BC rolls out property tax relief for small businesses and non-profits

Feb 25 2020, 7:07 pm

Through new legislation, the provincial government has launched a temporary program intended to reduce the property tax burden on struggling small businesses and non-profit, cultural, and arts organizations that have seen their lease costs escalate in recent years due to soaring property values.

The new Interim Business Property Tax Relief program was announced last month, and details on how the policy works and its level of benefits have since been released.

Municipal governments are being granted with the authority to tap into the relief program for their own jurisdictions, but they must have their bylaw passed by no later than April 22.

Varying parameters must also be set, such as establishing a base year to use as comparison to the current taxation year, a minimum percentage of increase in commercial land value since the base year, a minimum percentage of the total property value that must be land value, and the percentage of exemption by property, area, or kind.

“Years of an out-of-control real estate market have resulted in unexpected tax spikes for many small businesses that pay property taxes as part of their commercial leases,” said Selina Robinson, BC minister of municipal affairs and housing, in a statement.

“People have been asking for help, and today we’re offering a way for local governments to provide that help. This new program empowers local governments to provide immediate relief to the small businesses and organizations most affected by skyrocketing property taxes in their communities.”

This relief will begin during the 2020 tax year and remain in effect for up to five years, but it is intended to be a temporary solution, until a more permanent policy is developed, such as a new split tax assessment, which was proposed in a bill by the opposition BC Liberals last fall.

With a new split assessment classification, small businesses would see their property taxes substantially lowered. A new classification would be created for the empty space above small businesses, providing municipal governments with the ability to tax the unused airspace at a zero or near-zero rate. Small businesses would only pay property taxes for the property they actually use.

A new split assessment has been floated around for some years, and it is supported by various organizations representing businesses in the province. It was also included in various platforms in the last municipal election, and last year it was endorsed in a resolution at the Union of BC Municipalities convention.

The provincial government’s relief program is in response to the recent spate of small business closures, including retail and restaurants, and non-profits, arts, and cultural organizations voicing their concerns over their continued viability.

Rising property assessment values have pushed up property taxes, which are passed from landlords to commercial tenants, such as through triple-net leases.

Larger small businesses in the province are also facing the new significant expense of the Employer Health Tax (EHT), which was introduced to replace Medical Services Plan (MSP) payments. The MSP was eliminated as of the start of this month, and the new EHT affects businesses with payrolls of over $500,000.