Evidence of meeting #79 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 grant.
A recording is available from Parliament.
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
Well, time is money as well, and when things take time before approval is given, it's not as interesting as a self-assessment when you know you have a project that will meet the criteria that are listed and you're ready to go.
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
Are you then saying that people are more likely to jump on a tax credit than to apply for a grant? I don't want to put words in your mouth; I just want to understand exactly what you're saying. Is that correct?
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
Yes. I would say that provided it's a refundable grant, which is basically equivalent at the bottom line to a grant, then yes, because it's easier access.
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
There have been some discussions about the fact that since a not-for-profit doesn't have an income to report, it would be excluded in this case. I imagine that this is the case for many different scenarios. Would you say that to effectively make sure that all aspects are covered so that you are proactive and so that you are trying to stimulate investment, and at the same time you're trying to take care of those who aren't going to qualify, as I just mentioned, that it would be prudent to have two streams, a tax incentive and grants?
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
I think the answer to that is definitely yes, because if we think about it, there are three types of ownership of properties. There are properties that would be in the commercial mainstream, which would be owned by investors, developers, and so on, and those properties would be renovated to maintain the heritage character, and would likely either be used in some kind of commercial activity on the owner's behalf or be used for rental purposes. If they were used for rental purposes, there would be certain income tax rules applicable to them, which might constrain the ability to claim capital cost allowance. Tax credits would certainly help there.
There's home ownership, which in the context of the tax system is not something that is owned unless it's being renovated for rental purposes, in which case it would be the same. There may be other residential buildings that are not used for rental, but you may want to encourage them as well.
Then there's the non-profit sector, and there's the government sector, which owns a lot of heritage properties from coast to coast for, which the tax system—
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
—does nothing.
Liberal
Mark Gerretsen Liberal Kingston and the Islands, ON
Thus, a grant would help them.
I have only a minute left, but I want to ask something quickly.
There has also been some discussion about whether or not this is available only for the rich or for people who have more means. I'm from Kingston, and we have a lot of historic properties in the downtown core specifically. One of the problems we're having is that it's tough to get younger families to move into the downtown area because of the costs of maintaining a lot of these houses that are quite old. Would you say that an incentive program like this would assist more families and would encourage people to purchase these houses when they're looking at them?
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
Well, if they're going to be used for rental purposes, then yes, it's an incentive. If they're going to be used for personal purposes, then you'll need to have a grant approach in order to help them. For the kind of heritage property that in the main we're talking about, when you look at Kingston in particular, there are some beautiful big old buildings that could certainly use it.
To the extent that developers are encouraged to acquire and renovate, you're not looking at the top 1% or 3%. These are business people who have a desire to see built heritage renovated and used in a commercial context. One thing that's sad is when developers come in and are encouraged to tear down and start from scratch. To the extent that there are incentives to maintain a facade, to maintain the heritage qualities of particular buildings, that can only be beneficial.
Conservative
Ed Fast Conservative Abbotsford, BC
Mr. Farber, are you familiar with the National Trust for Canada, the organization whose vision is to promote the protection and preservation of “places that matter”?
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
I know of it. I'm not as familiar with it as you would be.
Conservative
Ed Fast Conservative Abbotsford, BC
They are very much involved in raising awareness in Canada and promoting the preservation of historic sites. They made a statement supporting this legislation, referring to the tax credit and the accelerated capital cost allowance:
These two tax measures would transform the economic fundamentals for renewing historic places. In the process would create more skilled jobs and generate less carbon than new construction.
I'm using that quote because it talks about using less carbon—in other words, the environmental objectives that you addressed: energy efficiency and restoring these buildings in such a way that they will use less energy. Beyond that, we have the inherent carbon that is within those wood-frame structures, or even concrete or masonry structures, that allows us to continue to use them rather than demolish them and take the debris and put it into a landfill.
Would you agree that the environmental objectives of this tax credit program in and of themselves should provide this committee—this being the environment committee—with serious thought about supporting this bill?
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
That was why, when I started my opening comments, my first inclination was that this was an opportunity to marry certain environmental aspects with the heritage aspects. These heritage buildings will have to undergo, or should be undergoing, those kinds of environmentally sensitive, energy-efficient mechanisms to bring them into this century. In doing that, for government, even though there's a cost associated with any tax proposal that is put forward, at the end of the day, the benefits of doing that—in terms of employment in the context of the renovation, and in terms of the GST and HST that will be generated out of the materials that come forward—will likely make this a very stimulative kind of thing. A lot of buildings would be eligible for it. I think this would be very helpful in that context.
I do think the bill needs a little more extension to the kind of energy conservation mechanisms that you just referred to, but in that context, I believe it would be very beneficial.
Conservative
Ed Fast Conservative Abbotsford, BC
You suggested that the tax credit be made refundable. Is that correct?
Conservative
Ed Fast Conservative Abbotsford, BC
You would agree that making it refundable increases the number of properties and individuals who would receive the benefit of the tax credit?
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
It doesn't increase the absolute number of properties that would be on the national register or the provincial register, but it may very well encourage more people who own properties and who are not in an economic position to do the kinds of things we want them to do, through this bill, to be able to do them, because the eligible expenditures they would be incurring that are subject to this investment tax credit would be refundable.
Oftentimes these kinds of mechanisms are bankable. You can take your eligibility to the bank and fund it accordingly. It would be a very stimulative kind of instrument for people to take advantage of.
Conservative
Ed Fast Conservative Abbotsford, BC
I agree with you there. Making it refundable, though, means a potentially larger hit to the fiscal framework for the government. Is that not correct?
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
Well, it would be a larger hit by virtue of more taxpayers taking advantage of it. It would not be a larger hit in tax expenditure terms if we assume equal numbers access the program. Whether it's over time or immediate, the value of it would be the same. It would just be more encouraging because it would be a line item on their budget right away.
Conservative
Ed Fast Conservative Abbotsford, BC
There's already a cost-sharing program for preserving historic sites in Canada. This would be another tool that would be used to incent the private sector to invest in historic sites preservation. I'm assuming that as a principle, you support it.
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
Yes, I do support that, because at the end of the day, whatever assistance is available, whether through a tax credit mechanism or a refundable mechanism or through other provincial or federal government grants, it reduces the cost base of that particular asset, both for depreciation purposes as well as any capital gains that may arise upon ultimate sale.
Things like that are accounted for in the tax system for determining either recaptured depreciation or capital gains upon sale. In that respect, the combination of incentives stimulates the activity more than it would otherwise be stimulated.
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.
Senior Advisor, Norton Rose Fulbright Canada, As an Individual
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.
