Every four years, the Municipal Property Assessment Corporation (MPAC) updates assessments on all properties for tax purposes, including farm property.
The latest MPAC assessments were conducted in 2016. Municipal tax rates set for 2017, 2018, 2019 and 2020 property taxation years were be applied to the reassessment based on property values as of January 1, 2016. In response to COVID-19, the Ontario government froze all MPAC assessment values at their 2020 levels and have yet to instruct MPAC to conduct a provincial reassessment. That means current assessments for tax purposes are based on values as of January 1st, 2016.
OFA has advocated that the provincial government instruct MPAC to deliver a new province wide reassessment without further delay.
Farmers should carefully review their most recent Property Assessment Notice sent from MPAC for two important items.
- The assessed value of their property.
- The classification of their property.
Reviewing your property assessment notice is important to ensure you will be paying the correct taxes for 2021.
Assessment of Farm Properties
In the case of farm properties, only bonafide farm-to-farmer sales are used to establish a farm’s current value assessment.
Components of a Farm’s Current Value Assessment
Farmland
Farmland is assessed according to its productivity value. Productivity rates are established using a process that determines rates for the best soils and reduced rates for less than optimum soil conditions.
Residence
The residence is assessed based off the replacement cost for a new residential structure less depreciation.
Residence Site
If a farm residence is occupied by the person(s) farming the property, a one-acre parcel of land is valued as farmland.
In most cases, if someone other than the person(s) farming the property occupies the residence, it is considered a non-farm residence. In this case, one acre of land is valued as rural residential.
Farm Outbuildings
A farm outbuilding is any improvement, other than a residence, that is used for farming operations. Outbuildings are assessed based on their design and classified by their use (e.g., barn, silo, grain bin).
Other buildings
All other buildings not used in the farm operation are assessed based on their design and classified by their use (e.g., garage).
Value Added and Dual Use
MPAC values and classifies properties based on the use of the land and buildings. A farm property could be partitioned by MPAC into multiple property assessment classes when the property is used for more than one use.
Types of Property Classes include
- Residential
- Farm
- Commercial
- Industrial
Under Section 44 of O. Reg 282/98 facilities used to conduct value added activities are classified in the commercial or industrial property class but the land underneath these buildings is valued as farm.
Value Added Property Tax Class
On May 19, 2018, the provincial government amended O.Reg 282/98 under the Assessment Act to introduce the Small-Scale On-Farm Business Subclasses. These are optional sub classes under the commercial and industrial property tax classes.
Prior to these new property tax classes, any on farm value added activities would result in the on-farm building plus one acre of land being taxed at the full commercial or industrial tax rate. This resulted in thousands of dollars in additional taxes paid by the farmer engaging in value added activities.
Table 1 shows the property tax consequences of a farmer using a building for value added activities prior to the changes made in 2018.
Table 1: 1 Acre of land with value added building in commercial class (old rules)
| Valuation | Tax Class | Tax Payable | |
| Land | $10,000 | Commercial | $159 |
| Building | $490,000 | Commercial | $7,796 |
| Total | $500,000 | $7,955 |
In municipalities that choose to enact the optional property tax sub-classes, eligible on-farm buildings, where value added activities are taking place, will have the first $50,000 of assessed value taxed at 25% of the local commercial or industrial tax rate. Buildings with assessed values of greater than $1 million are not eligible.
As shown in Table 2, capping the benefit to only the first $50,000 of assessed value severely limits any financial incentive for farmers to engage in value added activities. In this example using tax rates from The Nation Municipality, a farmer engaging in value added activities where the building and land is valued at $500,000 would only save $597.
Table 2: 1 Acre of land with value added building in small-scale value added (Current treatment)
| Valuation | Tax Class | Tax Payable | |
| Land | $10,000 | On farm commercial | $40 |
| Building | $490,000 | On farm commercial | $7,319 |
| Total | $500,000 | $7,359 | |
| Savings to farmer | $597 |
Given the significant financial investment required for a farmer to engage in a value-added activity a few hundred dollars saved in property tax is not a significant incentive.
In fact, the current financial incentives are so insignificant that many municipalities have been choosing not to enact these optional property subclasses. Not because they were worried about lost tax revenue, but because they did not feel that it would have enough impact to be worth the time of implementing them.
In January 2020, OFA and the Nation municipality met with Parliamentary Assistant, Stan Cho to discuss this issue. During the meeting, the Nation municipality put forward a proposal to eliminate the $50,000 assessment threshold under the current value-added subclasses.
While OFA supports removing the $50,000 assessment threshold, we view it as the minimum requirement to incentivise farmers to invest in value added activities. OFA’s standing position has been that if at least 51% of the product is grown and value-added to by the same farmer or farmers and at least 90% of the product is grown in Ontario, then that should be considered an extension of the farm business and taxed at no more than 25% of the residential property tax rate.
This will encourage more farmers to engage in value added activities. Restricting this benefit to operations using the majority of commodities grown by the same farmer ensures that large operations that import commodities for processing still pay the full industrial tax rates. In an ideal situation, a farmer would start by processing their own commodities and be taxed at a lower rate. If they are successful and scale up their operation and begin importing commodities, they would move to the full industrial tax rate, which at that point they could afford to pay. This progressive tax policy would help Ontario expand its food and beverage processing capacity and generate significant economic activity in rural Ontario.
Resolving Assessment Concerns
In general, if property owners feel that the assessed value or tax classification for their property is not accurate, they may file a Request for Reconsideration (RfR) with MPAC. In the case of farm properties, if property owners feel that the tax classification for their property is not accurate, they may file a Request for Reconsideration (RfR) directly with Agircorp. Refer to the For more information on eligibility for the Farm Property Class Tax Rate Program contact Agricorp at 1-888-247-4999.
By filing an RfR, you are asking for a review of your property’s assessment and/or classification. No fee is charged for this review. For most taxation years, the deadline to file an RfR is March 31st. More information on this service is available by contacting MPAC at 1-866-296-6722.
Filing an RfR with MPAC is a mandatory first step of the assessment appeal process. After MPAC has completed their reconsideration process, property taxpayers will have the option of filing a notice of complaint with the Assessment Review Board (ARB). The Assessment Review Board (ARB) is an independent tribunal of the Ministry of the Attorney General of the Province of Ontario. For more information, contact the ARB via email at ARB.Registrar@ontario.ca.
Farm Property Class Tax Rate Program Eligibility
Although MPAC may assess a property as farm, the property is taxed at the residential rate unless it is placed in the farm property class. Agricorp administers the Farm Property Class Tax Rate Program. Eligible farm properties are placed in the farm property class and taxed at no more than 25% of the local residential tax rate.
For more information, contact Agricorp at 1-888-247-4999.