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Ontario Clarifies Property Tax Rules for Renewables
On 4 January 2012, the Province of Ontario added greater clarity to the property tax treatment of renewable energy generation facilities by amending Ontario Regulation 282/98 under Ontario's Primary Property tax statute, the Assessment Act. The objective of the amendments made to Regulation 282/98, which take effect retroactively as of 1 January 2011, were to clarify the property tax treatment of renewable energy installations for property owners, project developers, municipalities and the Municipal Property Assessment Corporation in addition to ensuring that property tax does not act as a disincentive to renewable energy generation, particularly in situations where small-scale generation facilities are owned by persons who are not normally in the business of generation. Taxand Canada discusses the clarification of the taxation rates for renewable energy and considers how businesses are likely to be affected.
For a number of years, the property tax treatment of renewable energy installations has been a matter of some uncertainty in Ontario. Unlike wind energy, where $40,000 of value is attributed to a property for each installed mega-watt of capacity, solar energy developments and biogas developments previously lacked clear assessment rules.
We anticipate further clarification of the taxation rates for renewable energy installations as all uncertainty regarding the property tax impacts of a renewable energy installation is not removed by the regulatory amendments.
For instance, there will continue to be some situations where it is unclear how the test as to whether power generation is "ancilliary" to the main activity on the property will be implemented or applied. Further, if there is a change in the classification of the property, the impact of this change will need to be considered. Finally, the manner in which the value will be increased and whether that is based upon the costs of the installation, the value to the landowner in terms of income from rent or a sharing of income from the electricity generated will almost certainly be an important consideration and possible conflict with the Municipal Property Assessment Corporation.