Evidence of meeting #77 for Environment and Sustainable Development in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was register.
A recording is available from Parliament.
Director, Cultural Heritage Policies, Parks Canada Agency
The answer is yes, there will be a desire by people wanting to access the tax credit to be on the register, and therefore there will be a need for us also to be capable of managing the number of people that could ask to be registered.
Conservative
Ed Fast Conservative Abbotsford, BC
That's a good thing.
Mr. LeBlanc, have you done an analysis of the tax hit that your department is going to suffer as a result of this bill being passed and implemented?
Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
We don't have a precise cost estimate, but here is how we think about it.
The $900 million per year that's spent in the U.S. is, in one way, quite similar to what's in Canada, because it's just the 20% credit for designated properties, the $900 million. The 10% non-designated isn't part of the $900 million. If you pro-rate that, you end up at $90 million. But the U.S. doesn't have residential properties. It's only income-producing properties. That factor in and of itself would push it above $90 million. How much is a question to which we don't have a good answer.
On the other hand, to be fair, one of the things Blaine mentioned is that there are several states.... Is it 38 states, Blaine? There are several state-level credits, so probably the credit rate that people are facing in the United States is often higher than 20%, at least on the income-producing side. That might, at least on the business side, create a bit more activity than you would have.
Those are the factors we would take into account, but we don't have a number at the end of the day.
Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Correct, but that's how we would think about it.
Conservative
Ed Fast Conservative Abbotsford, BC
Great.
Then I assume you haven't quantified the economic benefits that would be generated as a result of the increased activity.
Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
We haven't, because in our mind there is this really important and unanswered question of what is the incremental effect. We would have hoped, given all the experience in the U.S., that there would have been a better answer for this, but we don't see it. We doubt very much the effect is zero. We don't think it's 100%, and we don't think it's zero. We think it's somewhere in the middle, and where it is remains a very good question which we don't have the savvy answer to, and that's what you would need.
Conservative
Ed Fast Conservative Abbotsford, BC
All right.
Are you saying the revenue losses that you would generate under a tax credit program would not be completely captured by the additional economic activity?
Chief, Charities, Personal Income Tax Division, Tax Policy Branch, Department of Finance
I don't know if we've gone that far. Certainly, in the studies in the U.S., because the credit only applies at the federal level to income-producing properties, they only look at that. They also look at the downstream effects—the economic activity after the building has been placed in service, in terms of income from income tax, etc.
Here, we're looking at a potential increased cost in terms of the tax credit. This would then be applicable to personal residences as well. We did some work at the beginning with Parks Canada to try to sort out, in terms of existing properties on the register, how much was business and how much was personal. It wasn't easy for us to come up with hard numbers, all of which is to say—in terms of how much or how long it might take to recapture the tax credit expenditure—we just aren't there yet. We don't have that information yet.
Conservative
Ed Fast Conservative Abbotsford, BC
Really, all we're left with is the American experience, which seems to be quite positive but is not comparing apples to apples. We're comparing apples to oranges, because of layered tax incentives at the municipal, state, and federal levels. Is that correct?
Chief, Charities, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Absolutely. That's a fair statement. In addition to the state credits in most of the studies we looked at, they also mentioned the fact that other federal credits apply. There's a low-income housing credit and a new markets tax credit. It's a bit of a dog's breakfast.
Conservative
Ed Fast Conservative Abbotsford, BC
To be fair, the bill also proposes an accelerated capital cost allowance, which can be layered onto the tax credit program, except for the 20%. It's my understanding that if you look into the costs that qualify for the 20% tax credit, you can also, in some cases, layer on the accelerated capital cost, except for the portion relating to the 20%. Is that correct?
Chief, Charities, Personal Income Tax Division, Tax Policy Branch, Department of Finance
We were a little uncertain about that when we were doing our initial evaluation. This morning, Mr. Van Loan said that's what the intent of the bill would be, that it would only apply to that additional amount, so I think you're correct.
Conservative
Ed Fast Conservative Abbotsford, BC
We're talking about two incentives here for owners of historic properties: to get registered if they're not already and then to rehabilitate their buildings.
Chief, Charities, Personal Income Tax Division, Tax Policy Branch, Department of Finance
You're correct and I agree with the statement that it would encourage individuals and businesses to place their properties on the register. There's no doubt about that. That potentially increases the cost of the bill.
It was mentioned earlier that there are 13,000 properties currently on the register. My Parks Canada colleagues can correct me, but we think that's a low number, because it includes heritage districts that can encompass more than one property. Certainly, there are things we would have to look at in terms of trying to define the costs and benefits of the bill.
Liberal
The Chair Liberal Deb Schulte
I'm going to have to cut it off there.
It's been an excellent morning of digging a little deeper into this. We really appreciate all of you coming and sharing your thoughts and wisdom with us.
I'm going to have to clear the room quite quickly, because I did go beyond the time. I was supposed to have half an hour for committee business. I have less than 15 minutes, so I'm going to ask everybody's forgiveness as I ask them to rush out of the room.
[Proceedings continue in camera]