Though worship spaces are exempt from property taxes in Ontario, those portions of the building rented to commercial interests are taxable.
Trafalgar, Oakville, Ont., has long paid about $1,300 annually in property taxes on that portion of its 8,700-square foot building rented out to a daycare. A $4,510 re-assessment bill for the first six months of 2012 was a severe shock.
The church built an addition to its building 10 years ago and the new space had never been evaluated by a representative from the Municipal Property Assessment Corporation, Rev. Kristine O’Brien said. In September an inspector visited the church to reassess its value and use.
In Ontario, the Municipal Property Assessment Corporation is responsible for classifying and determining the current value of a property. Municipalities set tax rates for properties in their jurisdiction and use the MPAC assessments to calculate and issue taxes.
In the end, the extension was considered exempt from property taxes because the space was used predominantly for Sunday school, and was therefore connected to worship. The daycare, however, was a different story.
“The daycare, because they have a signed lease agreement with us and are a business, are considered to be commercial,” O’Brien said. “The space that they use is not deemed exempt because it is not used for worship purposes.”
Although some sections of the building are used by the church as well as the daycare, the inspector considered more than 2,000 square feet to be used primarily by the daycare.
The church’s leaders were still evaluating their options at press time, but O’Brien said the session was planning to ask for a reassessment from MPAC.
Such a request can be submitted anytime before Dec. 31 of the taxation year.
Trafalgar was the second church in the Presbytery of Brampton to be hit with a higher than expected tax bill, although the two churches were in different municipalities. St. Andrew’s in Port Credit, part of the City of Mississauga, saw their property taxes jump by several thousand dollars in 2011 because of nursery schools that rent portions of the building during the week.
The notice of reassessment had been overlooked (or its full implications underappreciated) during a period of transition between treasurers. The late discovery of the tax increase meant the church had missed the deadline to request a reconsideration from MPAC for that year.
A committee struck by session filed a tax appeal with the City of Mississauga under section 357 of the Municipal Act, alleging the church had been overcharged due to “gross or manifest error.” As of press time, they were still waiting for a reply from the city.
A second inspector sent by MPAC as a result of the appeal agreed the previous assessment was incorrect in some places. The church has made a request for reconsideration from MPAC in 2012.
Churches and eligible charities also have the option of filing a complaint with the Assessment Review Board, an independent tribunal, to resolve property classification and assessment concerns. There are special forms and fees that apply. Unless otherwise noted on the supplementary assessment notice, complaints can be filed until March 31 of a taxation year.
“Carefully scrutinize the property details and assumptions which underlie the assessment from MPAC,” suggested Donna Gallant, an elder at St. Andrew’s and a member of the committee struck to review the church’s options.
Churches should also examine their written agreements with third party tenants, especially businesses, since these documents are reviewed by MPAC as part of its assessment process, she said.
Both O’Brien and Gallant said the implications of their assessments could have affected the relationship between the churches and the tenants that have rented space for many years.
