial burden of some 20,000 euros per year.

“I personally find this unacceptable. We must give young people prospects, and these plans totally kill it,” she added.

Government spokesperson Steffen Hebestreit on Monday said decisions on the 2024 budget were in place and won’t be reopened, adding that the details of implementation were still being examined.

The cuts also aim to help reduce greenhouse emissions in the country’s agriculture sector that was responsible for 55.5 million metric tonnes of greenhouse emissions last year, roughly 7.4 per cent of the country’s total.

Environmental groups said farmers could bear the financial burden of the cancelled subsidies, citing profits made from rising food prices and other agricultural subsidies that are still in place.

“With all understanding for the farmers – making agricultural diesel cheaper by the state is expensive, harmful to the climate and should be abolished,” Greenpeace agricultural expert Martin Hofstetter said in a statement on Monday.

Erwin Decker, a wine farmer in Germany’s Black Forest region, said implementing the planned cuts would force many family-run farms to close across the country.

“What are we supposed to do? The land is there. It has to be harvested and if it turns into a jungle, no one gains anything,” Decker said.

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The federal finance department on Nov. 16 posted its legislative and regulatory proposals for changes to the UHT online and has teed up a consultation period for those proposals. Canadians and other stakeholders and organizations are asked to submit comment via email by Jan. 3, 2024.

The UHT — an annual, one per cent tax on ownership of vacant or “underused” housing in Canada which took effect Jan. 1 last year — has led a clutch of national farm groups to call on Ottawa for a blanket exemption for farmers from having to file a UHT return.

Canadian citizens and permanent residents are exempt from the UHT, but many corporations are not. That means a farm operating via a Canadian corporation or partnership with a residential property is required to file a UHT return each year, even if other exemptions mean no UHT will be owed.

Furthermore, the farm groups said, while some forms of farm worker housing, such as a bunkhouse or mobile home, are exempt, a detached house used for worker housing is not. That rule, they said, amounts to a penalty on higher-quality housing options for farm workers.

Freeland’s proposal would see certain types of corporations and partnerships added to the list of “excluded owners” for the purpose of UHT reporting — which means those entities “would no longer have UHT reporting obligations.”

The proposal would exclude:

• a “specified Canadian corporation” — that is, a Canadian corporation in which foreign individuals/corporations hold less than 10 per cent of votes or equity;
• any partner of a “specified Canadian partnership” — generally, a partnership whose partners are exclusively “Canadian”; and/or
• any trustee of a “specified Canadian trust” — generally, a trust whose beneficiaries are exclusively “Canadian.”

Freeland’s proposal would also set up a new UHT exemption for “residential properties held as a place of residence or lodging for employees.”

That new exemption would cover residential properties anywhere in Canada, except those in a census metropolitan area or “a census agglomeration having 30,000 or more residents.”

Those changes are expected to apply for the 2023 calendar year and subsequent years, the government said.

Not retroactive

Federal Revenue Minister Marie-Claude Bibeau tweeted Wednesday on X that the fall economic statement “addresses major irritants” of the UHT, particularly by broadening its definition of “excluded owner.”

That move will “eliminate the need to file (UHT) returns for many Canadian businesses, such as agricultural businesses,” said Bibeau, a former federal agriculture minister.

However, she noted in response to other X users’ replies on Wednesday, the changes will not be retroactive to the 2022 tax year.

UHT filers have been granted two “transitional” extensions to file for the 2022 tax year without penalty. The first, announced in late March, extended the deadline to Oct. 31; then, on Oct. 31, another extension was granted, giving UHT filers until April 30, 2024 to file their 2022 UHT returns.

However, the government said, UHT returns for the 2023 calendar year will also need to be filed by the normal deadline of April 30, 2024, to avoid penalties and interest.

That said, Freeland’s proposed changes to UHT rules also call for reduced penalties for those who fail to file UHT returns by the annual deadline — and would make those reductions retroactive to the 2022 tax year.

Those penalties — now $5,000 per failure for individuals, and $10,000 per failure for corporations — would be cut to $1,000 and $2,000 respectively. — Glacier FarmMedia Network

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“We urge the government to exempt farmers from the requirement to file a [underused housing tax] return,” said a letter sent to federal ministers.

The Canadian Canola Growers, Canadian Federation of Agriculture, Canadian Cattle Association, Ontario Fruit and Vegetable Growers, National Cattle Feeders, and Fruit and Vegetable Growers of Canada signed the letter, sent to ministers Lawrence MacAulay, Marie-Claude Bibeau and Chrystia Freeland on Aug. 16.

The underused housing tax (UHT) is an annual, one per cent tax on ownership of vacant or “underused” housing in Canada, the Government of Canada’s website says. It took effect at the beginning of 2022.

“The intent is to impose an annual one per cent tax on vacant or underused housing in Canada that’s owned directly or indirectly by persons who are not Canadian citizens or permanent residents,” said Kurt Oelschlagel, BDO partner and national agriculture tax leader, in an April report in Farmtario.

However, while Canadian citizens and permanent residents are exempt from the tax, many corporations are not.

“If you operate your farm through a Canadian corporation or partnership and it owns a residential property, you will be required to file a UHT return, even if no UHT is owed due to applicable exemptions,” Oelschlagel said. “Non-filing can result in substantial financial penalties.”

In the letter, the groups said that the UHT filing requirement is having a negative impact on farmers because many own multiple homes because they bought, leased or inherited farmland with a house on it, or because they house temporary foreign workers.

Bunkhouses and mobile homes, often used to house workers, are exempt however many accommodations still require filing, the letter said.

“Many farm employers have been moving towards higher quality housing for their foreign employees such as detached houses,” it added. Since UHT filing is required for these, it effectively penalizes higher-quality housing for workers, the groups said.

“While we recognize this tax provides an exemption process for which farmers can apply, the professional fees (i.e., accountants) to complete the exemption application can be significant and are simply one more burden upon farmers who are already facing increasing input costs, energy costs and regulatory requirements,” the groups said.

In the letter, the ag groups asked the federal government to exempt farmers from the requirement to file a UHT return without requiring them to apply for this exclusion.

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