B.C. tax panel urges phased-in redefinition of “farm”

The panel tasked with reviewing what constitutes a “farm” for municipal tax purposes in British Columbia recommends a single minimum threshold of farm income be phased in to set the bar.

The B.C. Farm Assessment Review Panel delivered its report to the provincial government on deadline Friday.

The panel, co-chaired by Saanich Mayor Frank Leonard and MLA John Rustad, was formally launched in February 2008 amid controversy, starting in Saanich, over a reassessment of farm properties that reclassified many as partly residential — thus taxing them at a higher rate than strictly “farm” property.

The panel was assigned to hold a “provincewide, comprehensive review of farm assessment regulations in order to streamline rules and procedures, while ensuring their fairness and transparency,” for the province to consider in time for the 2010 assessment roll.

In an interim recommendation in June 2008, the panel asked that any further large-scale farm classification projects by BC Assessment be suspended until the panel’s report is received and decisions are made.

“I look forward to reviewing the report’s recommendations for how we can improve the efficiency of the assessment process,” provincial Agriculture Minister Steve Thomson said Friday. “In these tough economic times it’s more important than ever for farmers to have the competitive edge that comes from a fair system of regulation and policy.”

Recommendations

The panel on Friday recommended BC Assessment use Canada Revenue Agency (CRA) income tax return information for farm income reporting, to decide if income criteria are met for farm status for assessment purposes.

During a proposed transition year in 2010, BC Assessment would audit income reports with lower income ratios — meaning the ratio of actual farm income to required income threshold — to make sure the income is generated from farm products on the CRA’s Primary Agricultural Production (PAP) schedule.

Also during the transition year, BC Assessment would accept “supplementary information” from farmers where there’s additional income from ag products not accepted by CRA.

By 2011, the panel recommended, BC Assessment would set a single income threshold for all farm properties at a minimum of $3,500 annual gross farm income, but would maintain current income thresholds during the 2010 tax year.

After that, the panel recommended, BC Assessment would scrap its higher threshold of $10,000 in farm income for properties smaller than 0.8 hectares.

The panel also recommended that in 2011, BC Assessment would analyze the impact from the use of CRA reporting data and review the income threshold every five years from then onward.

Land under production

On the matter of “split classifications” of farm properties, the panel recommends that properties in the province’s Agricultural Land Reserve that are actively farmed, with farm status, would not be split-classified. However, any portion of land in another use, such as business or commercial, on a farmed parcel would still be classed according to that use.

As well, the panel recommended amending the province’s Farm Class Regulation to include areas not suited to ag production and/or used as buffer zones, or for ecological goods and services, or in a non-arable capacity (such as rock, swamp or treed areas).

Outside the Agricultural Land Reserve, property wouldn’t be split-classified if at least half the parcel is under production (or contributes to the production) of qualifying primary agriculture products, or if at least 25 per cent of the parcel is under production and the landowner/farmer meets a “higher income threshold.”

The panel recommends that the higher threshold, where needed, be set at $10,000 for 2010 and at four times the income threshold, or $14,000, for 2011 and beyond.

To encourage new and developing farm operations, the panel recommends amending the Farm Class Regulation to make sure the length of the start-up period is “realistic and relative to the commodity being produced” and that new farm practices are recognized.

Also, retired long-term farmers and their spouses would be able to stay in their farm residence and, if the farm property continues to be farmed, to keep their land’s farm status until the land is sold or there’s a change in use.

The panel also recommended setting a tax exemption for farm improvements at 87.5 per cent of assessed value or $50,000, whichever is greater.

In those cases, the panel said, the province may consider providing funding for five years for affected local governments to compensate for the lost revenue.

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