Resolution No. 7-04M

WHEREAS, a recent ruling by the Saskatchewan Municipal Board regarding taxation exemptions allowed by Section 331 (q) of The Rural Municipality Act, 1989, on a dwelling occupied by a resident who is a lessee of land; and

WHEREAS, this decision implies that the lessee does not actually have to be involved with the agriculture operation of the land and all that is required is a “legal lease”; and

WHEREAS, this decision leaves open for interpretation that a lease can be drawn up for the sole purpose of using the leased agricultural assessment to reduce the assessment on any residential improvements; and

WHEREAS, this decision sets a precedent that may adversely affect the entire province with respect to current taxable residential improvements;

THEREFORE BE IT RESOLVED, that SARM and the Department of Government Relations review this decision and prepare amendments to The Rural Municipality Act, 1989, to eliminate this “loop hole”; and

BE IT FURTHER RESOLVED, that the required amendment(s) be prepared and submitted to the legislature in order to rectify this situation prior to the 2005 assessment year.

Response from the Honourable Len Taylor, Minister of Government Relations:

Prior to legislative amendments in 1989, eligibility for this property tax exemption was based on the percentage of annual income that the property owner received from the agricultural use of the owned or leased land. These provisions were very complex for RM administrators to administer because of the diversity of farm operations and differences in reporting for income tax purposes.

This ultimately led to amendments in 1989. In 2001, legislation was amended so eligibility for the dwelling exemption was based on the land being classified as agricultural. This restored the exemption to its original intent and provided a much clearer and more objective criterion; the land classification as determined by the assessment system. The legislation accommodates extension of the exemption to leases, provided that this criterion is met; i.e., the land is classed as agricultural. This was done in consultation with SARM. This approach seemed like the best one at the time but if SARM has alternatives that it wishes to have considered, we would be pleased to do so.

Adding a qualification to the exemption that leases must include active involvement in an agricultural operation on the land likely creates some of the same administrative difficulties for rural municipalities that led to the amendments in 1989. Implementing the changes suggested would require a substantial investment of administrative time and effort at the local level. Difficulties would arise as municipalities attempted to define and validate the authenticity of agricultural operations and/or set standards with respect to what "proof" might be acceptable to determine the actual involvement in operation of leased land.

Inconsistencies in the application of the dwelling exemption could result, as all leases would need to be reviewed to ensure eligibility. We need to determine whether a return to this level of complexity is the best course. The changes that took effect in 2001 appear to be working in most instances, but this matter can be considered further.