Calgary Business Tax Exemption Bylaw

Background

The City of Calgary is reviewing its current business tax exemption rules. The recommended changes to the rules will have business tax implications for certain types of nonprofit organizations starting in 2010. Currently, the City’s business tax bylaw creates and exempts classes of businesses from paying business tax. However, the current rules are based on the Municipal Taxation Act that was repealed 13 years ago. The current exemption is worded "Any Business which would not have been subject to the imposition of taxes under the former Municipal Taxation Act (MTA)."  The City believes that it would be easier for businesses to assess if they are exempt if the bylaw did not refer to the MTA.

The result of this change is that over 200 not for profits would lose their business tax exemption including:

• 85 associations (trade associations, agricultural associations, professional associations)
  6 bingos
• 30 private clubs or groups
• 46 unions
• 15 non exempt training/research
• 10 did not provide enough information to categorize
• 12 others

Another 90 organizations have not provided the information needed to assess if they will be exempt or not. If approved, this bylaw would determine tax exemption starting in 2009 tax year, but all businesses exempt as of December 31 2008 would be grandfathered until the 2010 tax year.

The proposed City of Calgary Business Tax Exemption Bylaw bases its exemptions on the provincial Municipal Government Act Community Organization Property Tax Exemption Regulation (AR283/2003). However, this regulation is set to expire in October, 2008 and the provincial government is in the final stages of reviewing the regulation. Any changes that are recommended will be released before the expiration of October 31, 2008. We are tracking this policy review and once the recommendations are released, we will asses the implications for the City of Calgary’s proposed tax bylaw.

CCVO Tax Policy Alternatives Presented to City Council

The following four alternatives were presented to the SPC on Finance and Corporate Services by City administration and they are recommending option number four- to follow the same rules as the province uses to exempt organizations from paying property tax:

1. Continue to exempt businesses with reference to MTA
   Administration states that an issue raised by exempting all not for profit organizations is that “many of them compete with other businesses,” and this raises issues of equity. Further, many of the organizations currently exempt under the MTA have restricted membership and do not provide benefit for all Calgarians. (i.e. professional associations, unions and private clubs)
2. Council create and exempt its own classes of business
   This option is not seen as viable as it is unwieldy and would create two standards, one for property and one for business tax.
3. Exempt all not for profits
   This option would create a new classification for not for profits and exempt this class in the Business Tax Bylaw. No organizations would lose their exemption if this alternative was chosen. But, this would create an inequity where they compete with for profit businesses. And, many organization do not benefit all Calgarians, for example because of restrictive membership. It would also create a discrepancy for those who qualify for business tax exemption, but not property tax exemption- i.e. professional associations, unions and private clubs. Finally, it would open the “possibility of organizations structuring themselves as not for profit merely to avoid tax liability.” 
4. Follow Property (Recommended Approach)
   If a premise occupied by a business is exempt from property tax (as per the Municipal Government Act Community Organization Property Tax Exemption Regulation, it would also be exempt from business tax.

April 2009 Update 

Over the past year and a half, your organization has probably received a number of letters from the City of Calgary about its review of business tax exemption rules. On April 27, City Council will vote on a new bylaw that will match the property tax exemptions for community organizations under provincial regulations. If this bylaw is approved, the majority of Calgary’s nonprofit organizations will continue to be exempt from paying business tax. However, as with property tax, some types of organizations including unions, private clubs, professional associations and bingos will have to start paying tax as they are not deemed to serve the broader community or have membership restrictions.

Related Information

CCVO Policy Breifing Note: The City of Calgary’s Business Tax Exemption Review

Municipal Government Act Community Organization Property Tax Exemption Regulation

Questions?

Contact:
CCVO’s Policy Analyst Laura
lmackinnon@calgarycvo.org
403-261-6655 extension 228