Property Assessment and Taxation
Assessment Act, R.S.O. 1990, Chapter A.31; Municipal Act, 2001, S.O. 2001, Chapter 25; City of Toronto Act, 2006, S.O. 2006, Chapter 11, all as amended
The Assessment Act, Municipal Act, 2001 and City of Toronto Act, 2006 govern all aspects of real property valuation and municipal taxation in Ontario, subject only to special Acts that govern specific properties or municipalities. Generally, all real property, structures and fixtures are liable to assessment, with specified exemptions from municipal taxation such as for government and some agency properties, hospitals, public schools, certain charities, and machinery and equipment used for manufacturing purposes. Retroactive assessments can be made for the two years prior to the taxation year in the case of property not previously assessed, but this is limited to omitted assessment, and does not include a change in the assessors’ opinion of value. The provincial Municipal Property Assessment Corporation (MPAC) is responsible for the assessment (valuation) of real property.
All real property is valued at its “current value”, which is to reflect the estimated sale price of the “fee simple if unencumbered” interest as of the valuation date. For the taxation years 2013-2016, this valuation date was January 1, 2012 (2012 CVA). For the taxation years 2017-20 the valuation date is January 1, 2016 (2016 CVA), with any increase in value from the 2012 CVA being phased in at 25% in each year, so that the full 2016 value will be effective for 2020. There is no phase in of any reduction in value. For the next cycle of taxation (2021-2024) the valuation date is January 1, 2019 so as to permit more time.
All assessed real property is classified by MPAC for municipal taxation purposes, including, but not limited to, residential, multi-residential, commercial and industrial classes, according to definitions in regulations. Multi-residential, commercial and industrial taxes are generally significantly higher than residential. However, hi-rise residential condominium units are not valued or taxed as multi-residential units but as houses. The province levies a business education tax on commercial and industrial properties significantly higher than that on residential properties, which it is reducing gradually. Municipalities are responsible for setting the tax rates applicable to the different tax classes, which are subject to “ranges of fairness” so that the multi-residential, commercial and industrial tax rates, which are usually higher than residential tax rates are not permitted to exceed a certain multiple of the residential tax rates.
The introduction of “current value” assessment in 1998, and the increases in value experienced for the 2009-2012 taxation years and generally for 2013-2016 have been and are subject to a complicated municipal “capping and clawback” tax system that reduces increases on taxes arising from new assessments, yet also “claws back” reductions arising from reduced values. For changes to properties resulting from re-zoning, demolition, or new construction or alterations, the phasing in of increased assessments is separately regulated and complicated. However, given that the “new” current value has been in place for 18 years, most properties are now at or close to their current value so that they are unlikely to be subject to significant capping or clawback, except for commercial, industrial, or multiresidential properties in Toronto that received tax increases of more than 10%, primarily as a result of being assessed not on their existing use, but on their highest and best use for future development.