Farm Property Class Tax Rate Program Questions and Answers

Table of Contents

1. Background and Eligibility for the Farm Property Class Tax Rate Program
2. Application Information
3. Newly Purchased Lands
4. Tenant Farmers
5. Assessment Questions and Problems

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Background and Eligibility for the Farm Property Class Tax Rate Program

Q1. What is the Farm Property Taxation Policy?

Starting January 1998, the Farm Tax Rebate Program was replaced by a new Farm Property Taxation Policy for farm properties. Under the new tax policy, farm properties satisfying the eligibility requirements are identified for the Farm Property Class and are taxed at 25% of the municipal residential tax rate. The farm residence and one acre of land, surrounding it, will continue to be taxed as part of the residential class.

The information collected on an active multi-year Farm Property Class Tax Rate Program application will be used to determine the eligibility for the Farm Property Class tax rate for the 2014 taxation year and future years.

The Ontario Ministry of Agriculture and Food (OMAF) and the Ministry of Rural Affairs (MRA) continues to have annual responsibility to determine and report eligible properties to the Municipal Property Assessment Corporation (MPAC). Property owners submitting the multi-year application signed a declaration acknowledging their responsibility to notify our office if any of their information changes. To ensure the integrity of the data on file, applications will still be sent to a limited number of clients each year.

Q2. What are the eligibility requirements for the Farm Property Class (25%) tax rate?

To be eligible for the Farm Property Class tax rate, the following criteria must be satisfied:

1. Complete and return a multi-year application by the appropriate deadline date to be eligible for Farm Property Class Tax Rate in the following and future years.
2. The property must be assessed as farmland. This will be done through the Property Assessment Division of the Municipal Property Assessment Corporation (MPAC).
3. The property must be part of a farming business generating over $7,000 of gross farm income and be reported to Canada Revenue Agency.
4. The farm business operating on the property (the owner or the tenant) must have a valid Farm Business Registration number (e.g. a valid 2013 number for the 2014 taxation year).
5. More than 50% of the property must be owned by Canadian citizens or permanent residents of Canada.

If the property is owned by a business which is a sole proprietorship, the owner must be a Canadian citizen or permanent resident.

If the property is owned by a business which is a partnership, more than 50% of the profit or loss of the partnership must be allocated to the partners who are Canadian citizens or permanent residents.

If the property is owned by a business which is a corporation, more than 50% of the voting shares must be owned one or more individuals who are Canadian citizens or permanent residents.

Q3. Are there any exceptions to the income eligibility requirements for the Farm Class Tax Rate?

If your gross farm income fell below $7,000 you may still be eligible for the 25% tax rate if:

1. The applicable year was not a normal production year, but if it had been, the gross farm income would have been over $7,000; or
2. As a result of age or illness of the owner or his/her spouse, or the death of the owner’s spouse or same sex partner, gross farm income fell below $7,000 in the applicable year. The person carrying on the farm business must be the property owner, the farm business must have generated an income greater than zero and be reported to Canada Revenue Agency for income tax purposes, must have been operated by the owner for at least ten years and the owner must have qualified for and received, the farm property class tax rate during this time; or
3. You are starting your farm operation and have not yet met the $7,000 income criteria you may be eligible for a start-up exemption. To qualify for this exemption, you must clearly demonstrate that the operation will gross the $7,000 income in future years. The length of the start-up period must be realistic and relative to the commodity being produced.

Q4. What is considered farming income?

For the purpose of Canada Revenue Agency (Income Tax Act), farming income is defined as income earned by: soil tilling, livestock raising or showing, horse maintenance, poultry raising, dairy farming, fur farming, tree farming, fruit growing, bee-keeping, cultivating crops in water or hydroponics, Christmas tree growing, operating a wild-game reserve, chicken hatchery, running a feedlot.

In certain circumstances, farm income may also include: the raising of fish, marketing gardening, operating a nursery or greenhouse. It may also include some value-added food manufacturing, or sales from a retail outlet/farm stand or restaurant on-farm provided these sales are related to the farming activity on the property, are on a small scale and are considered incidental to the total farm income. To be sure your activity fits this category you must obtain an advance ruling from Canada Revenue Agency.

Farming income does not include income earned from working as an employee in a farming business or trapping.

Q5. I grow a non-traditional crop or raise non-traditional livestock; does this count as farming income?

Yes, as long as you can meet the basic program criteria.

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Application Information

Q1. How do I apply?

We receive the names of new property owners from the Municipal Property Assessment Corporation (MPAC) and mail applications throughout the year. If your property is assessed as a farm and you have not received an application by approximately 90 days after your purchase, you should contact our office. If your property is not assessed as a farm, you should contact MPAC.

Q2. What is the deadline and what happens if I don't return my application by the deadline?

If there are mitigating circumstances involved, the Program Administrator may accept an application until December 31 of the actual taxation year. The Program Administrator has no legal authority to accept an application after this date. If this deadline is missed, you maybe unable to qualify for the Farm Property Class Tax rate.

Q3. Why can't I obtain an application from the website ?

The farm property class administrator does not issue blank applications on the website or by mail. All applications issued are custom printed which include property roll numbers, legal descriptions and ownership information provided by MPAC.

Applications also contain a unique program and owner barcode which allows for more accurate and timely application processing and to provide specific responses to a property owner about the status of their personal/individual application.

Newly Purchased Lands

Q1. I have purchased a new property, how will it be taxed?

For properties assessed as farmland by MPAC, the default tax rate is residential. A new property owner must complete and return an application to show that all of the criteria have been satisfied, prior to the upcoming tax year.

If the property transferred is currently at the Farm Property Class Tax Rate, MPAC will normally allow the property to remain in the farm property class for the remainder of the tax year.

New Farm Property Owners and Property Taxes: What you Need to Know

Q2. I have purchased property that is not currently assessed as farmland, how do I get it assessed as farmland?

You should contact MPAC. To confirm the assessment and tax rate for the property prior to the purchase, you should contact MPAC.

Q3. I have purchased property that is not currently in the farm property class, can I get the farm property class rate?

A new property owner or an owner who commences to farm the property, and who meets the eligibility criteria, may contact our office and request an eligibility determination and approval for the farm property class tax rate for the remainder of the tax year and to see about eligibility for the next year.

Tenant Farmers

Q1. Do I need to apply if I rent out my land?

Yes, the person who owns the land must apply for the Farm Property Class Tax Rate.

Q2. If my tenant farmer has not paid her/his farm business registration fee what will happen to my application for farm property class taxation status?

The owner is responsible for ensuring that the tenant has a valid Farm Business Registration Number. If the tenant farmer does not pay the fee, then the property is not eligible for the Farm Property Class.

Q3. What if I can’t get a hold of a tenant farmer to sign my application?

The signature is important to verify that a tenant is really farming the property. Applications without a signature will be returned.

Assessment Questions and Problems

Q1. How do I interpret my property assessment notice?

Answer: You should contact MPAC to confirm, but in general, the property assessment notice will confirm two things:

1. The Property Class Tax rate- If the property is taxed at the Farm Property Class Tax Rate the property classification should read "Farm". If it is being taxed at 100% residential rate it will read "Residential". If there is a house on the property it will be taxed in the residential rate, even if the rest of the property is taxed in the Farm Property Class.
2. Phased-In Assessment is the dollar value of the property as assigned by MPAC. It should be comparable to other similar properties in your area.