An Act to amend the Income Tax Act (rehabilitation of historic property)

Sponsor

Peter Van Loan  Conservative

Introduced as a private member’s bill. (These don’t often become law.)

Status

In committee (House), as of March 23, 2017

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Summary

This is from the published bill. The Library of Parliament often publishes better independent summaries.

This enactment amends the Income Tax Act to establish a tax credit for expenses related to the rehabilitation of a historic property. It also establishes a tax deduction for the capital cost of property used in the course of such a rehabilitation.

Elsewhere

All sorts of information on this bill is available at LEGISinfo, provided by the Library of Parliament. You can also read the full text of the bill.

Votes

March 23, 2017 Passed That the Bill be now read a second time and referred to the Standing Committee on Environment and Sustainable Development.

Environment and Sustainable DevelopmentCommittees of the HouseRoutine Proceedings

December 4th, 2017 / 3:10 p.m.
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Conservative

Joël Godin Conservative Portneuf—Jacques-Cartier, QC

Mr. Speaker, we all agree that the government needs to show some leadership when it comes to heritage conservation. That being said, where we do not agree is how the financial resources are being managed.

One of my Conservative colleagues presented a solution in committee that demonstrated that Bill C-323 did represent a solution, at no cost to the government.

The Liberals rejected this bill. Most of the recommendations meant additional costs. The committee did not take into account the financial implications of these measures in its analysis.

While the objectives of the legislative recommendations are commendable, the Conservative members of the committee believe that it would be irresponsible, considering the huge deficit, to impose these expenses on taxpayers without examining the financial implications.

Environment and Sustainable DevelopmentCommittees of the HouseRoutine Proceedings

November 30th, 2017 / 10:10 a.m.
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Liberal

Deb Schulte Liberal King—Vaughan, ON

Mr. Speaker, I have the honour to present, in both official languages, the ninth report of the Standing Committee on the Environment and Sustainable Development in relation to Bill C-323, An Act to amend the Income Tax Act (rehabilitation of historic property).

The committee has studied the bill and recommends not to proceed further with this bill.

November 28th, 2017 / 9:55 a.m.
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Liberal

The Chair Liberal Deb Schulte

Seeing no further comments, we'll vote on the motion.

(Motion agreed to)

Thank you. We are done.

I want to thank everybody. Bill C-323 has been interesting, and I'm glad the report is speaking to a lot of the things we want to see move forward. I am very hopeful that we're going to see some progress on this file because it's very important to all of us.

Before we let everybody go, we have a couple of things to settle. The next meeting was to be on Bill C-57. Linda has asked us not to do it on Thursday, so we're going to do the press release and we'll have a discussion about what that's going to look like based on what has happened today. That will be first thing on Thursday.

I want to bring to your attention that we had two amendments to management plans tabled by Minister McKenna. If we want to discuss them, we can. I did ask Mr. Fast. He said that's not necessary. You can let me know if you are interested in talking about those at committee. We can. They're tabled and we have the option to discuss them if we want. It's up to you guys. You can let me know.

On Thursday I think it would be really helpful if we had some discussion on our trip to the GLOBE summit and make sure we have figured out how we're going to move forward on that initiative.

Then on Tuesday, we will start our clause-by-clause work on Bill C-57.

November 28th, 2017 / 9:55 a.m.
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NDP

Wayne Stetski NDP Kootenay—Columbia, BC

When I looked at this bill, again, I thought of some of the people I know who own historic buildings. I know we have a report with great recommendations coming forward, but I saw this as an important step in moving in the right direction. From my perspective, I will continue to support Bill C-323. I think it's a good step.

November 28th, 2017 / 9:50 a.m.
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Liberal

John Aldag Liberal Cloverdale—Langley City, BC

If you want me to, sure. The motion is:

