Vancouver Charter Section 396F“Exemptions for Not-Profit

Corporations”

Standing Committee on City Services & Budgets

September 22, 2011

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• CoV has had a longstanding, unique provision - s396(1) - that provides statutory exemptions to a range of eligible charities & NPOs

• Similar statutory provision is not available in the Community Charter; other BC municipalities rely solely on the permissive provision to exempt charities & NPOs

• The Province enacted s396F in July 2010; the City did not request this addition

• s396F provides Council expanded permissive authority to exempt a broader range of NPOs above and beyond the existing statutory exemptions available under s396(1)

Addition of s396F to Vancouver Charter

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Statutory Exemptions (s396(1))• prescriptive; eligibility requirements set by legislation, not

Council• administered by BC Assessment• application defined and refined by Property Assessment

Appeal Board and court decisions, not Council

Permissive Exemptions (s396A, s396C, s396E)• “optional”, discretionary tax relief

– Heritage Property (s396A), Riparian Property (s396C), and Revitalization (s396E)

• eligibility requirements set by Council• application approved by Council by 2/3 votes• maximum term up to 10 years

Statutory & Permissive Exemptions Available in Vancouver Charter prior to s396F

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• It has been Council policy to rely on the statutory property tax exemptions available under s396(1) and limit the use of permissive property tax exemptions to heritage properties only (s396A).

• It has been longstanding Council policy to not extend any property tax exemptions to tenants. Property taxes and any exemptions, if eligible, are applicable to property owners, not tenants. How property owners share these costs with their tenants is beyond the City’s jurisdiction.

Council Policies on Property Tax Exemptions

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PRE-CHARTER AMENDMENT…

• statutory exemptions under s396(1)

• charitable institutions are exempt if…

– an incorporated charitable institution is the registered owner or owner under agreement, of the real property, and

– the real property is in actual occupation by the incorporated charitable institution and is wholly in use for charitable purposes

• administered by BC Assessment; Council approval not required

• application defined and refined by Property Assessment Appeal Board and court decisions, not Council

Statutory Exemptions s396(1) - Charitable & Not-for-Profit Corporations

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CHARTER AMENDMENT…

• permissive exemptions under s396F

• provides Council expanded authority to exempt “not for profit corporations” which would not otherwise qualify for statutory exemptions under s396(1)

– "not for profit corporation" means a charitable, philanthropic or other not for profit corporation

– “eligible not for profit property” means property• of which a not for profit corporation is the registered owner

or owner under agreement, or• that is held by a not for profit corporation, and• that Council considers are used for a purpose that is

directly related to the purposes of the not for profit corporation

Permissive Exemptions s396F - Charitable & Not-for-Profit Corporations

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CHARTER AMENDMENT…

• Council has full authority over this process– set program objectives– define eligibility requirements, terms and conditions– approve individual exemptions (full or partial)

• maximum term of exemption is 10 years

• by-law enactment by Oct 31 to be effective the following tax year

Permissive Exemptions s396F - Charitable & Not-for-Profit Corporations

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Eligibility Requirements: s396(1) vs. s396F

Statutory Exemptions (s396(1))

Permissive Exemptions (s396F)

Scope Incorporated charitable institutions

A much broader scope of NPOs including charitable, philanthropic and other NPOs not eligible for statutory exemptions under s396(1)

Nature of work

Must be charitable in nature May operate for any purpose other than profitDoes not need to be charitable in natureMay not align with Council priorities

Form of property occupancy

Property must be owned and occupied by an incorporated charitable institution, and wholly in use for charitable purposes

Not limited to owned property Applicable to any form of occupancy

Given such broad definition, it is up to Council to limit application through policy.

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Given the existing statutory exemptions available under s396(1), is

there a need for an alternative mechanism to support NPOs that do

not qualify for exemptions?

Staff approach:

• review and assess effectiveness of CoV’s approach to supporting charities & NPOs

• quantify CoV’s financial and in-kind support for charities & NPOs

• benchmark with neighboring municipalities• make recommendation on an effective, targeted support

framework

Addition of s396F to Vancouver Charter - Permissive Exemptions for NPOs?

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~25,000 incorporated non-profit organizations (NPOs) in BC

– some are registered charities with Canada Revenue Agency

• ~2,500 in Vancouver (in good standing)

• must operate exclusively for charitable purposes

– relief of poverty– advancement of education– advancement of religion– purposes beneficial to the community

– some NPOs focus on services that align with Council priorities• housing, childcare, cultural, community service

– include veteran groups

Quick Facts on NPOs

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• statutory property tax exemptions under s396(1)

• tax relief for Class 3 - Supportive Housing designated by the Province

• operating and capital grants for NPOs that provide specific Council defined community benefits

– Infrastructure-related– Program-based– Neighborhood-based– Capacity development– Childcare– Sustainability-related

• access to City-owned space at reduced or nominal rents

• DCL relief for non-market housing projects

Current CoV Support Programs for NPOs

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CoV Support for NPOs (2009) Total Investment ($)

Statutory Property Tax Exemptions Charitable / Not-for-Profit Organizations $5.7 million Churches / Religious Organizations $1.9 million $7.6 million Operating and Capital Grants Housing $7.4 million Childcare $2.1 million Cultural $10.5 million Community Service $6.3 million $26.3 million Class 3 “Supportive Housing” Tax Relief $0.1 million Nominal Leases for Housing $2.0 million Non-market Housing DCL Relief $1.4 million Total $37.4 million

CoV Financial & In-kind Support for NPOs (2009)

Benchmark withneighboringmunicipalitiesbased on

availableinformation

Note: In 2011, there are 68 Class 3 “Supportive Housing” properties in Vancouver resulting in total forgone tax of $0.7M.

