Environment Committee on Oct. 24th, 2017

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

I looked at this report. Thank you very much for generating it, because it captured a lot of thoughts I've been having on the aspect of rural versus urban and small versus large.

My deep concern here, which really comes out in the numbers, is that, one, a lot of rural buildings are not even eligible for the funding. Two, when you look at the numbers for large projects versus small, they significantly outweigh each other. Three, when you look at the administrative aspects of a tax credit and being able to apply for the funds in the first place, the smaller projects or small rural communities don't have the resources, in most cases, to be able to even know how to apply or even find the funding in the first place.

My deep concern about the tax credit side versus a cost-sharing or grant program is that under a cost-sharing program you could more realistically target or focus the funding to ensure that there is a greater amount of sharing of the wealth, so to speak, through these programs between rural versus urban, large versus small. You'd also have greater control over the overall cost of the program because you'd have a fixed cost under a cost-sharing program versus a grant.

I'd like you to comment on that aspect of it.

[Govindadeva Bernier]

Obviously using a tax credit rather than a grant doesn't give you any control over the cost, because you have no idea what the take-up of the credit will be. Since a credit is not capped, it could be higher than what we predicted, but it's very hard to predict the take-up.

The tax credit is available to anyone who has taxable income. As we mentioned, if you have no tax liability, then the credit is not worth anything to you, which means that not-for-profit organizations, for example, will not get any benefit from a tax credit.

What is the best way to address the problem of historic rehabilitation? That question is in your hands. We did not stipulate that.

[Jean-Denis Fréchette]

Can I ask Mark to comment on this?

[Mark Mahabir]

There's nothing stopping politicians or the House from having both.

You can have both a tax credit and a cost-sharing program. Because the tax credit is harmonized with any government subsidy that is received by the taxpayer, the credit would account for any additional expenses by the taxpayer outside of the cost-sharing program.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Once again, my concern is that under a tax credit type of system, typically it's the more well-heeled in large urban centres that take advantage of it. We don't know that a lot of these projects wouldn't go ahead of their own accord, or that just enough grant money could actually incentivize them to go ahead with these programs.

My greater concern here is that in most cases, the small and rural projects are the ones that get left behind.

I see that you're nodding in agreement with that statement, so I'm going to pass the rest of my time over to MP Mark Gerretsen.

Thank you very much, gentlemen.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Thank you.

Mr. Fréchette, you guys are experts in tax policy, not as it relates to heritage, correct?

[Jean-Denis Fréchette]

That's correct.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Okay. Do we have similar tax credits that exist?

[Jean-Denis Fréchette]

The U.S. is the model that we used, but it's not similar.

Did you mean exactly similar?

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

No, no; do we have other examples in Canada where we provide tax credits? I don't mean for heritage specifically—just generally speaking.

[Mark Mahabir]

There are multiple personal tax credits for charitable donations, medical expenses. There are various tax credits in the Income Tax Act.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Then it definitely wouldn't be setting a precedent.

[Mark Mahabir]

No.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Okay.

Following up on Mr. Bossio's last comment, can you give us some insight into the difference in the behaviour within the market of a tax credit versus a grant? Does one particularly add to spurring more spinoff effects?

[Jean-Denis Fréchette]

I would say it depends on the level of the grant versus the level of the credit, or, as Mark said, the accumulation of both.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Do you know—?

[Jean-Denis Fréchette]

Going back to your question on what a grant would be that would be an incentive in addition to this 20%, the difficulty with a grant is to have a take-up rate of higher than what we have seen in the literature. That would be the difficulty. Of course, if you put a grant of, I don't know, 50% of the value of a building, of course everybody will go after the grant.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

You're saying that if the grant is higher, it will have greater impact.

[Jean-Denis Fréchette]

If it is high enough, yes.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

What's high enough?

[Jean-Denis Fréchette]

I don't know.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Well, that's extremely important to understand.

Can you give us a sense of how high the tax credit has to be, or whether there is a threshold to the tax credit?

[Govindadeva Bernier]

As a reference point, the take-up rate in the U.S. was close to 0.5% for income-producing properties. Depending on the years, 50% to 60% of these projects also received state credits, because multiple states also have their own credit. In that case, on top of the 20% they received at the federal level, there was also a certain percentage of tax credit at the state level.

Obviously the higher the total tax credit or the total tax incentive, the higher the take-up is going to be and the higher chance of actually seeing historic rehabilitation.

What would be the right amount? We have no—

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

It's hard to say.

[Govindadeva Bernier]

It's hard to say, and there's not really enough data to come to an answer.