That the committee report the following to the House: The Committee is supportive of the principle of Bill C-323 and believes that financial incentives, including tax credits, which encourage investment in the rehabilitation of historic properties and heritage places are necessary; however, the committee notes the following concerns with the bill: tax changes undertaken outside the budget process make it more difficult to ensure a coherent and consistent approach to fiscal management; the effect on federal revenue due to the proposed measure with the bill containing no upper limit on the amount which can be claimed for tax purposes with the parliamentary budget officer assessing costs at $55 million to $67 million in the first five years and Department of Finance officials stating it could be as high as $90 million a year; the lack of accountability tools associated with this measure; the restrictive nature of the incentive with not-for-profit entities, indigenous governments, and municipalities being ineligible; the cost to the federal government to administer the proposed changes to the Income Tax Act and the certification of the work being done for the purposes of the tax credit; the incentive not being designed in collaboration with other jurisdictions and partners to ensure its effectiveness; the lack of consultation on this measure with tax experts, as well as those provinces and territories that are a party to the Canadian Register of Historic Places, as well as municipal and indigenous governments; That in light of the above-noted concerns with the bill, the committee, pursuant to Standing Order 97.1, recommends that the House of Commons do not proceed further with Bill C-323, an act to amend the Income Tax Act (rehabilitation of historic property).

We can go through any of the bullets if anyone is interested, but we feel there was testimony as we went through the bill to substantiate the seven bullets that we have outlined here and the concerns.

November 28th, 2017 / 9:45 a.m.
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Liberal

John Aldag Liberal Cloverdale—Langley City, BC

As the document is being distributed, I want to say I really appreciated the work Mr. Van Loan did in putting forward this bill. It brought a very positive light to heritage. As we saw, the study we just discussed formed a very important part as we looked at the financial piece to it. I think it's a very important and timely discussion that we have as a government.

That being said, from our side we do have concerns which we've outlined in seven bullets. I'll give people a minute to look at it. Essentially we've tried to capture that we're very supportive of the principles of Bill C-323, but our bottom line is we're not recommending that we proceed at this point. We can go through the bullets once people have digested that.

November 28th, 2017 / 9:45 a.m.
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Liberal

The Chair (Mrs. Deborah Schulte (King—Vaughan, Lib.)) Liberal Deb Schulte

We're going to reconvene now into our second session which is in public.

Pursuant to the order of reference of Thursday, March 23, 2017, Bill C-323, an act to amend the Income Tax Act (rehabilitation of historic property), we're going into clause-by-clause consideration.

I'm going to call clause 1.

Mr. Aldag.

October 24th, 2017 / 10:20 a.m.
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Senior Advisor, Norton Rose Fulbright Canada, As an Individual

Leonard Farber

I think Bill C-323 certainly addresses any issues in the commercial context. For any buildings that are used for commercial purposes, rental purposes, or anything that generates a stream of income that is taxable, and against which one can claim investment tax credits or refundable investment tax credits, as well as depreciation or capital cost allowance, the bill is very helpful and workable in the commercial context.

For home ownership, I believe a grant mechanism to stimulate that kind of work is what would deliver the necessary results and a similar mechanism for non-profit organizations or charities that have heritage properties that would be important to renovate. We need a mechanism that gets them the capital that they would need in order to do the kind of work that this bill foresees, in terms of heritage property. That's the way to deliver that.

October 24th, 2017 / 10:20 a.m.
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NDP

Wayne Stetski NDP Kootenay—Columbia, BC

In your view, Bill C-323 primarily helps larger commercial heritage properties.

October 24th, 2017 / 10:20 a.m.
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Senior Advisor, Norton Rose Fulbright Canada, As an Individual

Leonard Farber

There's nothing in Bill C-323 that would affect home ownership, because these are tax measures, and tax credits in particular, as well as accelerated capital cost allowance, which is only relevant for people who are earning income from property or using that property in their business. Home ownership, which is a non-income tax event, the disposition of which gives rise to the principal residence exemption, is not impacted by that.

In my view, the only way one can stimulate the kinds of results that this bill is looking for in the commercial area is through a grant mechanism, either provincial or federal, whereby similar criteria for heritage quality is used as the basis for stimulating those renovations when home ownership is involved. The tax system can't do that.

October 24th, 2017 / 10:15 a.m.
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NDP

Wayne Stetski NDP Kootenay—Columbia, BC

Thank you.

In my riding of Kootenay—Columbia, which is located in southeastern B.C., we have a few commercial heritage properties, but by far what we have are homeowners who wanted to live in a heritage home and want to try to maintain that heritage value. It's very much a personal home ownership situation. These are basically middle-class people making middle-class incomes, but they have an appreciation for and want to maintain heritage.

Given your experience with taxes, what do you think is the best way to make sure they can continue to benefit from living in a heritage home but keep up its heritage values? Does Bill C-323 move us in the right direction, and if not, how can it be improved?

Let's go back to the first question, home ownership.