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Over the years, Vancouver has been a leader in supporting community partners through tax exemptions and grants.

Regional Benchmarking (2009) Support for NPOs – Tax Exemptions & Grants

NPOs($'000)

Veterans($'000)

Total($'000)

Per-Capita

Vancouver $5,743.0 $0 $5,743 $9.1 26,298 $32,041 $51.0Municipality #2 $943.7 $39.5 $983 $2.1 $3,213 $4,196 $9.0Municipality #3 $1,278.6 $0.0 $1,279 $15.4 $2,730 $4,009 $48.4Municipality #4 $321.9 $15.1 $337 $3.9 $1,610 $1,947 $22.5Municipality #5 $1,051.1 $0.0 $1,051 $9.3 $0 $1,051 $9.3Municipality #6 $822.6 $0.0 $823 $4.3 $0 $823 $4.3Municipality #7 $314.0 $25.2 $339 $2.8 $463 $803 $6.5Municipality #8 $375.1 $2.4 $378 $1.7 $0 $378 $1.7

Per-Capita

Property Tax Exemptions Grants

($'000)

Total Contribution

($'000)

Municipalities: Burnaby, Coquitlam, North Vancouver (District), Richmond,

Saanich, Surrey, and Victoria

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NPOs in Vancouver Benefiting from Statutory Property Tax Exemptions

- 2,500 registered charities in Vancouver- housing- childcare- cultural- community service

- 12% owner/occupiers - 94% of property owned are fully/partially exempt from property tax - 6% of property owned are taxable

- 88% tenants

- 20% of rented property are fully/partially exempt

from property tax

- 80% of rented property are taxable

Owners12%

Tenants88%

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Statutory Exemptions under s396(1) (2009)

- $12B (7%) of non-CoV property is exempt from tax on the Assessment Roll under s396(1)- If taxable, these properties would have generated $120M

tax- incl. 210 NPO properties ($5.7M forgone tax)- incl. 300 church properties ($1.9M forgone tax)

Other1%

Metro Vancouver

/Transit10%

Hospital12%

NPO/Charity7%

Federal/Provincial/

Crown29%

School34%

Church7%

Exempt Property

$12B(7%)

CoV Property$13B (7%)

Taxable Property

$159B (86%)

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Effectiveness of Tax Exemptions vs. Grants as a Tool to Support NPOs

Tax Exemptions Grants

Equity Applicable to owner/occupier type NPOs only

Applicable to owner/occupier and tenant type NPOs

Fairness Assessment-based – support ties to property value, not public benefits of programs and services

Program-based – support ties to public benefits of programs and services

Flexibility Can be effected only once a year at prescribed assessment schedules

Can be adjusted anytime to align with Council priorities and fiscal capacity

Administration

Statutory – BC AssessmentPermissive – labor-intensive, additional CoV staff required

Existing resource within grant programs

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• There are 2 primary veteran organizations:– The Royal Canadian Legion (8 branches)– The Army, Navy & Air Force Veterans (5 units)

• Together, these groups occupy 12 taxable properties– 9 owned & 3 leased– 2011 general purpose tax $236,000

• Historically, these organizations have not met the eligibility requirements for statutory exemptions under s396(1)– the ones in Vancouver are not registered charities– from an assessment perspective, they seem to operate

primarily as social clubs and have not been able to demonstrate that their properties are designated for charitable use

Quick Facts on Veteran Organizations

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Tax Exemptions

• Given the limited use of their facility for dedicated charitable purposes, providing permissive exemption would not be consistent with Council policy.

• Most neighboring municipalities share this view– some provide partial exemptions which exclude pub business– others do not provide exemptions at all– most have only 1 veteran property within their jurisdiction

• Staff do not support providing permissive exemptions to these properties.

Support for Veteran Organizations

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Other Financial Support

• Discussion is underway between BC Assessment and the veteran organizations to determine whether or how they qualify for statutory exemptions under s396(1).

• Should Council wish to provide any financial support to these organizations, staff recommend that such support be program-based (grants) rather than assessment-based (permissive exemptions) to ensure alignment with Council priorities and community needs.

Support for Veteran Organizations

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• Many of the properties are potentially valuable sites with redevelopment potential, some in neighborhoods where demand for housing, childcare and other social infrastructure needs are critical.

• Staff could further explore strategic partnership opportunities with these organizations which would serve to advance Council priorities and provide opportunity to continue their community work.

Other Opportunities for Veteran Organizations

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• CoV support for NPOs is substantial & the highest in the region– 2009 financial & in-kind contribution $37.4M ($59.5 per capita)

• Grants are the best option for supporting NPOs

– more accountability and transparency– more flexible and can be adjusted to align with Council priorities &

community needs– closely align with benefits for Vancouver residents– regularly reviewed for alignment with strategic goals

Summary

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RecommendationTHAT Council continue to support not-for-profit organizations through the existing range of statutory property tax exemptions available under Section 396(1) of the Vancouver Charter and the City’s grant programs; and THAT no further permissive property tax exemptions be considered at this time.

Property Tax Exemptions

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Advisory: Corporate Management Team

Work Team: Financial Planning & AnalysisRevenue ServicesCultural ServicesHousing PolicySocial InfrastructureSocial Policy

External: BC AssessmentNeighboring municipalities which participated in the

survey

Project Team