Industrial owners in New Brunswick – What you need to know about Bill 117

Industrial owners in New Brunswick could be in for a big surprise if Bill 117 gets passed this month. The proposed legislation takes aim at commercial and industrial property owners in New Brunswick and allows municipalities to change how they tax heavy industrial property.

Frequently asked questions

What is Bill 117?

The recently tabled Bill 117, “An Act Respecting Heavy Industrial Property” proposes amendments, largely to the Assessment Act, which would significantly expand the powers of both municipalities and the province of New Brunswick on how particular commercial and industrial property owners are taxed.

What are the proposed changes that would result from Bill 117?

Bill 117, if passed, allows municipalities to tax "heavy industrial" properties at higher rates. This bill piggybacks off an earlier (already passed) bill that allowed municipalities to tax commercial property at 1.4 to 1.7 times the residential rate starting in 2023.

Historically, the ratio for all non-residential property (i.e., all commercial and industrial property) was legislated at 1.5 times the residential rate. The outcome is a shift in tax burden to commercial property types. Bill 117 proposes taking it a step further and allowing municipalities to single out further (perceived) heavy industrial property as well.

The property types being affected could be interpreted/rolled out in a number of ways.

Is the bill too vague?

Much of the messaging surrounding the bill focuses on industrial property owners, however, the reality is it could be much further reaching. As an example, point (iii) describes "heavy industrial property" as being for "manufacturing or processing products, materials or substances prescribed by regulation."

What products you may ask? Well, that's up to the province to prescribe. The regulation updates are not included in the bill and point (xii) even goes so far as to allow “any other use prescribed by regulation” to be classified as “heavy industrial”. In essence, anything can be prescribed as heavy industrial at the province’s discretion.

What is critically missing from Bill 117?

The bill is extremely open-ended and affords much power to municipalities and the province. Regardless of one’s opinion on who should be taxed at what rate, the bill critically misses a remedy on lack of appeal rights for property owners.

What happens when a property owner disagrees with a particular classification? Unfortunately, in New Brunswick, there is no mechanism to do so. In fact, the legislation reinforces a lack of recourse.

Believe it or not, the province's Assessment Act, "The Director’s determination under paragraph (1)(f) that real property or any portion of real property is used for commercial purposes or is residential property referred to in paragraphs (a) to (f) of the definition “residential property” is final and may not be questioned or reviewed in any court."

The lack of appeal rights on classifications directly contradicts the International Association of Assessing Officers (IAAO) standard 4.1.5 for Appeals "Taxpayers need accessible and responsive avenues for challenging assessments, denied exemptions, and the classification to which property is assigned. Appeals systems should be designed to facilitate the taxpayer’s right to appeal."

Yet in New Brunswick, according to the Assessment Act, classifications cannot be “questioned or reviewed in any court” leaving taxpayers at a real disadvantage. Altus Group has long been advocating to have this legislation removed and at a minimum New Brunswick's Assessment Act, Section 4(12) should be amended/removed regardless of any proposed reform. Any justification for leaving this prejudicial legislation in place is unfathomable.

What could Bill 117 mean for commercial property owners?

The most obvious impact of Bill 117 would be imposing higher taxes on a number of industrial (and commercial) businesses and their operations. In essence, the municipalities would be able to assign a residential rate, and then assign a differing rate (somewhere between 1.4 to 1.7 times the residential rate) for commercial property, and then (if the bill passes) assign a third rate (also somewhere between the 1.4 to 1.7 ratio) for “heavy industrial” deemed property.

New Brunswick already has some of the highest property tax rates in Canada and depending on what ratios municipalities choose this could more than offset phased in provincial tax rate reductions that were announced in the province’s 2022-23 budget update in March of 2022.

Many may recall a similar situation back in 2018 when legislation was tabled (and squashed) to tax machinery and equipment, in a clear effort to target particular property types. Assigning different tax rates to different property types does fly in the face of ad valorem taxation (i.e., taxation according to value). Unfortunately for commercial property owners, who are generally taxed at higher property tax rates than residential, this is not an uncommon phenomenon in Canada.

For more information on this, Altus Group publishes our annual Canadian property tax rate benchmark report.

What is the current status of Bill 117?

The progression of this bill is moving extremely quickly with the first reading introduced on May 31, 2022, the second reading passed on June 2, & the committee phase passed on June 3rd. A recent motion to limit debate time before the New Brunswick Legislature will likely expedite this. As such, the bill could very well reach royal assent very soon, particularly as the legislature adjourns for the summer on June 10th.

Final thoughts and what property owners can do next

This bill is titled “An Act Respecting Heavy Industrial Property” and appears to home in on taxing heavy industrial property types. But evidently, the bill as its written could allow for many properties to be affected with no recourse available.

The interpretation of what is or is not to be “heavy industrial” is sure to be of much debate should this bill pass. Regardless of the intent, the semantics, or any perceived outcomes, the verbiage would allow for a broad pool of properties to be taxed at higher rates. This issue gets exasperated by the complete lack of recourse property owners have available to contest their classification.

Understandably this would impact the realities of doing business in the province. We encourage concerned property owners to reach out to their Members of the Legislative Assembly (MLA) and council members to voice their concerns.