October 24th, 2017 / 8:45 a.m.
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Financial Analyst, Office of the Parliamentary Budget Officer

Govindadeva Bernier

Thank you very much for your invitation.

As you know, on December 1, 2016, Peter Van Loan introduced a private member’s bill, Bill C-323.

This bill would amend the Income Tax Act to create a 20% tax credit for expenses related to rehabilitating a historic property, and to create a tax deduction for the capital cost of property used in the course of such rehabilitation.

The Office of the Parliamentary Budget Officer based its analysis on data obtained from the Canadian Register of Historic Places pertaining to the number of eligible historic properties, and from Statistics Canada data on the average cost of home repairs and renovation.

We estimated that the annual cost of the credit will range from approximately $55 million to $67 million in the first five years, if the average cost of rehabilitation and the take-up rate of the credit are similar to projects that have been undertaken in the United States, where they have somewhat similar credit, but only for income-producing properties.

As Summary Table 1 shows, large-scale projects, which primarily involve commercial and industrial buildings that are somewhat similar to those eligible for the U.S. tax credit, are the major cost driver of the credit. Although there are fewer large-scale projects, they cost a lot more because their costs are substantially higher than smaller projects. This will have a more significant impact on the total cost of the credit.

While there are also costs associated with implementing the tax deduction for the capital cost of property used in the course of rehabilitation, PBO has deemed that these costs are not fiscally material. If you consult appendix D, in particular table D.2, you'll notice that these costs are below $10 million per year.

As a little note on that, there are two tables in appendix D, tables D.1 and D.2, because at first when we did the costing analysis, the way the bill was written, it was unclear whether the capital cost allowance would be on top of the credit or if the individual had to choose between one or the other. The first table applies if you have to choose between one or the other, while table D.2 applies if the CCA is on top of the credit. Mr. Van Loan's testimony last week made it clear that his intention was that the capital cost allowance would be on top of the credit for the 80% of costs remaining that are not covered by the 20% credit.

That's the end of our presentation.

We are ready to answer any questions you may have.

October 24th, 2017 / 8:45 a.m.
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Jean-Denis Fréchette Parliamentary Budget Officer, Office of the Parliamentary Budget Officer

Madam Chair, Mr. Vice-Chair and members of the committee, thank you for inviting us to appear before you today.

It is the first time that a PBO team has been invited to appear before your committee. As per our legislative mandate, it is our role to support you in your parliamentary debate, and we always appreciate the opportunity to exchange directly with parliamentarians.

We hope that our costing analysis of Bill C-323 will be useful in your future discussion and for your report back to Parliament.

With your authorization, Madam Chair, I would like to ask my colleague Govindadeva—see, I have the same problem.

October 24th, 2017 / 8:45 a.m.
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Liberal

The Chair (Mrs. Deborah Schulte (King—Vaughan, Lib.)) Liberal Deb Schulte

I call the meeting to order.

We are continuing with our evaluation of Bill C-323, an act to amend the Income Tax Act (rehabilitation of historic property).

I'd like to welcome some guests here today to give us some advice. From the PBO's office, we have Jean-Denis Fréchette, the parliamentary budget officer. Thank you very much for being with us.

We have Mark Mahabir. Thank you very much. You're the director of policy costing and general counsel.

We have Govindadeva Bernier. Thank you for being patient with my pronunciation.

October 17th, 2017 / 10:10 a.m.
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Conservative

Joël Godin Conservative Portneuf—Jacques-Cartier, QC

Thank you, dear colleague.

I listened to your comments this morning and I must say it is unfortunate that you are not open to finding solutions. We all know there is a problem with the preservation of historic monuments in Canada. Through Bill C-323, my colleague is seeking to make certain provisions for preservation.

We understand that a bill is never perfect and that it will evolve. Our witnesses, particularly from the Department of Finance, raise some big question marks and seem to be closed, which I find disappointing.

You are here as managers, while we are parliamentarians and MPs. Since we wear different hats, I can understand that you have some reservations.

Mr. LeBlanc, I have some questions for you.

You stated in your presentation that one of the benefits of direct funding programs as compared to tax incentives is that they can give the government greater flexibility. They are not mutually exclusive, however. Why are you closed and why do you say that the proposed tax credit is not acceptable and is not the solution? I think it is a possible solution. We know it is not perfect, but that does not mean it should be ruled out.